Tucson Industrial Market Outlook: 2026

The biggest story heading into 2026 is supply catching up to demand—especially in larger-bay product—while IOS (Industrial Outdoor Storage) and well-located, functional buildings continue to outperform. This tends to be the trend nation wide as well.

Depending on the dataset and how sublease/asset classes are tracked, Tucson vacancy is best described today as a mid–single digit to high–single digit market that is trending upward as new speculative projects deliver in early 2026. We are quoting vacancy around 7.5% including finished speculative development.
Tucson’s vacancy trend has shifted from “tight and landlord-friendly” to “normalizing or even declining in some markets.”

Larger bay buildings are where the bulk of vacancy is starting to accumulate mostly with large vacancies in the Northwest and Southeast markets. Oddly enough, both the Southeast and Northwest small-medium bay and IOS markets are the markets with the highest lease rates and values and the lowest vacancy rates. The airport market continues to be the strongest sub-market for bigger bays mostly due to the proximity to I-10, I-19 and the airport.

2026 outlook for 30,000 SF+: We can expect lease rate compression for class b big bay as vacancy increases and class a product is delivered. We can expect class a lease rates to level off and possibly increase. The big unknown is in the 100,000 SF+ bays as demand is less steady and vacancy in class b and class a has increased. In 2025, class b-c landlords with lower basis started competing with lease rates, abated rent and TI allowances.

2026 outlook for 5,000-30,000 SF+: We can expect mixed trends throughout the market as this size range becomes more dependent on location, functionality, and access to IOS. In general, we can expect lease rates to decline, especially in the most dense markets like Palo Verde and Park/Ajo. Lease rates in the Southeast, Airport and Northwest markets will most likely plateau. In 2025, class b-c landlords with lower basis started competing with lease rates, abated rent and TI allowances. Public safety is also a major factor in this submarket and then becomes very hyperlocal.
2026 outlook for 1,000-5,000 SF: We can expect lease rates to trend similarly to the 5,000-30,000 SF range. These bays become extremely hyperlocal dependent. While little construction has occurred in this segment of the market, lease rates have increased steadily since 2019 but vacancy is increasing overall from 1% just a few years ago. This is also the segment of the market where nnn expense differences really start to gap and impact tenants moving out.

​Expenses and debt: This is the second most important part of the 2026 outlook. Landlords who manage expense increases well are experiencing record low vacancy. We can attribute this gap mostly due to CAMs, vendor management, creative improvements, intentional maintenance, and amortizing capital improvements in the most effective schedule. The quick rise of private equity in the trades has created massive gaps in costs. Recent HVAC quotes I’ve seen have ranged between $12,000-29,000. Having management and ownership that stays current and “in the weeds” with HVAC, plumbing, electrical, roofing and pavement costs has never been this important. 

Basis, floating rate debt, and maturing debt are now paramount. The real estate boom of 2020-2021 was mostly attributed to record low interest rates but not all of that debt was fixed. 5 year debt is now set to mature in 2026. Floating rate debt has increased and now mostly plateaued. Those who have maturing debt are faced with difficult decisions, sell and maybe preserve some equity or refinance and expect cashflow to be hit.
Not all properties face this fork in the road if base rent has increased but an increase with debt expense and NNN expenses is a difficult intersection and lately, landlords’ solution has been rent increases which either works in specific sub-markets or leads to higher vacancy.
 
What tenants should do in 2026

• Use the new competition to negotiate TI, free rent, and flexible terms—especially in big-bay.
• If yard/IOS is critical, start early and prioritize entitlement/zoning realities.
• Understand which sub-markets and sizes have higher vacancy rates and use that to negotiate.
• Recognize that just because a sub-market has higher vacancy, that doesn’t necessarily mean a landlord is ready or in a position to negotiate.

What landlords should do in 2026

• For large-bay and class b: win deals with speed and certainty (responsive proposals, realistic TI, clean lease terms).
• Protect NOI: keep an eye on NNN expense growth and renewal strategy.
• In weaker submarkets: be proactive—rate isn’t the only lever, but it’s the fastest one.

About Max Fisher

Max specializes in the leasing and sale of industrial and business park properties, including flex/research and development, warehouse and distribution, and manufacturing space. As a native Tucsonan, Max inherently understands what makes the community thrive. He has been active in the Tucson real estate market since 2012, and his strong community ties and industrial focus make him a standout in the commercial/industrial arena. 

​Max completed has consistently closed over 75+ transactions per year for the past 5 years.