Sluggish outlook for Tucson commercial real estate

Dale Quinn
January 25, 2012

Tucson’s commercial real estate market will likely continue its lackluster performance for the foreseeable future, several brokers told a gathering of property owners and managers Tuesday.

Last year, various real-estate sectors – such as retail, office and industrial – saw marginal improvement in vacancy rates and some stabilization in rent prices.

This year isn’t going to be much different, the brokers said at a 2012 economic forecast breakfast hosted by the Institute of Real Estate Management and the Building Owners and Managers Association of Greater Tucson.

Still, there have been some local signs of increased economic activity, said Tucson Mayor Jonathan Rothschild, who was a keynote speaker.

As of Nov. 1, sales-tax revenue was up $10 million, or about 2.5 percent, from the previous year, Rothschild said. “We’re moving back in the right direction, clearly more slowly than we want to be,” he said.

Here’s what specialists in various sectors had to say:

Commercial construction

“I’ve been really surprised how many restaurants have gone up over the past year,” said Brian Barker of Barker-Morrissey Contracting.

Five Guys Burgers and Fries and Paradise Bakery & Cafe, among others, have built new locations around Tucson, Barker noted.

Retail overall has had a lot of activity with QuikTrip and Circle K building new facilities.

Other sectors, such as office and industrial, have seen very little construction activity, he said.


Sales of multifamily properties plummeted from a total volume of $800 million in 2007 to about $250 million last year, said Art Wadlund of Hendricks & Partners.

The low volume can be attributed to a plunge in property values and Tucson’s aging apartment-complex inventory. The city has a shortage of luxury properties, and several apartment developers have begun projects to start filling that demand, Wadlund said.

Even with competition from investors and homeowners renting out their houses, vacancy in apartments has been stable since 2009, he said.


Any good news in the industrial market last year was countered with some bad news, said Brandon Rodgers of PICOR Commercial Real Estate Services.

Vacancy improved slightly in industrial properties, ending the year at about 11 percent, Rodgers said.

There was a flurry of activity in mid-2011, with high-tech companies and call centers taking up big spaces. Then later, other companies packed up and moved out of large spaces.

The upcoming year will likely follow a similar trend and end with 11 percent vacancy in industrial properties, Rodgers said.

On the plus side, there are some big spaces available to companies looking to locate in Tucson.

Contact reporter Dale Quinn at [email protected] or 573-4197.

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