TUCSON, ARIZONA — Highlighted this week is a new lease in Tucson at 5025-5069 E 29th Street within Town Central Business Park to Marksman Pistol Institute handled by Paul Hooker, SIOR, Principal, and Andrew Keim, Industrial Specialists with Cushman & Wakefield | PICOR.

The following leases were submitted to the Real Estate Daily News from May 23-27, 2022.

INDUSTRIAL – TOWN CENTRAL BUSINESS PARK, TUCSON 85711, East
OConGI, LLC, dba Marksman Pistol Institute, renewed their lease with Pegasus Tucson Owner LLC for 10,300 square feet of industrial space at Town Central Business Park, 5025, 5051, 5063, 5065, 5067, and 5069 E. 29th St. in Tucson. Paul Hooker, SIOR, Principal, and Andrew Keim, Industrial Specialists with Cushman & Wakefield | PICOR, represented the landlord in this transaction.

INDUSTRIAL – 965 W. GRANT RD., TUCSON 85705, Central
Lightsense Technology, Inc. leased 4,000 square feet of industrial space from Sundance Property Management, LLC, located in Grant Interstate Commons, 975 W. Grant Rd,, Suite 105 in Tucson. Paul Hooker, SIOR, Principal, and Industrial Specialist with Cushman & Wakefield | PICOR, represented the landlord in the transaction. Robert Davis, with Tango Commercial Real Estate, represented the tenant.

INDUSTRIAL – 3860 S. PALO VERDE RD., TUCSON 85714, South
Restaurant and Market Distribution LLC leased 2,364 square feet of industrial space at Palo Verde Business Center, 3860 S. Palo Verde Rd., Suite 317-318 in Tucson, from Pegasus Tucson Owner LLC. Paul Hooker, SIOR, Principal, and Andrew Keim, Industrial Specialists with Cushman & Wakefield | PICOR, represented the landlord in this transaction.

RETAIL – 5839 E. SPEEDWAY BLVD., TUCSON 85712, Northeast
Ali Garaawey & Amjad Aburahma leased 2,250 square feet of retail space at 5839 E. Speedway Blvd. in Tucson, from El Ganado Limited Partnership. Greg Furrier, Principal, Retail Specialist with Cushman & Wakefield | PICOR, represented the landlord in this transaction.

INDUSTRIAL – 1870 W. PRINCE RD., TUCSON 85705, Central
STAT Overnight Delivery LLC leased 1,440 square feet of industrial space at Exchange Place, 1870 W. Prince Rd., Suite 28 in Tucson, from Pegasus Tucson Owner LLC. Paul Hooker, SIOR, Principal, and Andrew Keim, Industrial Specialists with Cushman & Wakefield | PICOR, represented the landlord in this transaction. Stewart Flowers with Dollar Flowers Realty Partners, represented the tenant.

RETAIL – 5301 E. SPEEDWAY BLVD., TUCSON 85712, Northeast
Neltrek Evolution, LLC leased 1,200 square feet of retail space at 5301 E. Speedway Blvd. in Tucson, from H.L.F. Properties, Inc. The space will be used for selling electric bicycles, scooters, and related services, and serve as a wheel’s showroom. Andy Seleznov, CCIM, Retail Specialist, and Ryan McGregor, Office Specialist with Cushman & Wakefield | PICOR, represented the landlord in this transaction.

INDUSTRIAL – 3230 S. DODGE BLVD., TUCSON 85713, South
RX2 Restoration, LLC leased 1,200 square feet of industrial space at South Dodge Business Center, 3230 S. Dodge Blvd., Suite 5 in Tucson, from Pegasus Tucson Owner LLC. Paul Hooker, SIOR, Principal, and Andrew Keim, Industrial Specialists with Cushman & Wakefield | PICOR, represented the landlord in this transaction.

INDUSTRIAL – 3949 E 29th ST., TUCSON 85711, East
AZ Professional Services, LLC & AZ Systems, LLC renewed their lease with Pegasus Tucson Owner LLC for 1,129 square feet of industrial space at Midpoint Business Plaza, 3949 E. 29th St., Suite 706 in Tucson. Paul Hooker, SIOR, Principal, Andrew Keim, and Molly Mary Gilbert with Cushman & Wakefield | PICOR, represented the landlord in this transaction.

