Tucson Multifamily Demand Up, Construction Down

TUCSON-Demand for apartments in Tucson is about double what it had been last year, based on first quarter comparisons. However, construction has slowed.

A total of 808 apartment units had been absorbed in the first quarter, according to a new study by Hendricks & Partners, a Phoenix-based multifamily consulting firm. “The Tucson apartment market demonstrated a strong level of demand in the first quarter, helping to spur moderate rent growth,” says John Hendricks, owner, president and CEO of Hendricks & Partners.

New construction has totaled just 229 units in two communities in comparison to 356 in first quarter 2000. The new units have gone up in east and south Tucson.

The overall vacancy rate has remained steady through the first quarter, coming down to 6.8% from 6.9% a year ago. Slight improvements have been shown in the south, central, east and northwest submarkets, while the northeast has slipped somewhat. The hardest hit submarket is west Tucson, where vacancy is 10.8%. Still, it’s a bit better than December, when it had been riding at 12.1%. The cause, says the report, is new home construction.

Overall, Tucson’s home prices have risen dramatically in the past two years, which may have pushed more consumers toward multifamily living. In February, the average new home price had been riding at $167,163, an increase of $10,000 from a year ago and more than $23,000 from the figure posted in February 1999. Tucson now ranks 122nd in single-family affordability, according to the National Association of Home Builders, while Phoenix is 93rd. On the average, rents have increased 3.4% for the year ending in March, rising from $523 to $540.

Just seven sales had been recorded for apartment complexes with 40 units or more during the first quarter. The average price per unit is $36,746, up from the average price paid in first quarter 2000. Four of the sales had been in central Tucson.