|
|
Tuesday, September 7, 2010 |
 |
 |
 |
|
|
| Third Quarter Office Update |
By Rick Kleiner, Tom Knox, Tom Nieman, PICOR |
TREND REPORT, NOV 09 |
November 4, 2009
|
Anecdotal reports suggest market activity has increased through the third quarter. Statistical reports suggest otherwise. The city-wide overall vacancy is 11% in a market of 21.6mm square feet. Year to date absorption continues to be negative.
Despite protestations to the contrary from the banking community, local owner user office building sales have ground to a halt due to more stringent underwriting and appraisal standards. Potential buyers are discouraged from making an acquisition choice due to the increase in equity required.
Investment activity is nil in a market that is thin to begin with. Here, again, financing is the major deterrent. Buyers and sellers are agreeing on seller financings for short-term loans to weather the drought in the conventional credit market.
There is very little new construction activity in Tucson. Several small projects will deliver space in the fourth quarter, but no new projects are planned in a market that demands advance sales or pre-leasing. Owners of well-located development parcels are holding their ground in anticipation of better times ahead. We believe that time is still 12-18 months out, but unlike larger markets, Tucson does not suffer from a large overhang of empty, recently completed projects.
Vacancies are within a healthy range, with asking lease rates and sales prices holding at reasonable market levels. Still, with the lack of requirements actively seeking the available space, exceptional opportunities exist for tenants and buyers wanting a new home.
In the office market, overall activity remains flat in terms of quantity of inquiries as well as quality of prospective tenants. Our sense is that prospective tenants and buyers are not yet convinced that the market has bottomed out. Hence, they prefer to wait a bit longer for the ‘real deals’ that are ‘just around the corner.’ Typical asking market lease rates and sale pricing are now some 15% to 25% off their peak. There is intense competition between landlords to ‘sweeten’ lease terms for prospective tenants by offering a lower rate and free occupancy. Because the upcoming year-end timeframe is typically slow due to the holidays, we’ll see whether firms that have delayed consideration to relocate or expand will decide that it is timely to look at the market.
|
| >>Go to NEWS AND EVENTS |
|
|
|
|
|
|
|
