TUCSON, AZ (April 12, 2024) — Quarter 1 of 2024 is a wrap. As the Tucson housing market continues to pick up steam and build on the momentum from the second half of 2023, Real Estate Daily News thought it would be a great time for an update. In what has become a multi-year tradition, we went to the source of land and homebuilders in Tucson, Will White and Land Advisors Organization. We laid out a series of questions for Will to get his thoughts on where Tucson has been and where it might be headed. Will and John Carroll at Land Advisors-Tucson represent most of Tucson’s large-scale residential projects.

Highlights of the interview are below:

Time is flying, but we are done with Q1. What are you seeing and hearing out there?

It has completely lit up in the past 30 days. The “time out” taken into 2023 and the lack of “ready now” lot inventory has intersected. Things we couldn’t do 45 days ago, we can do now. That’s how Tucson works, good or bad. At this pace, most of the deal activity will be controlled in the next 60 days. It’s exciting. My favorite time! Q1 was strong. Good sales, good permits. This fuels the need to address the lot pipeline. The faster it goes, the quicker it needs to be replaced.

Permits are surging in Tucson. What is your take on this?

Correct. YTD permits are up 129% over 2023. Once the builder backlog started to move last summer, it was time to start building again. That is what you are seeing. Sales are strong with a handful of homebuilders consistently selling 50-60 homes per month. When you do this, you need to be even more aggressive in permitting more homes. In addition, we have noticed that the market is moving to a more “spec-heavy” program. Both factors combined are what is driving the permit surge, and I don’t see it stopping any time soon.

Builders took some time off when rates went up. How is this strong selling season affecting their attitude on land?

They did. You cannot do that in Tucson anymore. It’s a different ballgame, and the lot inventory just isn’t there. The freeze in summer 2022 was a big head fake, and once the rate buydowns started and the backlog started moving in 2023, it was game on. So now the lot demand is really strong, both by builders who have a bigger game plan and for those who realize that they are late to the party.

What does that landscape look like as we are in this post-pandemic era?

Good question. It 100% looks different. Our homebuilder market-shares are completely different, and the developer picture is as well. You will most likely have a Tucson metro market where four homebuilders do 75% of everything and a developer-heavy market that delivers about 80% of the lots out of larger projects. We have never had that situation in Tucson.

Where are the deals happening? Who is delivering lots?

In Tucson, the table is pretty set. Builders know who they will be buying the lots from. Sunbelt Holdings, Diamond Ventures, and Crown West have been the main suppliers with their larger projects. I think this will stay the same over the next 36 months. The main deal activity right now is in Marana and Vail. There is a lot coming up in the SW and I would keep an eye on that area.

We would assume supply is still tight. Do you have any new takes:

I’ll put some quick numbers to it. Builders have enough lots to last to the end of 2025 at the current absorptions. The Tucson market will permit 8,000 homes over the next 24 months, and builders will be able to purchase 3,500 lots to resupply. You can see the challenge as we get to the start of 2026. Community Count will be affected, the question is how severe and how long.

You are big on the struggle with infrastructure. Where are we with that?

After 2020 and the surge that followed, we figure about three years of business was pulled forward both in residential and commercial/industrial. This strained existing infrastructure, and the region didn’t get ahead of the next round. Now, we have major regional infrastructure components that need to be dealt with. Traffic, Interchanges, Floodplain/drainage, utility lines and capacity, entitlements, etc. We figure that there are about 20,000 lots that are now being held hostage to large infrastructure needs. The solutions will come, but how long that will take is a real concern.

Is Tucson destined to see many more apartments and multi-family alternatives become more prominent?

That will have to supplement the housing market. We can only get about 4,000 permits for SFR per year, and we have much more consumer demand. The challenge will be getting the multi-family projects constructed in the current market conditions. Also, a few groups swept up all the Multi-Family land, so they will dictate the pace of that. Tucson’s multi-family land is hard to come by, and companies like HSL Properties and Moderne Communities were extremely proactive in Tucson.

People would look around and say there is plenty of land in Tucson. What are we missing?

There is, but there just isn’t enough land in the condition that the homebuilders need it to be so they can build. Getting it into that condition will take time and dollars. They really prefer not to be in the land development game; they just want to build homes. To do that, they need full approval and all the infrastructure available to them. In a perfect world, it would be a 100% finished lot.

We are seeing a lot more industrial development on the outskirts of Tucson. While I assume this will be good for job creation, I can’t help but wonder if it is depleting our already limited supply of developable land.

Good topic. We are seeing a strong demand for our larger properties from a mix of industrial developers, mainly along I-10 and with access to good utilities. We are in the middle of a lot of discussions. What could happen, to your point, is we could see larger parcels slated for residential get transformed to employment/light industrial. Good for the region, but not great for the lot supply story.

LAO-Tucson has been orchestrating the lot game in Tucson for a very long time; is there anything you are changing with your approach?

No, I don’t think we will change much; the results have been solid. What we will be is constantly ahead of things for our clients and projects. I think you have a lot of ownership patience out there right now, and we want to push the market as best we can for the next 36 months. There are more records to be broken, and that excites us!

Give me three things to look out for in 2024:

1. Permits stay strong to get out ahead of demand and beat expectations.
2. Finished lot prices continue to run up.
3. Demand and deals from other commercial/industrial users for residential land around Tucson.

