Vacancy Rates Have Dropped for Four Consecutive Years

Tucson, Arizona  – The Tucson multifamily real estate market completed 2016 stronger than a year prior and shows promise to build further momentum this year, according to the 4^th Quarter report tracking 100+ units from Colliers International in Greater Phoenix.  To access the full report, click HERE.

Vacancy rates in Tucson rose 60 basis points during the fourth quarter, but finished the year at 6.9 percent, a full 90 basis points lower than year-end 2015.  This marks the fourth straight year that metro-wide vacancy has dropped.  New units are being leased at a healthy pace.

Construction of new units was steady for most of 2016, but is poised to slow down in the months ahead.  Developers have delivered an average of 950 units to the Tucson market each year since 2012.  Permitting slowed in the second half of 2016 with only 110 multifamily permits issued.  This is down from 275 permits in the first six months of last year.  Total multifamily permit issuance in 2016 dropped more than 60 percent from the 2015 total.

Rental rates in Metro Tucson rose during the final months of the year, which completes six quarters of increasing rents.  Asking rents increased by 4.7 percent in 2016, ending the year at $688 per month.

Sales of multifamily properties slowed slightly at the end of the year, but 2016 sales outpaced 2015.  The median price spiked nearly 30 percent during 2016 and reached more $41,500 per unit. Cap rates compressed to the mid-six percent range with fundamentals indicating a strong investment climate for 2017.

Construction is forecasted to slow considerably this year and new renter demand will expand with both population and employment growth.  This increasing demand will fill existing complexes. Further tightening the vacancy rates and pressuring gains in rental rates.  Purchases of multifamily properties dipped during the fourth quarter of last year, but have already picked up in the first few weeks of 2017.

For full report CLICK HERE.

The following commercial leases from Tucson and Phoenix were reported to the Real Estate Daily News from January 23 thru 27, 2017.

PHOENIX LEASES

RETAIL – 3755 S. GILBERT RD., GILBERT
Bullfrog Spas entered into a 5-year lease at Crossroads Towne Center 3755 S. Gilbert Road, Gilbert, AZ, 85234, Suite 108) for 4,000-square-feet of retail space.  Scott Smith and Sean Bishop of Lee & Associates represented the Tenant.  Brian & Tom Woods with Colliers, represented the Landlord.

TUCSON LEASES

RETAIL – 9610 N. ORACLE RD., TUCSON
Phuong Luu and Staci Do leased 1,300-square-feet at El Corredor in Oro Valley. The space will be used as a nail salon and will join Growlers USA within a new commercial development at the northeast corner of Oracle Road and Linda Vista. Kneaders recently opened in this project. Debbie Heslop, CCIM, of Volk Company represented the landlord, Boulder Oro Valley, LLC. [mepr-show rules=”58038″]Asking lease rate: $27.00 SF/YR NNN[/mepr-show]

RETAIL – 5623 E. 22^nd ST., TUCSON
Aleta Sarno, dba Lead Generation Services, leased approximately 1,200-square-feet of Office/Retail space located at 5623 East 22nd Street, Tucson, Arizona, from DG Commercial, LLC.  Frank Arrotta of Tucson Realty & Trust Co. represented both the Landlord and the Tenant in the transaction.

OFFICE – 6303 E. TANQUE VERDE RD., TUCSON
Peter Beren, P.C. leased approximately 898-square-feet of office space located at 6303 East Tanque Verde, Tucson, Arizona, from 6303 Tanque Verde, LLC.  Michael Gross of Tucson Realty & Trust Co. represented the Landlord and Gary Kipnis of Gary Kipnis Real Estate Services, represented the Tenant in the transaction. [mepr-show rules=”58038″]Asking lease rate: $14.50 SF/YR Full Service; Tenant Phone: 520.319.0370[/mepr-show]

