Tucson Distribution Leads the Way in Transforming the Commercial Real Estate Market

COVID has fast tracked the already trending direction of retail sales while online sales increased 30% in the first half of 2020. Many big box retailers struggle to stay ahead of the trends as rumors emerge of Amazon taking over JC Penney locations nationwide for last mile distribution purposes.

Even conventional grocery stores have put their new leasing activities on hold while Whole Foods, owned by Amazon has ramped up. Doordash just announced it’s first distribution location in the Tucson market. Other direct to consumer distribution models such as GrubHub, GoPuff and WholeFoods on Amazon Prime have grown massively since March. I feel we will only watch this trend grow steadily as retailers realize they can cut their rent in half by moving to an industrial building and even cut out some of the service headaches that are involved in the food business.

In other recent news, Walmart has announced Walmart Plus, a last mile distribution service similar to Amazon Prime https://www.nbcnews.com/shopping/lifestyle/what-walmart-plus-n1239895. We would expect other retailers to follow by leasing distribution building or even retro fitting retail buildings that are more centrally located for last mile distribution.

This increase in distribution space demand has spurred new activity in the industrial market. We can expect to see new spec industrial construction come to Tucson to satisfy the demand for distribution space. When distribution tenants are in the market looking at spaces they are typically looking for 30’ clear height plus, ESFR sprinkler systems, minimal office, close proximity to I-10 and the airport, and plenty of dock positions.