By: Isaac Figueroa, CCIM, with Larsen Baker
On February 16th, 2023, almost 425 people attended the 31st Annual Southern Arizona CCIM Real Estate Market Forecast, making it a record-breaking year. Held at the University Park Marriott, the event was introduced by myself, Isaac Figueroa CCIM, as the President-Elect of the Southern Arizona CCIM chapter, followed by a lineup of local industry experts who offered market insights into various market segments, including Investment Sales, Retail, Multi-Family, and Industrial.
Phil Voorhees of CBRE started the conversation for Investment Sales and kicked off the event by excitedly letting attendees know that neither the internet nor COVID killed retail. Phil spoke optimistically about the change in retail, stating that “Omni channel is the new normal.” Although retail was virtually un-sellable during the pandemic, retail is presently pricing at or better than historical averages. Phil let us know that absorption for retail assets was positive for the ninth consecutive quarter in Q4 2022, with completions remaining at record-low levels, encouraging 15-year lows in retail availability. Retail space has never been more productive than now and compares favorably to other CRE product types, with strong fundamentals and a higher return from cash flow.
Nancy McClure of CBRE continued the conversation for retail; she spoke about retail optimistically, saying, “retail is having its moment!”. With vacancy rates at 10-year lows, Tucson’s current top three performers are restaurants, retail, and beauty. She noted that the high development cost has significantly impacted the industry and touched on how important it is for businesses to have an online presence.
Jesse Blum of Cushman Wakefield | PICOR led the conversation for industrial by showing us how far we have come in the industrial market. In Tucson, we currently have 46.4 million RSF of industrial product, $0.86 aggregate asking rents, 2.6 million SF vacancy, and a population growth of 1,008,000 since 2009. In addition, he let us know that Tucson currently has 1.8 million SF under construction, with an impressive 990,000 SF coming soon.
Hamid Panahi of Institutional Property Advisor (IPA) spoke on the multi-family market. He noted that multi-family transactions have stalled and are down significantly from past years. Although transactions have slowed, Tucson has multiple properties under construction, which will ultimately open 3,096 units. With Tucson’s net migration steadily increasing yearly, there is hope for the multi-family market.
KC Conway CCIM, CCIM’s chief economist and co-founder at Red Shoe Economics, was the keynote speaker and led the discussion on economics. KC notes that retail ended the year with the highest delinquency rate, and we may have another “Retail Apocalypse” with 1,500 retail closings at the beginning of 2023. On a positive note for Arizona, we are still seeing an influx of Californians moving to Arizona; 1 in 5 move-ins in Tucson are from California! As for the office sector, it is the property type facing the most challenges due to the paradigm shift of remote work.
The 2023 CCIM Forecast was one for the record books and had a mood of optimism, despite the keynote’s sentiments. There is expected growth in all sectors, with the potential for office to lag the most due to remote working.
We thank all the presenters, volunteers, and attendees for being at the 2023 31st Annual Forecast and look forward to 2024, when we will present the 32nd Southern Arizona CCIM Forecast.