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Sunday, September 5, 2010 |
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| 2010 rough for Tucson's CRE, but signs of hope for 2011 |
By Dale Quinn |
ARIZONA DAILY STAR |
January 27, 2010
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This year will be another rough one for the commercial real estate and multifamily housing markets, but there are some signs of hope for 2011.
That was a theme Tuesday at the 2010 Economic Forecast Breakfast hosted by Southern Arizona's Institute of Real Estate Management and the Building Owners & Managers Association of Greater Tucson.
About 150 members of the two groups attended. Here's what some industry experts who spoke at the forecast had to say:
Nancy McClure, retail specialist with CB Richard Ellis:
The economic downturn is providing retailers opportunities to relocate to better locations, like those at major intersections near high-traffic commercial centers, McClure said.
But midblock locations, where motorists speed by at 45 mph, aren't seeing any action, she said. When it comes to keeping the cash flow at less desirable properties, landlords need to keep their properties in good shape, and start talking with their tenants early to get them signed into lease extensions, McClure said.
Retail vacancies increased 2 percent in the last six months of 2009 and are now about 12 percent, she said.
There are positive retail signs in Tucson, McClure said. Best Buy's highest performing store in Arizona is on Broadway, and Costco's number two and three stores are in Tucson, she said.
Rob Glaser, industrial specialist with Picor Real Estate Services:
The last year was a bleak one for the industrial market with a nearly 3 percent drop in occupancy, Glaser said.
At the end of the year, Tucson's industrial properties were 86.9 percent occupied, he said. Half of that vacancy was in 11 large facilities, Glaser said.
Property values and rents have dropped. Also, landlords are having to offer their tenants free rent to stay competitive.
As for a recovery, there probably won't be as much growth as there was in 2006 and 2007 when the market was peaking, Glaser said. "I think we've seen our last year of negative absorption," Glaser said. Occupancy levels should start to improve in coming years, but the recovery is going to be slow, he said.
Pete TeKampe, multihousing investment specialist, Marcus & Millichap:
Increasing home foreclosures have put pressure on multifamily properties. "That is one of the biggest threats to the apartment market," TeKampe said.
Foreclosed homes can become rental properties, and that pulls tenants away from apartment complexes, he said. At the end of the year, Tucson's vacancy rate for apartments sat at 12.5 percent, TeKampe said.
Recovery of the apartment market hinges on jobs, he said. Since 2008, there were 25,000 jobs lost here, he said. That means people are moving into smaller apartments or moving in with family or friends, increasing the number of vacancies.
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