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Friday, September 10, 2010 |
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| A Review of 2007 and Look to the Future |
By Russell W. Hall, SIOR |
SQUARE FOOT MAGAZINE (MARCH/APRIL 2008) |
March 19, 2008
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.jpg) The PICOR Industrial Marketing Group has completed its 2007 Industrial Market Study and, again occupancies have improved with continued absorption and lowering of vacancies market wide. Per the PICOR Study (see Historical Occupancy Chart), the occupancy status market wide has improved to 94.9%, its highest occupancy status by far in the history of the Study. The Study, prepared personally by PICOR Industrial Brokers, tracks activities within Tucson’s industrial parks and larger properties, and excludes much of the owner/user inventory. The PICOR Study tracks 16,307,000 square feet of a total market size in the 40,000,000 square foot range.
Absorption continues...
Despite a relatively small amount of available space, 390,996 square feet of space was absorbed during the year. The primary contributors to this absorption were the following:
- Solon America, a solar production company in Germany, leased a former IBM building of 100,000 square feet adjacent to the Airport on South Country Club. Of interest, Global Solar, another solar products related production company, acquired the 100,814± square foot Imation Plant and is scheduled to commence production in the first quarter of 2008. This 2007 transaction is not reflected in the Market Study but is certainly an exciting development within the market.
- UFC Aerospace converted a former Wal Mart warehouse for their use in Century Park
The balance of the absorption occurred market wide with leases ranging from 1,000 – 15,000 square feet.
All industrial submarkets had occupancies exceeding 90% with three smaller submarkets at 100%.
Vacancies reduced to 5.1%...
There are very limited large blocks of space available within the market. A sampling of larger vacancies as of the end of 2007 include:
- 180,000 square feet at Century Park – a brand new high-clearance distribution building.
- 29,750 square feet at Century Park – since the Study’s conclusion, this building leased to Bax Global.
- Keenan Commerce – 43,500 square feet available.
- The University of Arizona Science & Technology Park – 46,535 square feet. The Park’s newest building enjoying good activity.
- 150,000 square feet at Century Park – also enjoying good activity.
New Construction / New Product...
Approximately 1,502,004 square feet are under construction as 2008 kicks off, the largest of which is the new Target Internet Fulfillment Center in Southeast Tucson, in an emerging area which includes such major users as Raytheon and IBM at the UA Science & Tech Park, Global Solar and La Costeña.
The UA Research Park, Target, La Costeña and Global Solar combined include close to 4,000,000 square feet with 99% of the space occupied.
The remaining “under construction” space is spread throughout various submarkets.
A new product type to Tucson has just come online which is the business park condominium projects. One example of which is the Southgate Business Park with individual units from 2,400 square feet to 3,200 square feet with flexibility to sell units to a small company of 2,400 square feet up to a full building of 32,000 square feet. A total of 108,000± square feet in five buildings surrounding a corner convenience store will be built.
Other highlights of 2007
- Rents combined to increase in all types of product as the supply continues to diminish.
- Several new incubator projects broke ground during the year, along with the first condominium projects with units for sale.
- Business park lots increased in value, even in the Airport area, where the demand has finally caught up with the supply.
2008 Six Month Forecast
- Lack of available space should slow the absorption level.
- 2008 could see as much as 1,000,000 square feet of new construction completed, with about half of that space for lease.
- Rents will continue to increase as occupancy remains high and new construction rates set the market.
- Land prices will continue to increase as the supply dwindles in the established industrial areas.
- Cap rates may start to edge upwards (7.25%-8%) as investment activity has slowed.
In conclusion, the Tucson industrial market maintains strength and velocity as we enter 2008. New construction will span all submarket areas adding to our inventory and providing space alternatives to businesses that continue to find Tucson desirable for expansion or relocation.
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