No better news could have been reported for the Tucson apartment market than job growth, which translated into the strongest improvement in fundamentals in years. The vacancy rate for stabilized units in Tucson dropped 100 basis points (bp) from the previous quarter to 6.8%. This is the lowest first quarter rate since 2007. North Tucson, comprising Northeast Tucson (3.8%) and Oro Valley/Catalina (4.7%) reported the lowest vacancy rates. The University area experienced a 520 bps increase in vacancy, ending the quarter at 11.9%. One area of concern in this submarket is the potential of overbuilding in the student housing sector. In addition, older units, especially those in outlying areas, are losing ground in the form of lease-up and rents to newer units.Read More
PICOR Connect | Trends in Commercial Real Estate
The Tucson Apartment market saw continued growth in all major sectors in the fourth quarter of 2015. The vacancy rate improved 34 basis points (bps) during the quarter to finish the year at 7.82%. This marks a 105 bps improvement from the start of 2015, attributable to the previous year’s limited movement and a slight increase in job gains in the region. Nine of the fifteen submarkets experienced improvement, with the largest gains seen in the Southwest and Oro Valley regions. Quarterly absorption saw a slight improvement with 333 units absorbed as new developments began to lease-up stage.Read More
In a show of local market strength, Tucson’s multifamily sector reported positive growth in all key statistical categories in the third quarter of 2015. Absorption increased by 623 units during this time period as students and winter visitors returned to the region. For the trailing twelve months, Metropolitan Tucson experienced a 740-unit increase in occupancy. The net rents for the Tucson market increased $9 per unit to an average rent of $651 per unit and $0.89 per sf (without utilities) in Metropolitan Tucson. Of note, this represented the largest rental gain in a single quarter since 2006. Gross rents have increased $15 per unit (2.36%) over the last year with the largest gross rental gain occurring in the Tucson Mountain Foothills ($44 per unit). The greatest one-year decline was from the South Central Tucson market ($21 per unit). The leading indicators of absorption and net rents typically signal a strengthening market. The vacancy rate for conventionally-operated complexes improved 0.72% to an average of an 8.17% vacancy. Seasonal improvement is predicted most third quarters but the meaningful gains in each of these sectors is a true step in the right direction. The sentiment among management companies as a whole is more positive on the growth and immediate future of the multi-family market. As Tucson continues to add jobs in the marketplace, we will continue to see positive results in all the main sectors.Read More
Metro Tucson ended November with a total of 372,000 non-farm jobs, gaining 5,200 year-over-year (YOY), an annualized job growth rate of 1.4%. Growth in home prices began to flatten, with a 4.6% gain in median selling price in 2014. HomeGoods, a division of TJM Companies, announced interest in opening a western distribution center in Tucson, an operation employing up to 900 with an estimated economic impact of nearly $900 million. HomeGoods received Pima County approval and awaits a tax incentive decision from the City of Tucson in February.
For the Tucson apartment market, the third quarter of 2014 continued to report historic progress in absorption and vacancy figures. Tucson's multifamily inventory absorbed 618 units in the third quarter of the year. The vacancy rate dropped 0.8% to a very encouraging 8.2%. These two indicators continue to improve in the marketplace mainly due to the declining average rent in Tucson.
The second quarter of 2014 saw historic progress in absorption and vacancy figures. 235 units were absorbed in the second quarter of the year with the largest gain in South Central Tucson. Downtown Tucson had all the buzz, and many prospective residents were looking for properties within this submarket. The overall vacancy rate dropped 0.28% to a very encouraging 9.05% at the year’s midway point. The net rents for the Tucson market continued to stay flat with no gain over the last six months. Tucson sales were averaging $639 per unit and $0.86 per sf (without utilities) in Metropolitan Tucson. The highest average rent was found in the Oro Valley/Catalina submarket at an average of $838 per unit. The lowest average rent of $512 per unit was found in the South Tucson/Airport area.
The unemployment rate for the Tucson metro area as of May 31st was 5.8%, 60 basis points (bps) lower than year end and 50 bps below the national rate. Decreased government spending impacted both Tucson’s market momentum and activity. Home prices and inventory flattened in the second quarter, while the inventory of Tucson residential listings increased.
Topics: Tucson, Industrial, Commercial real estate, Economic development, Investment property, Absorption, Market trends, Vacancy, Lease rates, Leasing, Office, Medical office, Apartments, Multifamily
The Tucson apartment market has been remarkably steady for the past few years with occupancy remaining in the 90% to 91% range and rents slowly edging higher. Rental concessions have also continued to improve modestly, helping to boost property operating incomes.
Read the latest recap of the Tucson multifamily market from our team, as well as commentary from our friends at Reis, Inc. on the data set they track for the Tucson apartment market. A link to our full report can be found at the end of the article.
Operating fundamentals continued to slowly improve in Tucson with modest decreases in vacancy, positive absorption, a small increase in rental rates and some continued decline in rental concessions. Average vacancy dropped from 9.4% to 9.3% and the average rental rate essentially held steady, averaging $635. In a continuation of a four-year trend, higher occupancies and stronger increases in rental rates occurred in submarkets with higher-grade properties. The Northwest, Catalina Foothills, and Northeast submarkets, which have the strongest demographics in the region, had the lowest submarket vacancies in Tucson.