Oro Valley is a developing biotech cluster and is home to many notable biotech and aerospace companies, including Ventana Medical Systems-Roche, Sanofi-Avantis, University of Arizona Bio-lab, Freeport-Mcmoran, New University of Arizona Center for Innovation & Veterinary Sciences College and Honeywell. The property is easily accessible to retail and restaurants located nearby.
Recent closures of Target on Broadway, Office Depot on Broadway, Sears at Park Place, multiple Frys, multiple Walgreens, and many other retail businesses are creating worries for many Tucsonans. Is this increase in closures a sign of a declining economy?
No, this is a massive shift in our real estate market that not many are talking about.
Consumer purchasing is shifting quickly and instead of storing product at a retail store like Target, Ecommerce companies can ship directly from the warehouse. Now, for a lot of businesses there’s no need for retail exposure anymore because the consumer identifies the company/product on GoPuff, Amazon, Google, Yelp, etc as opposed to driving down the street.
GoPuff recently leased 7,000+ SF of warehouse in the Eastside Research Loop Industrial Park for "Last Mile" distribution. Last Mile distribution means the product is ordered from your phone or computer and delivered directly to your door from a warehouse within your city. GoPuff delivers products such as ice cream, beer, wine, Advil, toilet paper, etc. Pretty much everything you can get at a Walgreens or CVS.
The last mile distribution companies are leasing warehouses which are around 20-25% of the cost of a retail building, sometimes even less. Lower rent means cheaper prices which will create competition for retailers, effectively disrupting their business and bankrupting them (Sports Authority)……..is LA Fitness next? Barnes & Noble? Subway? Safeway? CVS?
This effectively creates more demand for industrial property/warehouses which means rates rise and industrial development will follow. Other cities such as LA, Phoenix, Atlanta,and many more have already experienced this. Tucson is just starting to feel the effects.
Other markets are already experiencing autonomous deliveries straight to their door step, and product being delivered within 1 hour of ordering. My prediction is that the future of retail is food and entertainment but the future of industrial is steady and strong growth with autonomous last mile distribution leading the way.
Rob Glaser and Max Fisher, Cushman & Wakefield | PICOR handled the most recent GoPuff transaction, 7,000 + SF.
520-465-9989 Text or Call
Construction, manufacturing, education and healthcare sectors led Tucson’s job growth. Tucson’s regional economy tracked positively alongside state and national metrics at the midpoint of 2019. While slightly behind the broader state’s GDP of 3.2%, at 2.9%, Tucson’s real GDP shined relative to such other western metro areas as San Diego, Salt Lake City, and Las Vegas. Consumer confidence remained strong in both the region and the US, despite tariff concerns. Tucson added 5,900 jobs over the year. By mid-year, Tucson was nearing heights of employment not seen since the cycles of 1969 and 1998.
The Tucson industrial market remained strong at midyear, as evidenced by our primary metric: Vacancy rate. Once again, vacancy has ticked-down, this time to 5.1%. Echoing the comments last quarter, Tucson is experiencing a “plateau effect” in the industrial sector in that the dynamic run-up in absorption slowed as the market leveled off at a highly-occupied equilibrium. Accordingly, this plateau resulted in a slow-down in leasing activity, as few options remained available to lease, and in many cases, companies operated existing facilities out of necessity rather than desire. Rents appeared to be rising at a measured pace as well, a natural outcome of the condition of such low vacancy. The gap in the industrial market continued to be seen in spaces over 100,000 square feet (sf), for which activity has been traditionally anemic. Signs of life in this sector have appeared with one recent lease completion over 100k sf and several others currently in the market.
On the investment side, while volumes for the first half of the year did not match early 2018, average price / sf (psf) continues to climb and at $93.41 psf in Q2 was the highest average on record. Available inventory has been a contributing factor, with only 1.6 msf on the market the lowest available for sale since pre-recession 2008.
