Source: Inside Tucson Business —
Three years.
That is how long it has been since the onset of the COVID-19 pandemic and the seismic effect it had on all elements of life, including the commercial real estate market.
As the economy continues to rehabilitate, here is a look at today’s economy, the activity of each commercial real estate division, and where 2023 may be headed.
Economy
During the fourth quarter, employment in Tucson increased to 393,000 jobs, up 2.2% over the same time in 2021. At 3.8%, the local unemployment rate remained flat compared to one year ago and is forecasted to increase in the year ahead.
Household formation grew 1.9% year over year (YOY) with median household income increasing 5.8% YOY from $60,100 to $63,600.
Nationally, consumer spending grew at a healthy 8.5% rate and retail sales were similarly up 8.4% YOY.
Inflation persisted over 7%, high relative to recent years, while consumer and corporate balance sheets remain cash strong.
Office
Throughout 2022, the Tucson office market was challenged by post-pandemic disruption to work patterns and reconsideration of layout and use of space. The office vacancy rate rose slightly to 10.4% on the total available inventory of 28,887,249 square feet. (See related story.)
While the Refinery at the Tech Park was completed, adding 120,000 square feet to the market, health care and ancillary medical practices continue to be the largest driver of new activity. With employers working through hybrid models for their workforces, many businesses are considering smaller spaces upon lease renewal, a trend we expect to continue in 2023.
