TUCSON, ARIZONA — CBRE Research has released the Q4 2017 MarketView reports on the Tucson office, retail and industrial commercial real estate sectors. With demand and market fundamentals on the upswing, the vacancy rate has dropped for office and industrial while retailers are seeing a shift to the suburbs.

Q4 2017 Office Highlights

• In the fourth quarter of 2017, net absorption reached 167,413-square-feet. This was a notable improvement from the same time last year when net absorption totaled 62,147-square-feet.
• Net absorption in Q4 2017 was bolstered by the East Central and Northwest submarkets, which accounted for 87,882-square-feet and 55,188-square-feet., respectively.
• Strong demand in Q4 2017 pushed the marketwide vacancy rate down 170 bps quarter-over-quarter to 12.6%. On a year-over-year basis, vacancy decreased by 300 bps.
• No new office product was delivered during the second quarter of 2017, while 150,000-square-feet. BTS for Caterpillar broke ground in the West Central submarket.
• For full report see Q4 2017 Tucson Marketview Office

Q4 2017 Retail Highlights

• Q4 2017 ended with 4,382-square-feet of positive net absorption, up from (50,272-square-feet) of negative net absorption recorded in the previous quarter.
• Vacancy in the Tucson retail market declined slightly by 10 basis points (bps) quarter-over-quarter to 7.2% in Q4 2017. On an annual basis, this represents a 10 bps decrease.
• Year-over-year, vacancy declined in only two of the six submarkets. Vacancy fell 260 bps in the Northeast submarket to 7.7%.
• In Q4 2017, the marketwide average asking lease rate dropped slightly quarter-over-quarter to $15.70 triple net (NNN) per square foot
• There was one new retail delivery to the Tucson market in Q4 2017, the BTS for Ross Dress for Less in the Houghton Town Center.
• One project totaling 55,000-square-feet is currently underway in the Southwest submarket. The Landing (formerly “Fashion Park”) continues construction on Phase I of the master-planned development located on Irvington Road west of I-19.
• For full report see Q4 2017 Tucson Marketview Retail

Q4 2017 Industrial Highlights

• In Q4 2017, Tucson’s marketwide vacancy rate decreased 10 bps quarter-over-quarter to 8.1%. On a year-over-year basis, vacancy fell 20 bps.
• Quarter-over-quarter, the average asking lease rose to $0.50 NNN per sq. ft. Year-over-year, average rent increased by 6.4% marketwide.
• No new space came online during the fourth quarter of 2017. Additionally, two projects are still underway. The Port of Tucson, a 238,734-square-feet rail-served warehouse, in the Southeast submarket is anticipated to deliver in early 2018. Additionally, Switchgear Solutions is building a 19,033-square-feet Class B warehouse facility in the Northwest submarket.
• For full report see Q42017 Tucson Marketview Industrial

Phoenix, Arizona – CBRE Research has released its Q4 2016 Phoenix Retail MarketView and Big Box reports, and overall the Valley’s retail market performed well to close out the year. Top-level highlights included:

Overall market fundamentals & general leasing activity:

• Q4 was highlighted by roughly 600,000 sq. ft. of positive net absorption, which was the greatest amount of any quarter in 2016
• Overall, 2016 saw nearly 5 million sq. ft. of gross leasing activity, surpassing 2015 totals by just over a million square feet.
• Market wide vacancy dipped four basis points (bps) quarter-over-quarter, ending Q4 at 8.9 percent.
• The Valley’s average asking lease rate ended Q4 at $17.16 PSF (NNN), which is a 4 percent year-over-year increase.
  • Trend alert: Rent growth was particularly supported by rising demand from restaurant users in 2016 as these users typically pay a premium for well-located, quality space.
  • Construction completions reached a six-year high in 2016, reaching 1.3 million sq. ft. of new product brought online.
  • Completed construction in Q4 alone exceeded 350,000 sq. ft.

