TUCSON, ARIZ. (July 24, 2025) — Cushman & Wakefield | PICOR’s Multifamily Advisory Team, led by Allan Mendelsberg and Joey Martinez, has released its Q2 2025 market commentary, offering a comprehensive snapshot of Tucson’s apartment investment landscape during a period marked by stabilized fundamentals but mounting underwriting pressure.
Investor Appetite Meets Capital Market Caution
According to Mendelsberg, investor demand remains strong, particularly for well-located, value-add opportunities. However, challenges on the financing front continue to dampen deal volume. “Lenders are underwriting conservatively,” Mendelsberg notes, “forcing investors to explore creative deal structures like seller financing and joint ventures to bridge the gap between pricing expectations and achievable leverage.”
Volume Slows as Sellers Adjust to New Realities
Joey Martinez observed a surge in listings during Q2—many with valuations still anchored to 2023 market conditions. “With rents flattening, insurance and maintenance costs rising, and cap rates adjusting upward, accurate underwriting is essential,” he emphasized. “We’ve succeeded by pricing assets in line with current realities, rather than holding out for yesterday’s numbers.”
Lending Landscape: Moderate Leverage, Insurance Hurdles
Pima Federal Credit Union’s Robert Motz reports an average loan-to-cost ratio of 65.72% in Q2, with interest rates for multifamily projects ranging from the mid to high 6% range. While sellers have become more flexible, Motz notes persistent headwinds from insurance premium hikes and volatile treasury yields. Still, the region’s fundamentals—proximity to I-10, the University of Arizona, and a diverse employer base—remain solid.
Appraiser Outlook: More Units, Lower Rents, Rate Watch
Ajay Madhvani of AM Valuation Services anticipates continued sluggish sales and slightly declining rents through year-end. While over 3,600 units are under construction and 4,800 in planning, Tucson is not yet at risk of oversupply. However, federal budget cuts, potential visa restrictions, and a softer job market may apply pressure. A federal rate cut could revive refinance and sales activity.
On-the-Ground Management Trends
Chris Meehan with Fort Lowell Realty reports that property managers are seeing longer leasing timelines and the return of concessions. “We’re seeing $0 deposits and free rent offers in select areas,” one manager noted. Despite seasonal traffic, some communities are struggling to find qualified renters, particularly in lower-tier assets where economic strain is more pronounced.
As the second half of 2025 begins, Tucson’s multifamily market appears stable but cautious, with success hinging on location, realistic pricing, and adaptive deal strategies.
For a complete list of first half 2025 Tucson multifamily sales with 5+ Units, CLICK HERE
For more information, contact: Allan Mendelsberg – [email protected] – (520) 546-2721 or Joey Martinez – [email protected] – (520) 546-2730.