Tucson real estate market 'like running in molasses'

“It’s like running in molasses,” Tucson Realty & Trust Co. CEO Hank Amos said at the firm’s annual forecast meeting. “We’re moving forward, but it’s kind of slow.”

Lagging business activity — and skittish business owners hesitant to expand — means less commercial leasing in Tucson, Amos said.

“It wasn’t as bad as it has been. We’re definitely off the bottom,” he said.

But residential real estate activity is up, due to pent-up demand from buyers and all-time low interest rates. Foreclosures hit a five-year low in 2013, boosting resale home prices, said Bob Solfisburg, land specialist.

The median price of a resale home was $168,000 in Tucson last year, a 10 percent increase over 2012. And median sales price for new homes is up 8 percent to nearly $245,000.

The rising cost of building — between the state’s higher minimum wage for 2014 and increases in building costs — has helped slow new home construction, experts said.

In 2013, about 2,000 homes were built in Tucson, compared with 12,000 in the heyday of 2006, before the recession.

Before 2006, about 5,000 new homes was considered a good year, said Chuck Blacher, industrial realty specialist.

Leasing and sale of contractor yards and warehouses to contractors like roofers, masonry companies and pavers play a big role of the industrial real estate market, and those contractors have been largely absent lately, Blacher said.

“Until new-home construction picks up to 5,000 units annually, the industrial real estate market will suffer,” he said.

More than 100 buildings are up for sale in Tucson, he said.

“Years ago, if you had a client in town looking for space, it would be tough to find enough buildings to show. Today it’s a two-day project,” he said.

Among the biggest lease signings in 2013:

• Timi Acquisition leased 43,000 square feet at 1625 S. Euclid Ave.
• Synergy Installation Solutions leased 33,000 square feet at 6000 S. Country Club Road.
• Excelsior Super Foods re-leased 112,000 square feet in the vacant Solon Industries building at 6950 S. Country Club Road.

Retail vacancy rates are down to 8 percent, in part due to big-box stores like Walmart and CVS redeveloping old and outdated retail space, said Pat Darcy, head of the retail division at Tucson Realty & Trust Co. Walmart continues to dominate the Tucson retail scene, he said.

Although Darcy said he doesn’t predict widespread retail development in 2014, the launch of the SunLink streetcar should spur activity along its four-mile route.

“Downtown is really turning around,” Darcy said. In the past five years, 60 restaurants, 53 retail stores and 18 nightclubs have opened in the downtown area, he said.