Commercial Real Estate Outlook Leaves Not Much to Smile About

Commercial Real Estate Outlook Leaves Not Much to Smile About

While there were positive signs for commercial real estate in Tucson early this year, the outlook has dimmed in recent months.

Stagnant job growth and the slump in homebuilding continue to drag on the market, said Hank Amos, president and chairman of Tucson Realty & Trust Co. While other areas across the nation have seen some recovery, the local economy has yet to see those gains, he said.

“There’s really been no trickle down from the national economy,” he said.

Amos made the comments at Tucson Realty & Trust’s midyear forecast Wednesday at the Tucson Country Club.

Retailers hit the brakes

Many retailers appeared poised to take advantage of the downturn at the beginning of the year, said retail specialist David Houge. But they put those plans on hold in the second quarter as they waited to see how consumers would react to lingering bad news about the economy.

“Consumers are just beginning to loosen their purse strings, and more money is being spent for nonessential goods,” Houge said.

There are still signs of recovery. The vacancy rate for retail properties was about 8.6 percent for the second quarter, and Houge predicted some of that space will fill in the coming months, dropping that rate to 8.1 percent.

Office deals sputtering

Landlords are continuing to lower rental rates to keep tenants, said office specialist Michael Gross. At the same time, tenants have continued to downsize their operations.

Vacancy in office properties is about 16 percent, but that number should gradually recede by the end of the year.

While there has been plenty of activity, “getting a lease or sale finalized nowadays is extremely difficult,” Gross said.

Industrial bounces on bottom

The industrial market has continued to move forward at a labored pace, said industrial specialist Terry Lavery.

Rental rates remained the same as last year, and tenants continue to demand short-term leases, he said.

Vacancy, at 11 percent, has improved slightly, Lavery said. But any real recovery will hinge on job creation and a rebound in the housing market.

Read article by Dale Quinn of the Arizona Daily Star

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