There are 100,000 apartments in complexes of 10 units or more in the Tucson region. No new complexes were built last year. But vacancy rates jumped to 8 percent at the end of 2007, from 6 percent a year earlier.
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Why?
According to CB Richard Ellis, these are contributing factors:
• Owners and investors who bought homes when the housing market was hot, found themselves unable to sell their properties or lease them at rates to cover the mortgage payments. As a result, they became "reluctant landlords" and put started renting them in what’s called the "shadow market." This was especially the case in what otherwise would be the region’s growth markets, namely the northwest, southeast and the eastside.
• The state’s Employer Sanctions Law that took effect Jan. 1 caused many Hispanic families to flee Arizona to other states and countries. Some properties in south central Tucson and on the southside reported "skips" of tenants doubled and, in some cases, quadrupled in January.
• The slowdown in the homebuilding industry cost many construction workers their jobs.
• The region’s population growth slowed to 16,000 last year from 25,000 in 2006.
Despite the challenging conditions, CB Richard Ellis sees several bright spots remaining in the region’s apartment industry. Well-located class A and B quality complexes are still in demand and the market for University of Arizona student housing is thriving.
Overall, rental rates among Tucson multi-housing properties continue to rise, in spite of the increasing vacancy rates. Still, though, Tucson has the dubious distinction of having the lowest rental rates in any of the 25 major markets in the western U.S., which does not bode well for new construction.
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