By: Barbi Reuter, COO, Cushman & Wakfield | Picor

Vacancy in the Tucson retail market remained at 6.6% in the first quarter, in line with the stability reported over a two-year span. Comparing year-over-year Q1 net absorption, the delta represented 139.0% more space absorbed in Q1 2016 than was lost in Q1 2015.

The top leases, highlighted in a table on the full report were led by Midtown Mercantile Merchants, a 29,211-square-foot (sf) C&W | PICOR transaction. Expansion of eateries, led by quick-service restaurants, remained the strongest market driver, with medical uses a close second. New openings included El Pollo Loco and Krispy Kreme near Broadway/ Craycroft, Taco Bell at Houghton/Old Vail, Chick-Fil-A at Kolb/Grant, and MOD Pizza and Smashburger in the northwest. By this writing, Charro Steak, Batch, and Elvira’s opened in downtown Tucson. In the medical retailing trend, C&W | PICOR leased the former Hollywood Video location at Broadway/Houghton to TMC One for clinic space.

Grocery activity included the reopening of two Safeway/Albertson’s stores reclaimed from the Haggen’s bankruptcy: Broadway/Harrison and Speedway/Silverbell. Natural Grocers is under construction at River/ Craycroft, to be accompanied by a second Tucson Kneaders Bakery. Walmart’s expansion at Speedway/Kolb demonstrated the challenges of infill expansion and the post-recessionary trend of movement into higher density sites.

Nordstrom Rack opened its second Tucson store at Broadway/Wilmot in late April, and Dunkin Donuts was under construction on a pad at the northwest corner of Tanque Verde and Sabino Canyon. McAlister’s Deli and Starbucks were under construction on adjacent pads at First & Wetmore.

The forthcoming closure of three Sports Authority stores, part of the national liquidation, is symptomatic of challenges faced by mid-level retailers in a barbell market where high-end and discounters prevail.

Sales activity in Q1 included 24 sales, 13 of which traded hands over $1 million. At $34.6 million, quarterly sales volume was below the pace for the prior eight quarters, while the average sale price of $148.03 per sf was more similar to pricing seen in 2013 and 2014.

Economy
Preliminary BLS data reported that Metro Tucson added nearly 13,000 jobs year-over-year through February 2016, with total employment over 455,750 and an unemployment rate of 5.2% (which improved to 4.8% since publication of this report). These results demonstrate significant positive progress for the Tucson labor market. If preliminary figures hold, this level of employment would represent a record and the lowest rate of unemployment since April 2008.

Outlook
The forecast is slightly more optimistic than cautious, thanks to higher economic development activity and employment gains. Tucson City Council advancement of the Broadway alignment plan signals progress and removes uncertainty from this key gateway to downtown Tucson. The Tangerine Road widening has commenced in the northwest sector, and home builder activity is trending up.

For full report https://picor.com/wp-content/uploads/2016/04/Tucson_RET_1Q16.pdf

An affiliate of Los Angeles-based, Decurion Corp. (Michael Forman, CEO) bought the Tucson West office building at 333 East Wetmore Road in Tucson for $26.5 million ($186 PSF). The seller was WCCP Tucson West, LLC, an affiliate of West Coast Capital Partners (William Metzler, manager) with offices in Scottsdale and Torrance, CA.

The seller, WCCP, purchased the 142,148-square-foot Class A building in April 2013 for $16.4 million in a value-add transaction when the property was 80% leased and sold it 96% leased.

The 5-story building has been ENERGY STAR certified since 2010 with an energy performance score of 93. Following new adjustments through ENERGY STAR in 2011, the property has a performance score of 84, saving the building’s owners an estimated $20,000 in annual energy costs.

New tenants in the building are Tucson Orthopedic Institute that consolidated into the new TMC wing into an 11,400-square-feet office space used for its administrative office. Tucson Orthopedic Institute has three locations in the Tucson metro area. Mark Irvin with Mark Irvin Commercial Real Estate Services represented the tenant. Phil Skillings with NAI Horizon represented itself, the landlord.

Cenpatico of Arizona, Inc. also subleased 52,008-square-feet (the fifth and sixth floors) from Jacobs Engineering Group, Inc. Rick Kleiner, MBA, Stephen D. Cohen, and Russell W. Hall, SIOR, GSCS, with Cushman & Wakefield | PICOR and Eric Olofson with Cushman & Wakefield of California, represented Jacobs. Dean Cotlow with Cotlow Company, represented Cenpatico.

And several smaller leases and subleases went to Cross Country Mortgage, Brown & Caldwell and Crown West Realty.

This was the second highest office transaction in the Tucson market for 2015, surpassed only by the One South Church Street 22-story tower that sold for $32 million in October, followed by the Coventry Health Care Building at 3535 E Valencia that sold for $21.6 million in July.

Phil Skillings with NAI Horizon in Tucson, a partner in the selling entity, will continue on as leasing agent at Tucson West for the new owner.

Skillings can be reached at 520.326.2200 for more information.

To learn more about these transactions, see RED Comps #3507, #3146 and #3319.

PHOENIX, AZ – Marcus & Millichap (NYSE: MMI) announced the sale of Shea Professional Plaza, a 26,531-square foot office property located at 3101 East Shea Boulevard in Phoenix, AZ.

The office, Shea Professional Plaza, was purchased by an individual / personal trust. It was secured and represented by Michael R. Myrick, an investment specialist in Marcus & Millichap’s Phoenix office.

According to Don Morrow, regional manager of Marcus & Millichap’s Phoenix office, the asset sold for $1.2 million ($45.23 PSF).

The property has one tenant with an occupancy rate of 38 percent. Originally constructed in 1976, the new owner plans to completely renovate the building.