OFFICE – 1200 N. EL DORADO PLACE, TUCSON 85715, Northeast
Edward D Jones & Co. LP, dba Edward Jones, renewed their lease for 912 square feet of office space, located in El Dorado Square, 1200 N. El Dorado Place, Suite F-646 in Tucson, with El Dorado Ventures, LLC. Thomas J. Nieman, Principal, and Molly Mary Gilbert, Office Specialists with Cushman & Wakefield | PICOR, represented the landlord in this transaction.

Submit sales and leases to [email protected]

LAS VEGAS, NV — The member organization for industry advancement, ICSC, held its premier event in Las Vegas last week.   According to many of the 22,000 attendees, the marketplaces industry is in recovery mode but still bears some scars from the pandemic.  ICSC promotes and elevates the marketplaces and spaces where people shop, dine, work, play and gather as foundational and vital ingredients of communities and economies.

In Summary

Consumers continue to shop despite inflation and supply chain disruption, pushing well-capitalized retailers to add stores and prompting investors seeking big returns to put their money into the marketplaces industry.

New retailers are growing, new tenant classes are emerging and existing tenants are finding their physical stores more important to growing profits and sales than ever.

But many landlords came to ICSC 2022 Las Vegas with vacant space to lease after the pandemic closed their weakest tenants, some of which operated large stores.

One of the industry’s biggest challenges will be reviving and retrofitting second-generation space to accommodate today’s growing tenants. Government officials are often the best collaborators on such projects, a source of tax breaks and other incentives that can motivate retailers and other end users to choose second-gen space.

Growing Retailers Demand Space

Don’t expect to see many more store closures this year. Retailers have learned how to manage their portfolios better and already shed many unwanted units during the pandemic.

New entertainment concepts abound, too.

The only thing slowing growing tenants down is a supply chain that’s keeping stores from opening on time.

Retailers also want to own more of their own industrial assets, and they’re even considering bringing manufacturing back to North America from Asia to have more control of the supply chain. Additionally, they’re stocking fewer seasonal items.

Interest Rates Won’t Slow the Market for Top Retail Properties

Meanwhile, investors are becoming increasingly fond of top retail properties, particularly those anchored by supermarkets and freestanding fast-food and drugstore properties, even though rising interest rates are making retail properties more expensive. A 10-year Treasury rate of 10% or higher is here to stay for a while, and it’s going to change how retail properties trade.

The average cap rate on retail property deals in May was 6%, according to CoStar Group. Even as prices rise, the income of the properties being purchased is growing fast enough to justify the higher prices, according to CoStar.

ICSC’s 2022 State of the Industry Report analyzes key indicators and data that point to the strength of the industry, the core challenges facing retailers, the state of consumer confidence and emerging trends and innovations that will help marketplaces continue to invigorate communities. See full report here.

PHOTOS:  A special thanks to Nancy McClure with CBRE Tucson who sent us the photos from ICSC.

By Barbara Jackson, Tango Commercial Real Estate Tucson

TUCSON, ARIZONA — For decades, Arizona school children have been taught the five Cs: Copper, Cattle, Cotton, Citrus, and Climate. Three of those “C’s” are agriculture. It has been said – If it wasn’t for Copper and Cattle – Arizona wouldn’t be here. The Miners and Ranchers are who settled this state. And thanks to major rivers such as the Gila, Salt and Santa Cruz long before Arizona was a state, and before there was a United States, agriculture thrived in the region. Agriculture’s history in the Grand Canyon State stretches back more than 4,000 years. Archaeological records show Indigenous people growing gardens to sustain their families. When explorers traveled through the state in the early 19th century, they found people growing corn, wheat, barley and raising cattle. They also found one of the most amazing irrigation systems, one that is still used today. The Hohokam people built the canals to move water from the Gila and Salt Rivers to their fields.

Ag land today in Arizona is still farmland, cattle ranches and dairies. Today, agriculture in Arizona contributes more than $23.3 billion to the state’s economy. One study puts the number of jobs supported by agriculture at approximately 138,000, and the number of workers employed at 162,000. The animal industry, led by cattle ranching and dairy, is the largest agricultural sector. These farms and ranches are about 26 million acres. Arizona also has the highest proportion of land allocated to Native American reservations, at 28%. Tribes and the state and federal government own 81.8 percent of all Arizona land, leaving just 18.2 percent open to private owners.

But the farmlands are going away – very fast – more than an acre of farmland is lost per minute in the United States, over 1 million acres are being developed annually. Between 1997 and 2017, 36% of all farmland in Maricopa County was lost.

