Deal activity in Q1 2014 for office product picked up from previous quarters. Vacancy in Metro Tucson was 19.4% with net absorption of 45,274-square-feet for Q1 according to CBRE. Vacancy is down from 20% and absorption is down from 63,031-square feet at the end of 2013.
Despite the decrease, this is the second consecutive quarter of positive absorption for the office product. Vacancy decreasing is a positive sign for the Tucson market. The submarkets gaining the most traction were midtown locations and throughout the Catalina Foothills in the Northeast submarket.
Activity is coming predominantly from local tenants who are looking for creative space and locations that offer collaborative environments.
Average asking lease rates on a full service basis for tracked office product in Tucson was $19.745 per square-foot per year in Q1 2014. Historically, office lease rates have remained relatively steady since the recession, maintaining an average rate between $19 per square-foot and $20 per square-foot. Tucson is expected to retain this holding pattern until vacancy rates decrease significantly.
There were no completions of office product during Q1 2014 but there was an increase in construction activity, which now amounts to a total of 186,497 square-feet. The longest number of office building being constructed resides in the North Central region: 20,000-square-feet in Villa Fatima at 1119 E Rancho Vistoso Blvd; 18,092 square-feet at 3808 N 1st Ave; 6,313 square-feet in Puento Nuevo Plaza at 3935 E Ft Lowell Rd; and 35,881 square-feet at the corner of Swan and Skyline.
In the Northwest side of Tucson, Magee Corporate Center continues to add space a little at a time, with 6,211-square-feet under construction, to be delivered sometime in Q2 2014.
In the East Central corridor, a 100,000 square-foot build-to-suit will soon exist for the Department of Economic Security, developed by Harrison Properties, LLC. This is significant as office construction has been nonexistent in greater Tucson since 2009. This type of construction activity will continue to strengthen Tucson’ economy and create a business-ready environment.
For complete report click here: CBRE1Q2014 Tucson Marketview Office