Trend alert: Grocers lead the new construction wave with four Fry’s Marketplaces and two Spouts Farmers Markets build-to-suits were brought online, driven by high levels of household formation and housing growth. Demand for grocers is expected to extend into 2017, with two Fry’s and one Sprouts in the development pipeline. According to First Vice President Greg Abbott, 2017 should continue to be a healthy year for retail. He points to steady job and wage growth continuing to support consumer spending as well as a strengthened housing market as indicators that will benefit the Valley’s retail sector.

“Phoenix still has a lot of runway for retail growth, given we were one of the last markets to head into recovery post-recession,” said Abbott. “The Valley’s housing market is projected to be one of the best in country and because retail tends to follow rooftops, I expect a lot of momentum as retailers expand and enter the Arizona market.”

Big box retail highlights:

Metro Phoenix’s big box market performed well in 2016 despite several big box retailer bankruptcies early in the year. Big box space continued to be in high demand as tenants expanded their footprints across the Valley.

• At year’s end, 120 big box spaces totaling just over 4.3 million sq. ft. were available across the Valley. Breaking that down, CBRE Research reports:
• 28 Class A spaces totaling 953,067 sq. ft.
• 53 class B spaces totaling just over 2.1 million sq. ft.
• 27 class C spaces totaling 819,686 sq. ft.
• 12 class D spaces totaling 497,712 sq. ft.

CBRE experts expect much of the older big box space to be redeveloped to meet modern use requirements. This includes adaption for uses other than retail, as well as seeing some broken down and split into smaller footprint boxes.

• Supply/demand balance remained healthy as four big-box spaces totaling over 300,000 sq. ft. were delivered – all 100 percent pre-leased.
• Former Sports Authority space continues to be in high demand. Three of the class A spaces were absorbed in Q4 bringing the 2016 total of absorbed SA boxes to four.
• Target signed an approx. 50,000-sq.-ft. lease for a “flexible-format” store – the first of its kind in the Valley.First Vice President Todd Folger says he expects demand from big box retailers will continue at the same – if not higher – levels as we head farther into 2017.“2016 saw 17 big box spaces absorbed for 905,046 sq. ft. in Q4 alone and 41 spaces for nearly 2.1 million sq. ft. for all of 2016. With only 28 class A boxes currently available, the market is getting increasingly competitive,” said Folger. “Development has started to keep pace with demand, so I expect pre-leasing activity on new class A space to remain high as well. The remainder of available big box space is starting to reach the end of its functional life, so look for continued redevelopment of those boxes for uses outside of retail.”

  To see the full retail report click here: 4Q2016_Phoenix_Marketview_Retail

  To see the full Big Box report click here: Big_Box_Retail_Report_4Q2016

PHOENIX, Ariz. — Company relocations and expansion in Greater Phoenix continued to capture headlines in 2016. CBRE Research tracked 74 company announcements during 2016 that totaled nearly 17,000 new jobs. Note, these jobs are company projections and are usually totaled over a three to five year time period. Not surprisingly, the majority of these company announcements are concentrated in Phoenix, Tempe and Scottsdale – areas that attract companies because of their amenities and access to talent. As a result, these location boast some of the strongest submarkets in the metro and are expected to remain high performers during the near term.

Among these announcement, the most active industries expanding were concentrated in office-using sectors including tech and financial services. Growth in office-using jobs over the past two-years resulted in a new market record for net absorption during the two-year span. These job announcements along with limited amounts of new supply underpin an outlook for continued improvement in office market fundamentals.

Overall, Phoenix metro employment grew 2.2% in 2016, adding roughly 42,100 new jobs. Heading in to 2017. The forecast is much more optimistic. According to University of Arizona Business and Research Center, Phoenix employment is expected to grow 3.2%, representing 63,000 jobs. These jobs will support demand for commercial real estate during the coming year as new jobs support consumer spending (retail), fuel the need for office space and continue to drive industrial and logistics demand.

To see metro map Click here