The Tucson industrial real estate market has experienced significant developments in 2024, marked by shifts in vacancy rates, rental trends, and key investments. Here’s an in-depth look at the current state of Tucson’s industrial market, including warehouse space, commercial properties, and manufacturing real estate. 

Vacancy Rates: Notable Increase 

The Tucson industrial real estate market has seen a notable increase in vacancy rates, rising to 5.9% due to a substantial supply addition last year. While this increase reflects the time needed for the market to absorb the new space, the vacancy rate remains relatively tight and comparable to pre-pandemic levels. This stability is supported by steady demand for logistics and warehousing space. 

Development Pipeline: Steady Progress 

Unlike other rapidly growing cities, Tucson’s development pipeline is progressing at a steady and measured pace. Currently, only one for-lease development is under construction, with few proposed projects in the pipeline. This contrasts with high-activity areas like Las Vegas and Phoenix. Key development areas include the Tucson International Airport and the northern metro area near Marana.

Rental Rates: Competitive Affordability 

Tucson’s industrial rental rates are competitively priced at $10.90 per square foot, significantly lower than Southern California’s rates, which can exceed $18 per square foot. This affordability, combined with Tucson’s strategic location near key trade routes, continues to attract tenant demand. Rent growth has moderated over the past 18 months, with average asking rents increasing by 2.2% over the past year. This trend is expected to continue, with rent growth stabilizing below 2% by late 2024.

Leasing Trends: Strategic Expansions 

Major players like Amazon have significantly expanded their presence in Tucson, enhancing the area’s appeal for logistics and advanced manufacturing tenants. Notable leases include NEFAB Packaging’s 81,100 square feet and Sion Power Corporation’s 111,400 square feet expansion. The growing demand for warehouse space and commercial buildings in Tucson underscores the region’s strategic importance.

Key Developments: Strategic Investments 

American Battery Factory’s decision to establish its first U.S. gigafactory in Tucson is a significant development, representing a $1.2 billion investment and the creation of 1,000 jobs. Construction activity is also focused around Marana and the Tucson International Airport, with speculative projects adding substantial new industrial warehouse space. These developments highlight Tucson’s potential for future growth.

Investment Activity: High-Profile Transactions 

Despite high interest rates and economic uncertainty, Tucson’s industrial real estate market has seen significant investment activity. Flint Development’s Tucson Commerce Center sold for $118.7 million, setting a new benchmark for the market. While transaction activity has slowed, these major deals indicate strong investor confidence in Tucson’s industrial sector. The interest in Tucson manufacturing real estate continues to grow, driven by its strategic location and potential for expansion.

Economic Context: Resilient Growth 

Tucson’s economy remains resilient, supported by a significant share of government jobs, including positions at the University of Arizona and Davis-Monthan Air Force Base. The local labor market has recovered well from the pandemic, with unemployment rates down to 3.4%. The University of Arizona continues to drive economic growth, contributing to the region’s stability and development. 

Why Choose Commercial Real Estate Group of Tucson 

Navigating the dynamic and competitive Tucson industrial real estate market requires expertise, local knowledge, and a strategic approach. The Commercial Real Estate Group of Tucson is your experienced broker to find the ideal space to meet your goals. With years of experience and a deep understanding of the local market, we offer: 

• Comprehensive Market Knowledge: We stay ahead of market trends and have in-depth knowledge of current listings, emerging developments, and investment opportunities. 
• Strategic Partnerships: Our extensive network allows us to connect you with the right properties and partners to ensure your business thrives. 
• Tailored Solutions: We understand that each client’s needs are unique. Our team works closely with you to identify and secure properties that align with your specific requirements and goals. 
• Expert Negotiation: Our seasoned professionals are skilled negotiators, ensuring you get the best terms and conditions for your lease or purchase. 
• Dedicated Support: From initial consultation to final transaction, we provide personalized and dedicated support, guiding you through every step of the process. 

With the Commercial Real Estate Group of Tucson by your side, you can confidently navigate the industrial real estate market and secure the perfect space.