TUCSON, ARIZONA (May 1, 2025) -- In Q1 2025, Tucson’s office market experienced a slight uptick in vacancy, reaching 10.3%, indicating a modest but persistent upward trend for Tucson commercial real estate trends, according to Cushman & Wakefield | PICOR. The availability of space is further influenced by 320,000 sf (square feet) of sublease space, reflecting ongoing reassessments of space needs. Despite these challenges, the market showed resilience with notable leasing activity, particularly in the healthcare sector.
The Foothills and Northwest Tucson submarkets performed well, with Northwest Tucson experiencing a 3.7% rent increase. Central and Downtown areas saw more leasing activity but higher vacancy rates, while Southwest Tucson posted positive absorption of 19,867 sf.
Significant leases this quarter included new TMC Health Cancer Center leases totaling 63,551 sf across multiple locations, and Bayada Home Health Care, Inc. leasing 6,432 sf at 5151 East Broadway Boulevard.
The average lease size stands at 2,700 sf, with smaller tenants, under 4,000 sf, showing more consistent activity, while larger spaces face slower absorption. High interest rates and limited access to capital continue to deter new construction starts, with developers preferring pre-leased or medical-oriented projects.
Professional office lease rates averaged $23.49 per sf, up 2.0% year-over-year, with premium submarkets like the Foothills and select Class A properties reaching rates around $30 per sf. Rising material and labor costs have increased tenant improvement expenses by 30 to 40%, creating financial pressure for landlords. The investment sale market was muted, with $105M in sales over the past year, significantly below the five-year average. Notable sales included Hemisphere Corporate Center and 800 E Wetmore. Medical properties and owner-user transactions dominated activity, highlighting the sector’s resilience amid broader market challenges.