The small-medium industrial bay leasing market has had a strong and steady Q1, mostly impacted by the housing market, distribution market, and mining industry. As the housing market continues to stay hot, contractors continue to stay busy and expand, fueling the small-medium bay demand.
The Northwest market continues to be the most expensive market as most service/trades businesses want to be close to the expanding markets (Marana, Oro Valley) and I-10. We can expect lease rates to climb until the vacancy loosens up which will not happen until the housing market development starts to cool off. Medium bay leasing is also a very strong sector of the market mostly due to the demand for increased distribution and storage of building materials. We can expect to see more industrial development occur where vacant industrial land permits as build to suits become more popular for last mile distribution.
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3215-3275 S Dodge, a nine tenant, heavy industrial business park sold to Torch Properties, the sister company of BRD Realty. Located in the Palo Verde industrial market, the largest industrial market in Tucson, this building was 82% occupied with tenants in the manufacturing, auto, landscaping, carpentry and gem show industries. Steve Cohen of Cushman & Wakefield PICOR and Max Fisher and Brandon Rodgers of BRD Realty handled the sale. 3215-3275 S Dodge, a nine tenant, heavy industrial business park sold to Torch Properties, the sister company of BRD Realty.
Located in the Palo Verde industrial market, the largest industrial market in Tucson, this building was 82% occupied with tenants in the manufacturing, auto, landscaping, carpentry and gem show industries. Steve Cohen of Cushman & Wakefield PICOR and Max Fisher and Brandon Rodgers of BRD Realty handled the sale. A mining division of H-E Parts has leased the remaining 8,400 SF of 3224 N Freeway Industrial Loop. This lease proves how strong the industrial market is and how spec industrial development is now a proven model and makes sense in the Tucson market. We can confidently assume that this success will spur more development which leads to job creation and strong economic development for Tucson.
For years, developers have been bearish with spec development. This new lease and lease rate in Tucson proves that the Southern Arizona industrial market is in need of spec development. The lease was completed before the landlord even built out any office or improvements,. The building was in shell condition at the time of the lease execution. That goes to show there is pent up demand from quality tenants in the Tucson region. As industrial businesses tour the Tucson market their biggest concern is the lack of inventory and the lack of new product. In a low vacancy real estate market, finding a new building can be a huge win for a growing business and can attract new businesses to the region. More spec construction will lead to increased economic growth in the Tucson area. The construction was completed by Peter Strunk of MJI Company. Peter can be reached at 520-269-9895 mjicompany.com Max Fisher of BRD Realty represented the landlord and Rob Glaser of Cushman & Wakefield | PICOR represented the tenant. As the housing market, mining market, and distribution markets continue to grow, outdoor storage is increasingly becoming a sought after asset class. The demand from materials suppliers for the housing market, fleet storage, heavy machinery, and mining parts and materials is fueling this new asset class. An industrial building with a fenced yard in this market is a real gem. As we've seen in other markets such as Phoenix, Dallas, Denver, LA, and others, well located industrial land has increased from $5 per foot to $20 per foot and even higher. Why? Last mile is ALL about location and proximity to the consumer. Land is finite and the increased demand from distributors, marijuana users, mining companies, and materials suppliers is squeezing the supply of industrial yards. In the future we will see fenced yards be developed into last mile distribution hubs. There is only so much real estate next to highways, so as distribution continues to grow, these sites will appreciate greatly. Pros of Industrial/Outdoor storage property -Minimal maintenance -Potential for strong appreciation in well located areas near highways and major arterial roadways -Minimal need for capital investment -Strong demand from tenants For more information about Industrial yard contact Max Fisher 520-465-9989 maxfishh@live.com Industrialtucson.com RSD Inc purchased 2101-2103 E 19th St in the downtown industrial sub market as a distribution hub for air conditioners and air conditioning supplies. As the demand for residential and industrial real estate increases, the demand for HVAC products, electrical products, and plumbing products has been increasing quickly. This will be RSD's second distribution building in Tucson. The downtown industrial market hit a small bump when COVID hit due to businesses that serve the downtown retail market closing or downsizing. Since then, the downtown industrial market has bounced back. Vacancy is around 2% now and rates are steadily increasing. We can expect the downtown industrial market to continue to improve from the demand for last mile distribution and the demand from construction contractors. Max Fisher and Rob Glaser of PICOR Commercial Real Estate represented the seller and Cushman & Wakefield of Los Angeles represented the buyer. RBEX Inc purchased 5951 S Wilmot for $1,750,000.
