The commercial real estate market in Tucson hobbled through 2010 with persistently high vacancy rates and lower rents.
And while conditions won’t likely get worse in 2011, it’s going to be a few years before any noticeable recovery, commercial brokers said this week at economic forecasts.
The Building Owners and Managers Association of Greater Tucson and the Institute of Real Estate Managers held their 2011 economic forecast breakfast Tuesday while Tucson Realty & Trust Co. held a separate event Wednesday.
“The good news is it looks like the market has bottomed out and prices have stopped sliding,” said Hank Amos, Tucson Realty & Trust Co.‘s chairman. The bad news, he said, is that “we’re still in that hole.”
Here’s a breakdown by sector:
In 2010, Tucson saw the absorption of more than 61,000 square feet of retail space, said Greg Furrier, of Picor Commercial Real Estate Services.
The overall vacancy rate for the year was 8.6 percent, he said.
“We see ourselves at bottom and headed in the right direction,” Furrier said.
Another glimmer of hope is that holiday sales came in stronger than previous years, said David Hogue with Tucson Realty & Trust Co. While some stores will continue to close their doors, Hogue anticipated more openings than closures in the coming year.
The vacancy rate for office buildings remained high at 17.1 percent, but it has shown some improvement compared with last year, said Bruce Suppes, of CB Richard Ellis.
Rental rates for multi-tenant office buildings ended the fourth quarter at $19.34 per square foot, which is more than $1 per square foot less than at the end of 2009, Suppes said.
Even with the lower rates, tenants still expect landlords to make substantial property improvements. And when it comes to lease renewals, “fear still lingers,” Suppes said. Rather than looking at multi-year lease extensions, most tenants are looking at one-year renewals, he said.