The Tucson apartment investment market is enjoying improved operating fundamentals and renewed interest from investors as confidence returns.
Operating Environment:
Tucson continues to enjoy a gradually improving rental market, as evidenced by a first quarter decline in vacancy of 0.76% to 9.41% from 10.17% at year end 2010. Submarket and property type vacancies continue to show disparity, with higher income submarkets and the student housing sector showing very strong occupancies. Oro Valley, Northwest Tucson and University Submarkets are reporting vacancies of 5.91%, 5.27% and 3.86% respectively, while South Tucson and south central submarkets reflect 13.52% and 12.91% average vacancy rates. However, the south sub markets have shown substantial improvements during the past year with the south Tucson submarket improving from 22.06% in the first quarter of 2010 to 13.52% today.
Absorption continues to be positive this quarter, with 652 units absorbed, three consecutive quarters of positive absorption, and a total absorption of 1,375 units over the past four quarters.
Investment Market:
With CAP rate compression increasing in primary markets and ample investment dollars seeking opportunities, the apartment investment market is gradually improving, as investors seek higher returns in secondary markets such as Tucson. The market has returned to the radar screen of many investors who are seeing fierce competition for deals in primary markets such as Phoenix, Southern California, Seattle and Dallas. With net operating incomes improving across the property class spectrum and with downward pressure on CAP rates, property values have seen the bottom and will continue to improve.
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A multi-year top producer with his previous firm, Bob Kaplan,
Principal, joined PICOR in 2006 advising on the sale and purchase of multifamily investments serving the needs of local, regional and national apartment owners and investors. Bob also represents buyers and sellers of industrial, office, retail and NNN leased investment real estate.
Allan Mendelsberg, a Denver native, launched his commercial real estate brokerage career in Tucson in 2004. Previously with Marcus & Millichap, Allan joined PICOR to specialize in manufactured housing parks in the southwestern U.S., where he also brokers apartment complexes in greater Tucson for private investors as well as REITs.
