CRE Market Overview

August 2016

Tide has Turned!

5 C’s 5 T’s

• Technology

• Trade

• Transportation

• Tourism

• Teaching

Key Drivers

National housing recovery

14,900 jobs created since July ‘15

& up 3.3% YTD

Community investment &

construction

Regional assets

The Secret is Out…

Photo: Mike Christy

Tucson Construction Completions

0

500,000

1,000,000

1,500,000

2,000,000

Sq

uare

Feet

Office Retail Industrial

Source: CoStar

Commercial Vacancy

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Office Retail Industrial Multifamily

Source: CoStar

Asking Rents

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

$20.00

$22.00P

er

SF

Office Retail Industrial

Source: CoStar

Tucson Market Sectors

Office

Industrial

Retail

Multifamily

Land & Housing

Office Market

Rents

Tenant’s

Market

Flat for 7

years

Investment

Trading well

below

replacement

Tenants

Primarily

Home Grown

More Health

Care

Vacancy

Gradually

improving

Could

pressure

rents

Key 2016 Transactions

Office Market

Lease

Caterpillar - 35,000 sf

97 E Congress

Tenet Healthcare - 13,000 sf

3501 E Speedway

Broadpath – 9,700 sf

6400 E Grant

63 Sales

698 E Wetmore

32,000 sf investment $4.6M

Continental Plaza

31,000 sf GV investment $3.1M

655 N Alvernon

39,000 sf user (UofA) $2.6M

Retail Market

Rents

At 2005

levels after

pre-

recession

spike

Investment

Fairly hot

Single tenant

NNN

Tenants

Food

Experiences

Discounters

Vacancy

Peaked at

8% in 2010

Highest

mid-block &

older

Key 2016 Transactions

Retail Market

81 Sales

Shoppes at Rita Ranch ($390/sf)

33,000 sf for $12.7M

Plaza Centro

24,000 sf for $8.7M ($367/sf)

Plaza Antigua (TJ’s)

20,000 sf for $7.9M ($394/sf)

Lease

Safeway returns to

Broadway/Houghton – 60,000 sf

Galaxy Theatres 54,000 sf

Montesa Plaza (SWC)

Midtown Mercantile

4441 E Speedway – 29,000 sf

Industrial Market

Rents

Movement

after ‘07

peak & ‘12

trough

Construction

Airport area

logistics

Tenants

Distribution

Experiential

Home-grown

Vacancy

Sub-9%

first time

since 2008

Key 2016 Transactions

Industrial Market

43 Sales

Clairemont Plaza

68,000 sf business park $3.65M

Old West/Clover Company

34,000 sf business park $3.0M

245 S Plumer

47,000 sf business park $2.6M

Lease

Private employer expansion

<100,000 sf

WalMart (temporary)

Century Park 70,000 sf

Autobahn Indoor Speedway

300 S Toole 60,000 sf

Multifamily Market

Rents

5-year up

trend after 5

years flat

Construction

489 units

UofA, NW,

Downtown

Investment

Price

dependent

Strong for

A & B

Vacancy

Strong ties to

employment

Multifamily Market

88 Sales

Harrison Park, 360 units

$30.8M, $85,555/unit

Overlook at Pusch Ridge, 424 units

$29.3M, $68,985/unit

Park Place, 11 E Orange Grove 365 units

$28.8M, $78,835/unit

Key 2016 Transactions

Finished lots: Historic low inventory

Permits up 25% over 2015

• Jobs

• Supply/demand

Focus on MPCs

• Gladden Farms

• Dove Mountain

• La Estancia

Urban infill

Land & Housing Market

Source: Land Advisors, Mesquite Homes

National

• July 2016 strongest in 9 years (up

12.4% last month)

TAR metrics July 2016

• Trending down over June, but up

YOY

• Avg sales price of $218,985 -6.72%,

but +4% YOY

• List price -6.57%; +3.69% YOY

• DOM down from 57 to 50 days

Bright Futures:

Permits +23.4% YOY

YTD permits +25.2% over 2015

Residential Market

Source: Tucson Association of Realtors

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