“The new location people want to be in is North of Grant Road between First Ave. and Craycroft Road,” said Buzz Isaacson, now with CB Richard Ellis after he and members of his company, Buzz Isaacson Realty, joined with the firm.
“If you look back at Tucson 20 years ago, people were downtown and if they left downtown they filtered out along Broadway,” Isaacson said. “At that time places like La Paloma Corporate Center were viewed as remote but today they are central. It has been a big shift.”
 Commercial space, like the one in St. Philips Plaza, is a hot ticket north of Grant Road, between 1st Avenue and Craycroft Road. Daron Shade photo |
Some hot spots in the new central area are centers at North Campbell Avenue and River Road, Camp Lowell Drive and Swan Road, River and Hacienda del Sol roads, and Sunrise Drive and Hacienda del Sol Road.
“Our office market has become a lot more like retail,” Isaacson said. “People want to office where there are good amenities, close to home, attractive to their employees and that is north of Grant between First and Craycroft. That’s going to be a dynamic area for a while to come between those areas.”
While the current economy has made things difficult in all areas of real estate the good news for Tucson office space is that it is not overbuilt.
“Phoenix is way overbuilt,” Isaacson said. “They are going to have to endure trying to fill it all which we aren’t going to have to.”
Isaacson said the last big, multi-tenant office building built in Tucson was in 1986. Since then, the largest office building constructed was the KB Home building, 250 S. Craycroft Road.
“But even that one was only triggered because KB had some requirements about what they needed in a building,” Isaacson said. “Still about six or seven years ago the market slanted toward people who wanted to own their own space. Office condos became popular, but they typically have been built as they are sold.”
There have been closures especially in mortgage and title companies that have left vacant space, but due to the lack of construction there isn’t as much as there could be to try and fill.
The vacancy rate for office space has crept up to around 12 percent but Isaacson expects it to rise.
“Luckily we don’t have any huge, 250,000 or 300,000 square-foot spaces to try and fill,” he said. “The bad news for Tucson is we’re shedding jobs. Ike [Isaacson] and I go out every day and talk to people with 14,000 feet who want to sublease because their requirement now is only 8,000 or 10,000 square feet. That hasn’t registered yet into the vacancy rate.”
One place the vacancy rate is climbing for business office space is downtown.
“Due to the lack of leadership and the poor performance of Rio Nuevo – there really is no other way of putting it than that – a lot of office users that used to think they needed to be downtown have given up on downtown,” Isaacson said. “
The most recent example, according to Isaacson, is the county purchase of the Bank of America building at 33 N. Stone Ave.
“We literally lost 600 people who worked downtown and they left. That building is being filled up with government workers,” he said. “Our leadership hasn’t gotten it. They don’t understand. They keep talking about a project like the Lofts on Broadway and how it will bring 70 to 80 people downtown and in the mean time 600 people just left and they don’t even realize it.”
In 2009, Isaacson says he sees a lot of product changing hands but believes the hot spots will stay in the north.
“People that own investment real estate will go to their lender and the lender will say they will need to make an equity contribution or buy down the loan and I think that is going to trigger a lot of investment,” Isaacson said. “We’re going to see a big price differential between that central area and some of the more remote areas. If you want to make a good buy, you can go to Broadway and Pantano Road, or Ina and Thornydale roads. You’d be able to make some great deals there, but if you want to be at the heart of what people are considering to be the center of the market, you will pay more for it. I don’t think we’re going to go backward very much in that area.”
Despite some hurdles, Isaacson believes the office market is balanced and very healthy.
“It’s a good market,” he said. “And we keep growing. We’re seeing 2.5 percent to 3 percent growth every year. People want to live here. We’re very lucky to be here.”
Contact reporter Joe Pangburn at jpangburn@azbiz.com or at (520) 295-4259.
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