The Tucson Commercial Real Estate Market

Tucson, Arizona, is rapidly emerging as a hotspot for commercial real estate, offering diverse investment opportunities and a dynamic market landscape. As the state’s second-largest city, Tucson’s expanding population and robust economic growth make it an attractive destination for property investors and businesses.

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Tucson’s Commercial Real Estate Overview

Tucson’s strategic location near Mexico and Southern California, coupled with its growing economy driven by sectors such as education, defense, technology, and healthcare, makes it a prime area for commercial real estate investment. Major employers like the University of Arizona and Davis-Monthan Air Force Base drive employment growth, contributing to the city’s expanding workforce.

Tucson also offers a favorable cost of living compared to nearby states, along with abundant recreational and cultural amenities that enhance its appeal to both residents and businesses.

Regional Breakdown

• Population: Over 1 million in the Tucson MSA; approximately 550,000 within city limits.
• Growth: 1.3% increase in population from the previous year.
• Cost of Living: Lower than the US and Arizona averages.
• Income: Median household income of $64,014, with per capita income at $37,595.

Tucson Job Market

The job market in Tucson is robust, with significant growth in the high-tech sector and a thriving small business community. Key companies such as Raytheon Missile Systems and Texas Instruments are major employers, contributing to a steady rise in job opportunities.

• GDP: $50.2 billion, a substantial increase from previous years.
• Unemployment Rate: 4.4% as of August 2023.
• Projected Job Growth: 1.6% annually for 2024 and 2025.

Tucson Industrial Market

Tucson’s industrial market is seeing growth, with increased space deliveries and rising vacancy rates. The market remains resilient with positive net absorption in key submarkets such as the Airport and Northwest.

• Market Overview (CBRE Q3 2023)
  • Inventory: 41,949,857 SF
  • Vacancy Rate: 5.9%
  • Absorption: 154,628 SF YTD
  • Key Leases: Better Box, ATI Restoration
  • Under Construction: 274,889 SF

Tucson Office Market

The office market in Tucson is rebounding with increased demand from medical tenants and a lack of new construction, which helps maintain competitive pricing despite economic uncertainties.

• Market Overview (Cushman & Wakefield Q3 2023)
  • Inventory: 28,893,292 SF
  • Vacancy Rate: 8.9%
  • Absorption: 303,558 SF YTD
  • Key Leases: Pima Heart Surgical Center, Safelite Auto Glass
  • Under Construction: 130,000 SF

Tucson Retail Market

The retail market in Tucson remains robust, especially in the food, beverage, and health sectors. Development is often tailored to specific needs, indicating a strong consumer spending trend.

• Market Overview (Cushman & Wakefield Q3 2023)
  • Inventory: 55,973,625 SF
  • Vacancy Rate: 5.6%
  • Absorption: 569,684 SF YTD
  • Key Leases: Blossom Living, Workout Anytime
  • Under Construction: 35,565 SF

Tucson Multifamily Market

The multifamily market in Tucson shows mixed results, with rising rents and increasing vacancy rates. Despite lighter sales activity, the market continues to attract investors with its balance of growth and stability.

• Market Overview (Northmarq Q2 2023)
  • Total Housing Units: 479,654
  • Multi-Unit: 110,320
  • Vacancy Rate: 8.1%
  • Asking Rents: $1,182
  • Under Construction: 3,799 units

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