Commercial Real Estate in 2014: more of the same?
This year is going to look a lot like last year for Tucson’s commercial real estate market. Top specialists from Tucson Realty & Trust took a look back and then forward today.
Industrial: Until new home construction picks up, the subcontractors – roofing, concrete, excavating, plumbing, etcetera – that occupy contractor yards and warehouses will be missing, and the industrial market will languish. Manufacturers, gun-shy during the still-uncertain economy, are taking on second shifts rather than committing to more overhead. They’re also turning to automation, which limits job growth.
The local industrial market ended the year with a vacancy rate of 10.2 percent.
Retail: Pat Darcy, TRT’s retail division head, said the market turned a corner last year. 2013 saw steady improvement, with increased absorption in retail space due to the small amount of new construction, redevelopment, and the leasing of most of its vacant big boxes.
Darcy doesn’t expect much new development this year. Major developments that will open this year are the Houghton Town Center at Houghton and Mary Ann Cleveland Road (home to a Walmart, Discount Tire, Panda Express and more), the Guitar Center and Conn’s Home Entertainment, two big boxes at the Marana Marketplace at Orange Grove and Thornydale, and a Whole Foods at Ina and Thornydale.
The local retail market ended the year with a vacancy rate of 8 percent.
Office: Stagnant, according to a report by office and investment specialist Michael Gross.
The local office market is about 18 percent, and he said it will stay in that range for the year thanks to the uncertain economy.
Many leases are now shorter term- landlords are cutting deals at lower rates, but don’t want to commit to them for long, and neither do tenants want to commit for long because of the economy. Some tenants are downsizing in response to technology, consolidation or layout efficiencies. Full-service rate ranges are $12-$15 PSF (Class C buildings), $16.50-$19 (Class B) and $18.50-$20.50 (Class A).
Land: 2013 was a positive year for total land sales volume, with homebuilders leading the way. Two major acquisitions include 480 acres near Kolb and I-10 and 120 acres in the Rancho Vistoso “donut hole.” This year, new housing opportunities will be available in the ever-hopping northwest side and in the Vail area.
Read the complete Inside Tucson Business article by Hillary Davis, ITB Staff Writer.