Thanks to healthcare demand, the Tucson office market has a heartbeat. By increasing the number of insured citizens, coupled with a growing aging population, the Affordable Care Act is anticipated to be a key demand driver for Tucson medical space. The activity level of behavioral health tenants in the Tucson office market has particularly blossomed. Overall, post-recession job recovery locally has lagged the nation and state as a whole, leaving job creation the most pressing demand driver.
PICOR Connect | Trends in Commercial Real Estate
With Tucson and state-wide post-recession job recovery lagging the nation, the local office market continued to rely on silver linings. Residential sales volume and median prices ended the year higher (14.0% and 7.1%, respectively), as positive recovery continued in the housing market.
Don't want to digest reams of stats on the Tucson commercial real estate market's state of affairs? We've got short snapshots for you here. That being said, if you enjoy diving into that statistical stuff, say the word, and we'll send some your way...
Arizona job growth is outpacing the national rate, as the state recovers. Improvement in job gains is dominant in the Phoenix metropolitan area, with only 1,300 net new jobs in the Tucson region since July 2012. The housing recovery statewide has positively impacted construction jobs in both Phoenix and Tucson, but permits remain low, relative to historic norms.
As with the national scene, quarter after quarter, we have cited the need for jobs to fuel a Tucson office market rebound. The State of Arizona reported significant job gains for the local market in February, with Tucson's unemployment improving to 6.7% from 7.3% in January. In the past year, 3,500 more jobs were added, largely in the education, leisure/hospitality and construction sectors.
Property taxes are one of the main expenses of real estate ownership in Arizona. In today’s business climate, taxes are under the microscope more than ever as property owners and managers seek ways to reduce expenses. We are fortunate that Arizona has a tax valuation appeal system. The system allows property owners or their agents to file an appeal petition for review with the purpose of lowering property tax.
Is it another quarter of 'more of the same' for Tucson's commercial office market scene? Read on...
After an extensive recessionary period when ‘uncertainty’ was the ruling word, Tucson’s commercial real estate sectors have settled into a sense of stability that signals firming fundamentals and a somewhat painfully slow return to market balance. Limited meaningful job creation remains the largest hurdle to overcome, with health care uncertainty and the impending presidential and congressional elections contributing to a cautious business climate. Some meaningful growth continues in Tucson’s medical sector, with economies of scale, more favorable locations, and proximity to health care centers fostering movement.
Tucson’s office market remains stable, yet far from dynamic, due in large part to limited job creation. In addition, health care uncertainty (preceding the Supreme Court decision) and the impending presidential and congressional elections have contributed to a cautious business climate. Some meaningful growth continues in Tucson’s health care sector, with economies of scale, more favorable locations, and proximity to health care centers fostering movement.
The Tucson medical space market has been dynamic through the economic recession, perhaps more so than any other sector of the commercial real estate market. Recent activity has shifted from the heady days of 2003 through 2008, when the purchase of medical office buildings was all the rage, to the currently more conservative world of leasing office space. To be sure, all activity, sale or lease, has occurred at significantly lower price levels, with prices and rents down 10 to 15% in medical properties, albeit significantly less than declines in the market for general office space.