OFFICE – 6262 N. SWAN RD., TUCSON
Malena Produce, Inc. has leased 794-square-feet at 6262 N. Swan Road, Suite 100, from Skyline Corporate Center, LLC.  Denisse Angulo of Cushman Wakefield| PICOR represented the Tenant and Cameron L. Casey of Oxford Realty Advisors represented the Landlord in the transaction. [mepr-show rules=”58038″]Tenant Phone: 520.281.1185[/mepr-show]

OFFICE – 6262 N. SWAN RD., TUCSON
Julia DiPierdomenico, MD & Daniel Thomas Horzempa, MD, husband & wife has leased 610-square-feet at 6262 N. Swan Road, Suite 105, from Skyline Corporate Center, LLC.  Cameron L. Casey of Oxford Realty Advisors handled the transaction.

To report your sales or leases contact us at REDailyNews@outlook.com

Greater Phoenix Office Market Improves Despite Slowing Job Growth

Phoenix, Arizona  – The Greater Phoenix office real estate market finished 2016 with positive momentum, despite year-end reports of slowing job growth.  The market vacancy rate dropped to 16 percent, the lowest figure seen since 2008.  A full copy of the Colliers in Greater Phoenix office market report can be accessed by clicking HERE.

Net absorption of Phoenix office space topped 930,000-square-feet in the fourth quarter, bringing the 2016 total to more than 3.5 million square feet.  Net absorption in the city’s office sector has been positive in each of the past 14 quarters.

Vacancy at the end of the year dropped to 16 percent, down 110 basis points from a year ago.  This trend has held steady since 2012, as the city has improved by an average of approximately 100 basis points per year.  Quarterly leasing activity was steady throughout much of 2016.  The largest lease of the year was signed during fourth quarter, when ADP committed to 225,000-square-feet at the former US Airways facility in Tempe.

The absorption growth and vacancy decreases have taken place despite a slowing in job growth.  Metro Phoenix experienced high-profile expansions and announcements from companies like ADP, Zenreach and Northern Trust.  After job expansion of nearly four percent in 2015, the local employment market grew by less than 1.5 percent in 2016.  The office-using sectors grew by approximately one percent in 2016 after posting a gain of nearly five percent in 2015.  Growth is predicted to accelerate in 2017 and the market could see a significant boost if single-family housing starts push higher in the year ahead.

Declining vacancy and impressive net absorption has pushed average asking rental rates up to $23.50 per square foot in the fourth quarter, which is 5.1 percent higher than a year ago. The fourth quarter marked the 15^th consecutive period of positive quarterly rent growth. Rents are rising across all property classes, which indicates improvement throughout the marketplace.

Approximately 547,000-square-feet of new office space came online in fourth quarter 2016, up from approximately 460,000 the prior quarter.  Developers brought nearly 2.4 million square feet of inventory online during 2016, which was a decline from 3.1 million square feet in 2015.  The final building of the 2.1-million-square-foot Marina Heights project in Tempe for State Farm will be completed in 2017 and several spec projects in the Tempe market are planned or underway for this year.

The office investment market showed a great deal of consistency in the fourth quarter of 2016, compared to a spike in large transactions at the end of 2015.  The fourth quarter saw a strengthening in office investments, even as interest rates rose.  Prices rose and cap rates compressed as 2016 closed.  The median price for a sale during fourth quarter 2016 was $145 per square foot, up from $141 per square foot in third quarter.  Prices were approximately eight percent higher in 2016 over 2015.  The average cap rate for 2016 was 7.6 percent, unchanged from the 2015 average.

The Greater Phoenix office market is expected to continue improvement during 2017.  Supply and demand growth in this cycle have been far steadier than during previous market expansions.  This suggests that our “boom and bust” history may be shifting to a less volatile path.  It is important to monitor the growth of office jobs, as continued slowing of employment expansion could put a drag on future demand for office space.  The improving market fundamentals are supporting a healthy investment market, which is predicted to remain robust in 2017.  While interest rates rose by approximately 85 basis points in the fourth quarter, sales velocity and pricing both ticked higher towards year-end.  Rising interest rates might lead to higher cap rates in future months, but so far those increases have not impacted our investment conditions.