In the event that several of the current 100k sf users in the market do in fact land new leases and absent a market correction, Tucson will see vacancy dip to unprecedented low levels which might force new speculative construction. The outlook for the Tucson industrial market remains strong in the near-term. The mining, distribution and defense industries continue to lead the way, bringing into their orbit smaller vendors and suppliers, and small business is projected to remain stable with continued lateral moves.
Featured Industrial Property For Sale
Listed by Rob Glaser and Max Fisher, Cushman & Wakefield | PICOR
$1.90/ SF ($6,450,000)
(Pricing subject to change if parcel is split)
•2.2 miles from I-10 & Tucson International Airport
•Neighboring parcels include: HomeGoods Distribution, FedEx, Old Dominion, Ontrac, and Tucson Airport Authority
•Prime logistics or UB parcel with proposed development plan
•CI-2, Pima County, Heavy Industrial
•Potential for Mexico – US safe distribution
Proposed Development Plans
Smaller scale manufacturing operations (1,000-5,000 SF) seem to be opening up shop and gaining momentum faster than ever.
Why is this happening? I think the cost of manufacturing machines has come down and because of the strong economy, entrepreneurs have the spirit and the capital to start a manufacturing operation or grow their business with existing cash or lines of credit. Also, the cost of distribution continues to become more competitive.
Another crucial factor that has contributed to the success of smaller scale manufacturing businesses is social media and the internet. 20 years ago, more capital was needed to advertise a product in magazines, newspapers, TV, radio, etc. Today a manufacturing business can create an Instagram page, Facebook page, and a website for less than $15 per month and reach the entire world! https://www.nelsonprecisionmfg.com/, https://www.thesuperchargerstore.com/, and http://gorillasplitters.com/ are perfect examples of successful Tucson businesses that sell their products across the world through social media and website efforts (paid advertising sometimes isn’t even a necessity).
Is there anything that can help our manufacturing companies continue to grow and prosper? Yes, decreased regulations is one of the most important factors and I’m not talking about environmental regulations. Contrary to popular belief, modern day manufacturing operations are very clean and very rarely involve exhaust. For example, I visited two business owners within the past month who have automotive related businesses. One repairs and sells transmission parts and the other repairs and sells electrical parts for vehicles. Because of government regulations, lots of replacement parts cannot be manufactured at a price that would make sense for the consumer or manufactured at all. Decreased regulations would spark an increase manufacturing while creating more affordable products for consumers. For example, if you have an electrical issue with your 20 year old Ford F-150 that needs a replacement part, you wouldn’t have to search for an existing part in a junk yard or buy one on Ebay for $300 when a manufacturing company can manufacture that part for $5 and sell it to the market for $15. Decreasing regulations effectively creates more supply which creates more industry and more affordable parts for the average Joe.
We can also support Pima College and their efforts to expand their already successful trades and manufacturing programs. There is a big demand for manufacturing workers and these jobs pay well because of the specific skill set, strong demand, and lack of supply. A manufacturing employee can learn a skill set at Pima College for a fraction of the cost of a University degree and in just a few years. Then that student can step into the workforce making $40,000 + with limited college debt and room to climb the ladder. Sometimes a manufacturing company will even help their new employee pay off their student loan debt.
Recent announcements with the South 32 mine in Patagonia and Rosemont Copper are bringing increased activity to Tucson with companies such as Hexagon Mining and Caterpillar. We expect to see this activity ramp up and soon we will see increased activity with Rosemont and South 32 sub-contractors and materials suppliers, especially in the Palo Verde to Vail sub markets. Aerospace, defense and mining manufacturing continue to lead the charge in manufacturing.
The strongest sub-markets in Tucson are the Northwest and Downtown markets. As the downtown and northwest markets have around 3% vacancy we will watch as demand grows further North into Marana with new construction and further south towards the airport and Vail, effectively filling already vacant buildings to the South and East. Airport and Palo Verde area activity is much stronger than this time last year. Rates in the Palo Verde market have already jumped from $.50 MG to $.60 MG within one year.
Tucson continued to experience full employment, ending February at a 4.5% unemployment rate and adding 5,400 jobs over the past year. Meanwhile, manufacturing employers struggle to find skilled manufacturing labor.
