CBRE's 2Q retail report is reporting the Tucson retail market has yet to find any momentum in terms of leasing space as the overall vacancy rate declined to 8.4% in Q2 2014 down only slightly from 8.5% in the first quarter. However, the Tucson market is gradually improving as the vacancy rates at this time in 2012 and 2013 were 10.2% and 9.2%, respectively.
Net absorption in Q2 2014 was positive with 13,927-square-feet of space being absorbed bringing the mid-year total to 48,647-square-feet of positive absorption. However, absorption at mid-year is off the pace for this time in 2012 and 2013 when the market had positive absorption of 405,834-square-feet and 102,935-square-feet, respectively.
As mentioned, the retail market is yet to gain any traction this year due in part to how retailers are viewing their economic health and the economic health of the consumer. While many retailers report some of their strongest sales in the Tucson market some retailers are still feeling the hangover of the closing of the federal government last fall. The impact can be felt across many industry sectors including both residential and retail. The retail sector also continues to be challenged by e-commerce; however, smart retailers are well-immersed in omnichannel retailing trying to best capture consumers and their shopping patterns.
Another trend to note is that of new tenants looking for space in prime areas but finding it increasingly difficult to identify product that meets their needs in these core retail areas. As supply continues to tighten in these prime areas, rents are being pushed beyond pre-recession rates. As a result of the lack of space, the Tucson market will continue to see user-driven development in the core of town and along the freeways. However, in the peripheral and less- sought-after areas, rental rates will continue to see decompression and little new development.
Uncertainty in the economy combined with lagging consumer confidence, and recent higher jobless numbers have impacted the landscape of the Tucson retail market. At some point, consumers and businesses will return to surer footing. For now, it is a question of when and how strongly they re-enter the market.
To read the full report click here: https://f.tlcollect.com/fr2/514/26105/2Q2014_Tucson_Marketview_Retail_Secured.pdf