To read the full report on Tucson’s Retail market activity in Q3, click here
In Q3, Tucson’s retail market remained balanced amid cautious optimism, with vacancy rising slightly to 6.0% due to larger store closures. Tucson’s retail sector was defined by steady fundamentals, targeted expansion in niche segments, and cautious upward pressure on rates.
Smaller-format availabilities under 4,000 square feet (sf) were limited with vacancy at just 2.1%, underscoring few options for shop space operators. Elevated construction costs and interest rates restrained speculative development, keeping new supply muted.
Leasing activity is returning to rebound to pre-pandemic levels, with space demand centered on value, experiential, and fitness-oriented users. Discounters and resale operators were actively backfilling big-box vacancies, while health, wellness, and indoor recreation tenants expanded their footprints.
Infill and adaptive reuse projects gained traction as cost pressures discouraged large ground-up builds. Asking rents climbed 4.8% YOY, reflecting stronger momentum, though average rates still sat below national benchmarks. The affordability of Tucson’s retail space remained advantageous in attracting regional and national tenants. Supply constraints kept vacancy from climbing sharply and rent growth may accelerate if tenant demand persists.
Pricing reflected a market in equilibrium with steady rent growth and stability across most segments. Tucson’s average retail lease rates held near $20 per sf in Q3. Roughly 20% below the U.S. average, but posted annual growth of 4.8%, outpacing national trends. Affluent submarkets such as Foothills and Oro Valley commanded notable premiums due to strong household incomes and luxury retail demand.
Limited new construction and restrained supply applied modest upward pressure on rents, keeping market conditions balanced between landlords and tenants. Large-format may experience downward rate adjustments as vacancy builds, but smaller infills, fitness, and experiential users continued to lease at prevailing rents.
