Cushman & Wakefield | Picor in its Q3 2014 Office and Industrial reports say an improving national economy and an employment picture looking better has office leases being led by higher education and medical space. A slight negative absorption of 42,770-square-feet market-wide brought Q3 vacancy to 12.6% in the Tucson metro area. Class A space saw the most improvement over two quarters this year, Q1 with a 13.9% decrease in vacancy and Q3 a 10.0% decrease.
Lease rates remained stable with average quoted rates across all classes at $18.11 PSF. Class A asking rates averaged $21.64 PSF while the CBD categories were averaging $23.31 PSF.
Sale momentum continued to trend up with user purchases increasing activity over three consecutive quarters. The median price for office user sales was $128 PSF, 28% higher than in Q2. Overall sales averaged $132 PSF.
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The Tucson Industrial snapshop was also encouraging, after several years void of significant prospects, three large users were active in the Q3 market, two local expansions and one new employer. In addition, R&D space began to move. Several well-capitalized medical marijuana grow houses with requirements between 18,000 and 40,000 SF were active, thanks to softened local regulations.
Positive net absorption of 172,000-square-feet erased the two previous negative quarters, bringing year-to-date absorption to a nominal, yet positive, 49,000 SF. Improving vacancy rate from 11.6% to 11.0% was enjoyed across nearly all the submarkets.
Sales with 1031 exchange activity was up, sellers were buyers and trading increased with inbound capital investment largely from California.
With the recent opening of the expanded Port of Entry at Tucson’s neighboring US/Mexico border, wait times to enter the US for trade and commerce have improved measurably.
Two buildings under construction totaling 259,751-square-feet, exceed the activity seen since 2009.
Click here for full Tucson MarketBeat Industrial Q3 2014.