Summer Industrial Leasing Surge

Pre-2020, Tucson industrial leasing would slow down in the summer. Leasing remains strong although not like 2021 levels with multiple tenants bidding on the same vacancies. The leasing demand seems to be coming in waves and this summer packs strong demand. In June alone, I closed 9 transactions.

Overall vacancy has increased while the vast, vast majority of vacancy remains in bigger bays. Vacancy below 50,000 SF warehousing remains at all time lows while more industrial product is set to be demolished and re-developed this year than is built. Demand is robust and diverse, ranging from housing market materials suppliers and subcontractors to manufacturing, distribution and lab space. The biggest drivers for Tucson’s economy right now are housing market construction, mining and defense.

We have seen a lull in the manufacturing market as demand seems to be softening as manufacturing jobs also soften. Demand in the Northwest market remains the strongest for bays less than 20,000 SF while demand for bigger bays remains the strongest in the Palo Verde and Tucson Airport sub-markets.
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One interesting new trend that we are noticing is demand or lack of demand related to crime. Vandalism, drug use and burglaries are on the rise and tenants are leaving buildings where they experience crime and are moving to more desirable areas. Historically, some of the areas had little to no crime. Ironically, heavier industrial markets are seeing less crime and more demand from tenants relocating from higher crime areas.