“The fundamentals of our market are strong,” said Tim Healy, vice president with CB Richard Ellis Tucson. “The vacancy rate is around 6.2 percent. The interest rates are super low. The problems in housing aren’t affecting the industrial market a lot. I don’t see properties going back to the banks. In most cases the properties are very stable. It’s nothing like the late ’80s and early ’90s where the vacancy rate was 25 to 30 percent.”
The main issue in the industry, Healy said, is that nobody wants to make any concrete decisions at this moment.
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“The land sales activity has been almost zero for 2008,” Healy said. “Owner user activity, where the owner purchases a space intending to occupy it, is down. Investment sales are very healthy right now if you can find a buyer. You have to work to find the product for it. But leasing activity has gone up proportionally to a much higher percentage of business this year because no one wants to buy. So it’s sort of a different set up right now.”
While Healy says there are many things we can’t do anything about and the credit markets returning will provide a big lift he also says the waiting to buy is kind of a Catch-22.
“All the people sitting on the sidelines with Monday waiting to see what happens, could actually be part of the solution if they jumped in now,” Healy said.
Another issue facing industrial real estate is the availability issue.
“With such a low vacancy rate it obviously makes it more difficult to find a space that is suitable for your needs,” he said. “It is hard to find the right size and type of space right now. There also hasn’t been much construction in industrial for a while.”
Because of this, Healy said there really isn’t any area of town that is a real hot spot for industrial space, with the exception of drug companies that’ll probably want to be in Oro Valley. But it is more of a, wherever-there-is-space attitude.
One thing Healy expects to help in the lack of space is Tucson Regional Economic Opportunity’s Shovel Ready program. TREO is working with various municipalities in the region to be able to offer companies looking to locate here the opportunity to be through the permitting process and onto construction within 90 days.
“I think that is a huge bonus for us,” he said. “When you’re competing with other cities, there are a lot of considerations involved but for some people timing is really important, like it was for Target. I think it potentially puts you at the top of the list when competing with a Phoenix, Albuquerque or wherever.
It is especially critical at this time to have a program like that because job growth is so important.”
Job growth was the next problem facing the region Healy mentioned.
“We’re losing something like 6,000 jobs in Pima County this year,” he said. “There have been some good notes this year though. Texas Instruments gave up their manufacturing site but kept a presence here. According to Bruce Wright the Science and Tech Park is full and their day-time employment is higher now than it was when IBM was at full capacity. So there are some bright spots for jobs out there.”
Healy says Tucson has many strong foundational assets that will help bring the economy back and create job growth but he thinks the government needs to do whatever it can to make new business easier and more efficient process.
“Anything that puts us at a competitive advantage or at least puts us on a level playing field with other communities, can only help get us out of this quicker,” he said. “Even in a down market, Tucson can do things to position itself for positive job growth and bring companies here.”
Contact reporter Joe Pangburn at jpangburn@azbiz.com or at (520) 295-4259.
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