The industrial market continues to grow in a strong and steady direction as distribution and residential housing continues to grow quickly. Arizona as a whole outpaces the rest of the country by far when it comes to unemployment rates, economic growth and real estate activity. Migration patterns continue to favor Arizona as residents migrate to Arizona from densely populated cities and states. Reasons for migration include COVID, real estate prices, taxes, regulations and climate. As this mass migration continues, the demand for the residential market continues to stay very strong. This demand is fueling the industrial market as residential developers spur more demand for industrial supply houses and trade related businesses. Migration and the upcoming wave of demand from marijuana cultivators are going to slim the industrial inventory even more over the next year. We can expect lease rates and sale rates to increase. Max Fisher of Cushman & Wakefield | PICOR handled this transaction 3224 N Freeway Industrial Loop -8,400 SF available -New construction -20+ parking spots -14' roll up doors -Semi accessible -I-10 visibility and signage -Frontage road access -NW location -Custom build out per tenant's needs Contact Max Fisher maxfishh@live.com or 520-465-9989 Listed by BRD Realty Tucson Demand Predictions:
Residential: Increase Industrial: Increase Office: Decrease Retail: Decrease Tucson Supply Predictions: Residential: Increase Industrial: Increase Office: No change Retail: Increase Migration is the largest economic spur right now for Tucson. Migration from densely populated cities will continue to increase. Why? 3 reasons. 1) Employees paying thousand of dollars per month on rent in cities like San Francisco, New York, and Seattle are working remotely but making the same salary. They are relocating to more affordable areas that are not as dense and less expensive. The Income tax rate is also very attractive. 2) COVID has sparked concerns for those living in densely populated cities as COVID has impacted densely populated areas significantly more than more spread out areas like Arizona. 3) Younger people like the options that Tucson and Arizona as a whole has while other cities are shut down. Arizona is not shut down to the degree that New York and California areas are and Arizona has plenty of outdoor activities for younger people and retirees. Arizona as a whole outpaces the rest of the country by far when it comes to unemployment rates, economic growth and real estate activity. Lease rate and sale price predictions: Residential: Increase Retail: Decrease Office: Decrease Industrial: Increase Opportunistic markets based on 2021 predictions: -Small bay industrial (trades related businesses that support the housing market) -Medium to large bay industrial (last mile distribution and Ecommerce) -Residential housing -Multi-family -Marana -Industrial land on the outskirts of Tucson but close to I-10 -Drive through retail -Residential land -Industrial with fenced yard (industrial materials serving the housing market) The demand for office and retail nationwide and especially in densely populated cities will decrease substantially. The demand for office and retail in Arizona, Colorado, Utah, Texas, and Florida will remain steady without noticeable increases or decreases as the migration demand will offset the COVID effects on office and retail. We would also expect new retail development due to the quickly changing world of retail. Drive through developments for retail will increase and last mile will begin to pop up more in retail projects as DoorDash leases their first Tucson last mile distribution location and Amazon continues to expand, spurring other retailers to compete and sign new distribution related leases. I would expect the large big box retailers including home improvement and grocery stores to start leasing distribution spaces to adjust and compete with Amazon, GoPuff, and DoorDash. Rumors of Amazon taking over JC Penney locations may be foreshadowing for last mile distribution. The Downtown Tucson market as a whole seems to be hit the hardest as restaurants and bars face shut down procedures. The loss of income will have to be mitigated through rent structures and mitigation between landlords and tenants. We would expect the vacancy rates for office and retail downtown to increase and will take a few years to get back to 2019 levels. This recovery will be directly related to consumer confidence in dine in eating and whether or not office employees decide to work from home or the office. At this point all indicators and corporate decisions are pointing towards 40-50% of employees will work remotely through 2021 at a minimum. The industrial market downtown felt some losses but has since been filled up from northwest demand that cannot be solved with limited Northwest supply. Another trend that I’ve noticed is the baby boomer generation retiring. Lots of baby boomer business owners have been phasing out of the business for years but have not officially made the move. COVID was the last straw and made them take the last step towards retirement. We are also seeing a lot of movement from companies that have historically had manufacturing in china. COVID supply chain issues have spurred companies to start looking at the US and Mexico for manufacturing alternatives. If more companies start to move manufacturing to Mexico, Tucson and Arizona will benefit from the supply chain shift and some of that money will move north into Arizona for vacationing and shopping. Sonora Mexico is positioned very well for this shift as they have the labor pool for manufacturing, the logistics position, and access to materials. Do you know someone who has talked about moving their business to Tucson? Below are 9 reasons to move your business to Tucson. https://www.industrialtucson.com/move-your-business-to-tucson.html |
AuthorMax Fisher, Industrial Properties Broker Archives
April 2024
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