TUCSON, ARIZONA -- Tucson retail activity remained relatively stagnant in the last quarter of 2021. Metro Tucson ended Q4 2021 with 38,551-square-feet of negative absorption pushing the yearly total to 34,912-square-feet of positive absorption.
Tucson has approximately 2.2 million square feet of retail product that is currently available with 1.9 million square feet vacant. While there seems to be a lack of product and new construction deliveries, the Tucson retail market remains optimistic with new users and developers continuing to enter Arizona from out-of-state markets.
Availability and Vacancy
The Central submarket had the highest levels of vacancy with over 600,000-square-feet vacant space available.
The Central submarket posted the most notable annual decrease in vacancy, dropping 470 bps to 13.7% in the fourth quarter of 2021. Over the same period, the Northwest submarket dropped 120 bps to 5.9%. The Southwest submarket saw the largest increase in vacancy, growing 290 basis points to 7.9%.
The direct average asking NNN lease rate in Q4 2021 was $15.99, $1.91 per sq. ft. NNN lower than the average rate from Q3 2021. The lease rate is down 0.8%year-over-year. For the last four years, the average monthly asking NNN lease rate ranged from $15.49 to $18.16, although rents vary considerably based on the product type and location. Some of the highest leasing rates are in the West and Northeast submarkets where the average asking NNN lease rate is $23.27 and $20.25, respectively.
Net Absorption and Leasing Activity
The Tucson retail market concluded 2021 with 38,551 square-feet of negative net absorption bringing the yearly total to 34,912 square-feet. The Southeast submarket led the market with 4,594- square-feet of net absorption with many small tenant move ins under 10,000 square-feet. One of the noteworthy transactions from this quarter included Big 5 Sporting Goods leasing 11,748- square-feet in the Southeast submarket.
Year-to-date net absorption totaled 34,912-square-feet led by the Northwest submarket, which accounted for 77,874 square-feet of positive net absorption. Over the same period, the Central submarket posted 28,862-square-feet of net absorption.
Construction activity has been stagnant in Tucson due to the rise in available big-box space which has provided additional options for tenants looking to expand. While there are smaller
retail buildings under construction, there has not been any new development activity on larger shopping centers since Q3 2019. While there are no large shopping centers under construction,
there are smaller shops underway at The Bridges and The Landing.
Despite a year with low leasing activity and no minimal new construction, the Tucson retail market continues to have an optimistic outlook as new users from out of state are leasing space. As retail continues to bounce back from the Covid-19 pandemic, expect to see new retail developments enter the pipeline. The return to office should also be a huge benefit to the retail
sector as Tucson continues to grow its population base.
For full report, click here. For more information, contact Nancy McClure at CBRE Tucson office, 520.323.5117