TUCSON, ARIZONA - Cushman & Wakefield | Picor is reporting total housing permits rose by 23.0% in 2020 statewide which includes a 25.5% increase in multi-family permits. Residential values have risen 7.9% statewide during the year. Arizona’s unemployment rate is expected to drop from the 2020 pandemic peak of 8.1% to 5.8% in 2021.
Tucson’s relatively low cost per unit and favorable cap rates are attractive0 to investors leaving inflated markets like California, Denver, Texas, and even Phoenix. Owners continue to request pricing analyses to determine their properties’ current value, with some investors hesitant to sell pending more certainty and inventory to exchange into. With heightened demand, the Tucson multifamily market has not skipped a beat; average time on the market for well-priced properties is under two weeks. It is a great time to be a seller in Tucson, as properties for sale have limited competition amid strong interest from buyers.
Read Picor's full Q1 2021 Tucson Multifamily report here.
During Q1 2021, the Tucson office market ‘stayed the course’ from activity patterns that have been in place during Q3 and Q4 2020.
Overall market vacancy remained stable at 9.3%. Of note, the Central, East and West submarkets posted the highest vacancy rates at 13% and up, while Downtown and Southwest submarkets reflect strong demand with vacancy rates of 3% and up. The Foothills submarket also reflects continuing lease-up, with an 8% vacancy rate. Average lease rates ticked up slightly to $20.67 per square foot (psf). While total inventory remained stable, it’s worth noting that significant new construction is underway in the Downtown, Southwest and Central markets, which not coincidentally are submarkets with the lowest vacancy rates. We anticipate that Q2 2021 will turn the corner towards increasing demand for office space. In light of Arizona’s low rate of COVID-19 infections and encouraging vaccination trends, companies will be returning to their offices in increasing numbers. Pent-up demand is likely to become evident as decision makers feel more comfortable evaluating their near-and long-term office requirements.
The average Tucson lease rate increased slightly by $0.05 psfor 0.2% in the last quarter showing a slowing of rental rate growth. The market sale price increased by $0.69 psf. Cap rates increased from 7.4% to 11.8% which is likely a reflection of slower leasing activity and a slight increase in vacancies in Q1 2021. The median cap rate increased 1.5%, while the median building price dropped 6.2%, most likely due to a few large properties selling well below market rate.
Read Picor's full Q1 2021 Tucson Office report here.