Entertainment and fitness retailers backfill vacant big-box spaces
Despite a lackluster three quarters for Tucson’s retail market, tenants absorbed large retail vacancies during Q4 2018, bolstering year-end market fundamentals.
Tucson’s retail market had its healthiest level of quarterly net absorption since Q1 2017, totaling 115,243 sq. ft. in Q4 2018. Year to date, metro Tucson’s net absorption was negative 175,368 sq. ft.
Marketwide, vacancy increased by 80 bps year over year to 7.9% in Q4 2018, the fourth consecutive year where vacancy increased. It should be noted that the rise in vacancy is not a reflection of an overall decrease in demand for space; retailers expanded in the metro over the period but prefer new builds to absorbing outdated vacant spaces.
Metro Tucson’s average lease rate fell by 1.3% over the last four quarters to $15.49 NNN per sq. ft. The increase in vacancy caused landlords to lower asking rents in five out of the six submarkets in the Tucson market.
New supply will be limited to BTS development in suburban submarkets where homebuilders are active.