CBRE has released its second quarter 2015 market analysis of the TUCSON metropolitan area’s office, industrial and retail sectors. Highlights follow:
The Retail Market gears up for strong second half. Tucson’s retail market has bounced back from seeing multiple big box tenant vacate the market. With 43,495-square-feet of positive net absorption the market is seeing a definite improvement from last quarter’s negative 11,929-square-feet. If history is any indication, Tucson is likely to see an increase of activity. In the past two years, the second or third quarters have been the marquee quarter of activity for the year.
The second quarter saw an increase in activity from new retail users and experienced less turnover in occupancy, leading to a decrease in vacancy to 8.2 percent. As comparison, a year ago the market posted a vacancy of 8.4 percent.
- With few quality spaces left in the market, developers are taking notice and undertaking projects to either redevelop existing product or bring new product to the market. The Wilmot Plaza center is a prime example of shopping center redevelopment.
- Based on historical trends, expect the third and fourth quarters to display increased market activity. In 2013, the third quarter recorded 255,000 sq. ft. of positive net absorption, and in Q2 2014 the market recorded 113,000 sq. ft.
To read the full report click here 2Q2015 Tucson Marketview Retail
The Office Market continued is lateral motion at midyear. While unemployment rates continue to drop across the state, the white collar-jobs have yet to return to the Tucson market. However, while the market struggles to gain momentum, it hasn’t lost any ground on the improvements made in 2014. The second quarter of 2015 recorded 11,398-square-feet of positive net absorption, similar to first quarter’s 13,975-square-feet of net absorption.
- The Tucson office market vacancy rate ticked down in the second quarter to 20.1 percent from 20.5 percent in quarter one. The overall sentiment is the office vacancy rate can, and should, dip below 20% within the year.
- Market asking rates for Tucson office product on a full service basis recorded an incremental rise to $20.25 per sq. ft. from $20.21 in the previous quarter.
- Due to approximately 20 percent of available office product considered functionally obsolete, users are looking at more creative solutions for their requirements via adaptive reuse projects like Comcast’s currently-under-negotiation lease of 100,000 sq. ft. at the former American Home Furnishings building.
To read the full report click here 2Q2015 Tucson Marketview Office
The Industrial Market supply continues to tighten. Looking back over the previous two years tells contradicting stories. In 2013 at the end of second quarter the industrial had recorded over 270,000-square-feet of positive absorption, but tapered off in the second half of the year, ending with just less than 400,000-square-feet of positive net absorption. Conversely, 2014 reported a little over 86,000-square-feet of adjusted positive net absorption in first half of year, but ended the year strong to post a total of just over 325,000-square-feet.
Fast forward to the present, the first half of 2015 reported 58,077-square-feet of positive net absorption, which brings the year to date total to 238,144-square-feet, begging the question of what industrial market activity will Tucson experience in the second half of 2015?
- The industrial market vacancy dropped to 10.4 percent in the second quarter, a mere 10 basis point drop from the previous quarter. For comparison, this time last year industrial vacancy was 11.9 percent.
- The average triple net asking rate for industrial product held its position at $0.51 per sq. ft. per month in Q2 2015. This shows a year-over-year increase of $0.04, up from $0.47 per sq. ft. triple net per month in Q2 2014.
- Much of the new leasing activity in the last quarter derived from users smaller than 10,000 sq. ft.
To read the full report click here 2Q2015 Tucson Marketview Industrial