-Raytheon announced a merger with United Technologies which will be the largest defense merger in US history
-Nikola Motors announced a new 400 acre manufacturing facility in Pinal County
-Modular Mining expands autonomous mining research, development and manufacturing operations in Tucson
-Lucid Motors announces new $700,000,000 manufacturing facility in Pinal County
-Harsch Investment started construction on a 150,000 SF + speculative distribution facility near the Tucson Airport
Most recent manufacturing deals completed by Max Fisher;
Arizona Heritage Cabinetry
Nelson Precision Machining
Photos are from the Pima College trades college
Featured Tucson Manufacturing Facility listed by Rob Glaser, Brandon Rodgers, and Max Fisher of Cushman & Wakefield | PICOR
Available- 13,848 SF
Lease Rate- $0.59/SF NNN- (NNN’s: $0.14/SF/Mo.)
SF Configuration- ±2,000 SF office / ±11,848 SF whse
Year Built- 2005
Ceiling Height- 22’
Loading- (2) 10’ x 14’ Doors, (4) 10’ x 12’ Doors
Zoning- C-2 General Commercial, City of Tucson
Property Taxes (2018)- $15,749.69
Utilities- 240V, 3 Phase
Cooling- Evap in whse, HVAC in office
Construction- Steel / Masonry
2300 E Vistoso Commerce
Situated on 1.84 acres
25% office, 75% warehouse
Dock and grade loading
Concrete tilt construction
Sold to Miles Label Company
For more details on this sale or any other industrial property email firstname.lastname@example.org
The state of Arizona is riding an employment high with over 110,000 jobs added in 2018 and continued momentum into 2019, with employment growth ranking third in the nation for the first two months of the year.Tucson continued to experience full employment, ending February at a 4.5% unemployment rate and adding 5,400 jobs over the past year. Occupational areas expected to have the highest growth in the next 12 months are Architecture and Engineering at 9.0%, Computer and Mathematical at 6.4% and Construction and Extraction at 6.1%.Tucson’s average home sales price of $259,466 was up 4.2% year over year, while new home permits were up 5.2% in the same time period. Taxable retail sales statewide were up 4.9% in January over the prior year.
Ending with a slight increase in overall vacancy quarter over quarter, the Tucson industrial market’s performance was reflective of a point of overall stability after two years of unprecedented absorption. Available inventory is expected to continue to tighten in buildings with spaces under 5,000 square feet (sf), as well as within some of the higher-quality vacancies in larger blocks. As national shopping trends shift brick-and-mortar retail demand increasingly to eCommerce, local demand from retailers and logistics companies for related warehouse and distribution space has followed suit. Amazon is nearing completion of both an 850,000 sf fulfillment center near Interstate 10 and Kolb and a 50,000 sf last-mile delivery facility near the I-10 and I-19 interchange. Total industrial space under construction Q1 totaled 1.32 million square feet, inclusive of these two projects. Several national companies are in the market for supplemental warehousing facilities. Sales activity has also been off to a strong start in 2019, with first quarter volume of $30.0 million up 37.3% over the same quarter 2018. Sale prices for the quarter averaged $91.71 per square feet, consistent with pricing throughout 2018.
In contrast to the frenzy of activity during the prior two years, overall market activity will continue at a more stabilized, moderate pace. This is not reflective of a slowdown in general market interest, but instead a decreasing supply of higher-profile, functional space alternatives, particular for national credit users. In spite of this market appetite for newer higher-quality inventory, the slow pace of rent growth is not yet high enough to spur significant speculative construction in the near term. One bright spot which has been anticipated and welcomed is the notable uptick in market interest from larger warehouse users (over 100,000 sf). Should a few of these translate to completed lease transactions, overall market occupancy could reach unprecedented levels and place increased pressure on new development.
Listed by Brandon Rodgers and Max Fisher, Cushman & Wakefield | PICOR
Contact Max Fisher for more details 520-465-9989
Max Fisher, Industrial Properties Broker