Will White has led the Tucson office of Land Advisors Organization for over 22 years. Under his leadership, the Tucson office has been recognized as the leading land brokerage company in Tucson by volume for well over a decade. Will specializes in representing the area’s top master-planned and residential communities. His work with southern Arizona’s homebuilders is well documented, and the office has been responsible for Tucson’s most high-profile land transactions and assignments.  Will represents Tucson projects with a lot inventory exceeding 20,000 future lots and is a known go-to for speaking engagements and writing contributions. Will’s long-term relationships with many key players in Tucson and Pima County enable him to represent public and private homebuilders, master developers, and large financial institutions effectively and efficiently. He is a member of the Southern Arizona Homebuilder’s Association, Big Brothers Big Sisters of Southern Arizona, Chair of the Advisory Board, and has worked with Urban Land Institute in their Mentor/leadership program. He received the inaugural TREND REPORT Best in Class Award as the Top Residential Land broker based on transaction volume, and he has consistently earned the CoStar Power Broker recognition in the Tucson Market. This achievement is based on transaction volume and dollar value. Will graduated from the University of Arizona with a bachelor’s degree in regional development and earned his Arizona Real Estate license in 1997. He can be reached at 520.514.7454 or wwhite@landadvisors.com.

(April 12, 2024) — Economists around the globe gasped at the latest March Consumer Price Index (CPI) data, which revealed creeping inflation isn’t going away just yet.

Surging gas prices and sky-high mortgages and rent caused inflation to rise more than expected in March, adding to Americans’ prolonged and painful battle with high costs. That could force the Federal Reserve to keep its punishing rates higher for longer.

US consumer prices picked up again last month, vaulting to a 3.5% increase for the 12 months ended in March, according to the latest Consumer Price Index data released Wednesday by the Bureau of Labor Statistics.

That’s up considerably from February’s 3.2% rate and marks the highest annual gain in the past six months. Wednesday’s report further highlights that the path to lower inflation remains extremely bumpy. It continues to drag down Americans’ hard-earned finances, preventing any loosening of monetary policy from happening soon.

• By the numbers: In March, the Consumer Price Index (CPI) surged by 3.5% YoY, exceeding the Fed’s target of 2%, and rose by 0.4% MoM. The CPI release and a strong jobs report have raised concerns about the potential delay in anticipated interest rate cuts.

• Consumer pressure: The agency said rising gas, rent, and mortgage costs accounted for over half of the monthly increase in the inflation index. Energy prices increased by 1.1% from the previous month, adding pressure to household budgets. The shelter segment also registered significant increases, contributing to the broader inflationary pressures. This combination signals tough times for consumers trying to keep up with essential spending.
• Higher for longer? In JPMorgan Chase’s latest annual report, Jamie Dimon’s letter to shareholders said 8% interest rates are still possible. A higher rate environment from persistent inflation means further delay in recovery for CRE. However, it also creates investment opportunities for distressed assets.

PHOENIX, ARIZ. (April 12, 2024) – NAI Horizon Executive Managing Director Isy Sonabend announced that commercial real estate industry professional and longtime executive Kelle Rice has been named the firm’s Director of Operations.

Rice will drive the NAI Horizon strategic plan, highlighted by operational and recruiting growth, building its property management division, and enhancing client and property marketing services.

In addition, Rice will be the firm’s Designated Broker, responsible for all oversight of brokerage activity in Arizona. NAI Horizon has offices in Phoenix and Tucson.

Rice provides operational leadership in all key business areas, including finance, transaction management, marketing, and human resources. She must work closely with the Board of Directors and Executive Committee to develop, implement, and direct the organization’s operational and fiscal function and performance.

“With her institutional background and deep experience in asset management, Kelle is a great addition to our team,” said Lane Neville, NAI Horizon Executive Vice President. “Our expectation is that Kelle will elevate our service offerings and client experiences through her leadership, managerial skills and community outreach.”

Rice will participate in outside organizations to increase the awareness, vision, and positive image of NAI Horizon for recruiting and business development locally, within the NAI Global network nationally and internationally. In the U.S. alone, NAI Global has more primary, secondary, and tertiary market coverage (over 135 offices) than each of the publicly traded real estate companies. NAI Global completes in excess of $20 billion in commercial property transactions annually (worldwide).

Rice is involved with the Urban Land Institute (ULI), AZCREW (Commercial Real Estate Women), and Valley Partnership.

Rice possesses 25 years of experience in leasing and managing operations of commercial real estate portfolios consisting of millions of square feet for prominent national REITs. She has been actively engaged in asset management, landlord lease representation, development, investment acquisitions/dispositions, and financial analysis underwriting.

Former employers include the largest dedicated owner and operator of medical office buildings in the U.S., Healthcare Trust of America (HTA, before it merged with Healthcare Realty Trust); Healthpeak Properties Inc. (when it was known as HCP); Ventas Inc.; and Whitestone REIT, which acquires, owns, operates and develops open-air, retail centers located in some of the fastest growing markets in the country, including Phoenix, Austin, Dallas-Fort Worth, Houston and San Antonio.

“The demands of commercial real estate in 2024 require constant course corrections. Kelle will be instrumental in navigating our growth particularly in operational roles that are so integral to driving revenue and delivering exceptional client services,”  Sonabend said.

A native of Columbus, Ohio, Rice enjoys hiking and traveling. She holds a Bachelor of Science from Arizona State University.