Tucson Realty


Reasons for Optimism in Tucson Retail Market

Reasons for Optimism in Tucson Retail Market


by Pat Darcy Retail Division Head

As we reach the midyear point of 2015, the Tucson Retail Market is steadily improving, similar in its performance to last year…but now three steps forward and one step back with the promise of new retail developments in 2016.

The trend in Tucson seems to be “Scrap and Redevelop ”. New retail developments are being built where old obsolete retail properties used to be. You are going to see much more of this redevelopment in the city’s central core.

The current retail vacancy rate is approximately 7.8 percent.  Quoted retail lease asking rates are averaging $15.90 per square foot NNN.   The largest sales transaction so far this year was the sale of Casas Adobes Plaza which sold for $46M or $503.73 per square foot. The Purchaser was Global Retail Investors which is the same group that purchased River Center at River Road & Craycroft in 2014. Whole Foods is the anchor tenant for both of the centers.

redevelopment projectsIn my opinion, there are five reasons for some optimism within the Tucson Retail Market: First, the small amount of new retail construction that has occurred over the past few years; Second, the economic viability for the demolition and redevelopment of obsolete central city properties. Examples of this Scrap and redevelop trend include Wilmot Plaza where Dick’s Sporting Goods will open soon. The two redevelopment projects across the street from Wilmot Plaza where Mercado Shopping Center was scraped for a CVS and pad sites.  One of the adjacent CVS pad sites will soon have Kneader’s Café & Bakery, which will open in mid July.  Next door,  Marie Callender’s has been scrapped and in its place will be a 4,500 square-foot Corner Bakery Café along with another 10,000 square feet of shop space; At Oracle/Ft Lowell, the old Goodyear Tire store has been replaced by a Quik Trip The third cause for optimism is that vacant central area land is now are being developed, such as Evergreen’s construction of the DES office space behind the Walgreen’s at the southeast corner of 22nd Street & Alvernon Way and Chapman’s Motors expansion on 22nd Street east of Columbus Blvd;

Fourth, there are new retail tenants entering the market and assembling multiple retail sites. Examples include Tractor Supply (4 stores) Natural Grocers with four stores planned stores including one at Broadway Village. Longhorn Steakhouse recently announced a new site at Oracle & Wetmore where an Arby’s used to be; and (5) the continued expansion ofUrgent Care facilities, dental chains, mattress stores and pawn shops

Repurposing Older Properties

This redevelopment and/or scrapping of older properties in central Tucson has been a good thing.  There is too much obsolete retail space in Tucson’s central core. Property assemblages have and will continue to take these older, smaller retail spaces off the market and replace them with newer product and stronger retail tenants.   Larsen Baker revitalized their Circle Plaza shopping center at Broadway/Kolb  by adding Natural Grocers and building5,600 square feet of new shop space to the east end where Play It Again Sports used to be located. We need more of this type of re-development throughout the Tucson area.

New Developments

A WalMart Neighborhood Market anchored retail center is currently under construction at the southeast corner of Drexel and Tucson Boulevard. Opening date is expected to be in mid December.

A 14-screen Cinemark movie theater will open at Tucson Marketplace (The Bridges) in the summer of 2016.

Fry’s has announced a new super store in Midvale Park at the southwest corner of Valencia & Indian Agency Road. Opening is planned for fall of 2016.  This will be the first new Fry’s store to open in Tucson in over 10 years.

On the northwest side at I-10 & Twin Peaks Rd, the 360,000 square-foot Tucson Premium Outlets is being constructed by Simon Property Group and Vintage Partners. It will open in late September or early October. The outlet retail tenants will be similar to their Phoenix Premium Outlets on I-10 south of Phoenix. Expect an auto mall to be in the second phase along with a possible hotel.

Anchor tenants are still being very cautious on sites in the outlying areas of Tucson. The words you will hear most often are “phasing in”, as developers and their bankers both want their anchor  tenants signed up and under construction before they start preleasing their shop space. Anchor tenants and savvy developers want to see actual rooftops and not rooftop projections before moving forward to develop suburban sites.

The Restaurant Scene

longhorn steakhouseExpect several new restaurants to open in Tucson.  As previously mentioned, The Longhorn Steakhouse will open their second restaurant at Oracle/Wetmore soon.  Earlier this year, Cheddar’s had a successful opening of its first Tucson location at El Con Mall so expect them to add new sites.  Other new restaurants include, Raising Cane, Costa Vita Grill, Blake’s Lotaburger and McAllisters Deli  The fast baked pizza restaurants will start to look for new sites.

Downtown Action

I also want to spend some time talking about downtown retail activity.  The Downtown Retail Market has nearly 500,000 square feet of storefront space with a vacancy rate now under 6 percent.  In the past five years, over 200 new businesses have opened in the downtown area.  They include over 60 restaurants, 53 retail stores, 2 mini grocers and 18 nightclub destinations, with almost all of them locally or statewide owned.  Johnny Gibson’s Downtown Market which was expected to open in March has delayed their opening until late summer.  Retailers who have recently opened include Kearbey’s Burgers and Shakes, Hub Ice Cream Factory, Riveted and Highwire. The 8-story hotel boutique hotel called AC by Marriott with 147 rooms plus  first-floor retail and a parking structure is expected to break ground this summer and open in mid year of 2016.hub


Look for more nontraditional shopping center tenants such as health clubs, charter schools, pawn shops, thrift stores, churches and medical & dental care facilities to open new stores

High-visibility retail pads and end-cap shop space will command retail rates in the $30.00 per-square-foot range in and near high-profile shopping centers.

Haggen Food & Pharmacy with corporate headquarters in Washington State has opened three stores in the Tucson area.  Two were former Safeway’s and the other a former Albertsons. To be competitive, look for Hagen to purchase operating grocery stores in the Tucson area in order to compete with the other national grocer store chains.

A new power center will be built in 2016 at the southeast corner of I-19 & Irvington. Sam’s Club is a possible anchor tenant.  New power centers are also planned for Valencia/Kolb and Golf Links/Houghton.

Marana Main Street located at I-10 & Marana Rd will begin phasing in projects in its 28 acre mixed-use development.

Look for independent gas stations to continue to close and be redeveloped into single-tenant retail sites.  Think mattress companies.  Sadly, some familiar restaurants will continue to close.  As every new restaurant opens, it takes customers from other nearby restaurants.  Mom and Pop tenants will continue to fight the battle with the chain stores, Amazon and road-widening projects.  Look for more office supply stores to close or merge. Their space will be quickly taken by other retailers like Summit Hut.

The road-widening projects on Grant Road from Stone to Swan Road and the East Broadway widening project from Euclid to Country Club approved by the voters in 2006 still has no set plan.  These projects will continue to create more vacancy due to the uncertainty of the timing of the road work and the timeframe of the City’s ability to acquire properties.. work and the timeframe of the city’s ability to acquire properties.   It’s called condemnation blight.

Overall, the Retail Market in Tucson is improving and with the vacant large retail spaces dwindling, this should spur new retail construction. The Retail Market is slowly turning and better things are ahead


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