Another major loss to ag is foreign ownership. Anyone can buy US farmland. China currently owns almost 200,000 acres of U.S. farmland. Major investment companies are buying farmland for the water rights and re-selling the water to the highest bidder. Tucson did this in the 70’s buying up much of the Avra Valley farmland. A 1978 law was supposed to ensure that foreign-owned farmland is tracked through the USDA, but the data collection associated with that law appears to be incomplete.

The House Appropriation Committee approved an amendment to the USDA funding bill. Not only would it ban China from buying any more farmland, but it would also bar current land from being eligible for farm subsidies. The amendment was added by Congressman Dan Newhouse of Washington state, who calls it a national security issue.

How to stop that loss of land is a major problem for Ag. One tool being widely used today is putting land into conservation easements.

We always talk about the highest and best use for a property. Approximately 29% of the land in the United States is too wet, rocky, steep, or arid to support cultivated agriculture.  Cattle ranching is the perfect example of “upcycling.”  Cattle graze on grasslands turning natural resources like pastureland and solar energy into beef and other everyday products. They are “upcyclers” that take otherwise useless materials, add nutritional and environmental value, and transform them into a high-quality protein and essential micronutrients. In fact, the U.S. beef industry produces more than three-times more high-quality protein for the U.S. food supply than cattle consume.

What is the real “elephant” in the room – WATER, or the lack thereof. During the construction of the Central Arizona Project (CAP) farmers all along the route of the canal were encouraged to “deed over” their wells and use cheaper CAP water. Most of them did so. Fast forward to 2022 and in the major central valley irrigation districts the farmers received a 30% decrease in their CAP waters. In 2023 the other 70% will go away. Meanwhile the government is providing millions to drill wells to replace that water loss.

Today approximately 70% of the state’s water goes to agriculture – but one needs to remember – when it goes on a crop it soaks into the ground allowing that plant to grow, most of that water is being returned to the water aquafer below. It comes back to us, unlike water used for residents or industrial.

Here at Tango our thoughts regarding industrial properties are that is hard to draw trend conclusions other than the supply – demand for industrial SPACE indicates there should be increased sales activity for industrial parcels to build for lease or sale buildings on. Currently $2.50 / SF in the southeast – $6.00/ SF in the northwest. When you think about it, most of the industrial space in Tucson is OLD! Much of it was built in the 1970s and 1980s. Additionally, the spaces are obsolete for the way business is done today. We need more properties that are configured differently, climate-controlled vs swamp cooled and have access to high speed data. You can argue the case that not should there be increased sales activity for industrial parcels to build new facilities but many of the current industrial properties, though strategically positioned, need to be torn down as they’re obsolete and replaced with something useful. Goes back to the saying, “Tucson isn’t overbuilt, it’s under demolished!”

Speaking to a fellow commercial/ag realtor in the Phoenix area he said: “Commercial and Residential land is hot in Maricopa county.  Here in the East Valley Dairies are going to both and several have been sold for Industrial sites.  Mesa converted a large part of former Industrial to Residential. Most of the valley has CAP or Salt River Water, so water is not an issue.

Even Maricopa has lots of development again with the State selling a half section for about $300,000 / acre. Except for land close to Casa Grande, there is not much rural activity for farming or industrial.  Farmer to Farmer sales (which depend on the water situation) are almost non existent.”

Today in Marana farmland is selling for $60,000 to $65,000/acre. No one will farm that land – it will be developed. Farmland in Arizona that will be farmed – if it has water is $10,000 to $30,000/acre. Right now farmland in the heart of the mid-west is auctioning for over $10,000/acre

So the age old trend continues – ag lands go away to residential or industrial development.  Needless to say the transition of farmland to industrial is driving the price of farmland up and therefore land for industrial use.

Barbara Jackson, Vice President Agricultural & Industrial Properties at Tango Commercial Real Estate is a seasoned agribusiness and life science professional. She literally grew up in the agribusiness and has a passion for bovines and the cattle industry! A native Tucsonan, she was raised on a commercial feed yard and her family pastured cattle where Green Valley is today. Barbara graduated from Washington State University in Pullman, Washington, with a BS in Animal Science, minor in Ag Economics. After college and one year at her family’s feed yard business in Arizona, she left and joined Syntex Agribusiness.

Barbara can be reached at (520) 730-5564 or [email protected]