Build-to-suit construction rises amid healthy tenant demand
Several build-to-suit (BTS) developments, totaling 87,955 sq. ft., came online during the fourth quarter including a 26,600-sq.-ft. building for Hexagon
Mining in the Downtown submarket and the Casa de los Niños headquarters (61,355 sq. ft.) in the West Central submarket.
Developers are currently underway on 549,200 sq. ft. of office space marketwide. The largest project under construction is Geico’s 200,000-sq.-ft. BTS, which is anticipated to deliver in mid-2019.
Tucson’s office market’s 127,253 sq. ft. of net absorption in Q4 2018 brought the 2018 total to 192,187 sq. ft of net absorption, less than half the 479,540 sq. ft. from last year.
In the fourth of 2018, vacancy fell 10 bps year over year to 11.8%, just above the decade low of 11.4% in Q2 2018.
The market-wide average asking lease rate rose to $20.94 per sq. ft. FSG in the fourth quarter, marking a notable annual increase of 6.8%. Limited available space in high-demand submarkets put upward pressure on asking rents, raising the market-wide average.
Tucson’s employment growth was healthy in Q4 2018, expanding by 3.0% year over year.1 Over the same period, professional and business services grew by 3.4%, a major user of office space.