Tucson, AZ Economic Overview
Tucson is the second largest city in Arizona after Phoenix, and is the county seat of Pima County. Located just 60 miles north of the Mexican border, the City of Tucson is home to over 520,000 people, while the Tucson MSA, which includes the Tucson-Nogales combined statistical area, has nearly 1 million residents. Tucson is home to a variety of manufacturing businesses, as well as the highest concentration of start-ups of any similarly-sized city in the U.S. These, along with the city's proximity to Mexico and its transportation infrastructure, are reasons why companies doing business in both the U.S. and Mexico continue to create demand for commercial real estate in Tucson, Ariz.
The economy in Tucson is led by a variety of high-tech, defense, and green energy manufacturing industries. Tourism also plays a major role in the economy of the Tucson metropolitan area, attracting over 3.5 million visitors each year, who generate over $2 billion in revenues from Tucson's high-end resorts, hotels and touristic attractions.
With a median household income of just over $47,000, an average annual salary of nearly $43,000, and an unemployment rate of 5%, the economy in the Tucson metropolitan area remains stable year after year. Businesses of all types drive Tucson’s diverse economy, attracted by a wage market that is lower than the state average, as well as part of an economic environment that offers an overall lower cost of doing business.
Tucson, AZ Commercial Real Estate Market
The ongoing growth of the Tucson commercial real estate market is driven by its proximity to the Mexican border and the diverse manufacturing base of the aerospace, biotech, defense, healthcare, information technology, fiber optics, solar, and green energy industries. In addition, Tucson is quickly becoming one of the most innovative business centers in the country, thanks to the partnerships between the University of Arizona and the biotechnology industry, with companies like Sanofi U.S. and the Critical Path Institute.
With over 42 million square feet of inventory nine submarkets, the demand for industrial space to lease in Tucson continues to be strong. Vacancy rates are down an entire percentage point quarter-to-quarter, net absorption and rents have continued to increase, and nearly 30,000 square feet of industrial space is in the construction pipeline. The submarkets with the most industrial space in Tucson are Oro Valley and the Southwest Tucson Cherry Avenue and Tucson Airport commercial real estate commercial submarkets.
Demand for office space in the Tucson area continues to be strong, as well. With just over 26 million square feet of office space across ten office submarkets, vacancy rates are down nearly 2% over the past year, and net absorption and asking rents are on the rise. While the office leasing market in Tucson is not strong enough to attract speculative construction, office vacancy rates in the Tucson metro area are at an all-time low. Notable office submarkets include Menlo Park and El Presidio in central Tucson, and Highland Vista Cinco Via and the Broadway Northeast commercial real estate submarket.
Tucson's commercial real estate market encompasses over 52 million square feet of retail space, with a healthy mix of power and regional malls, neighborhood shopping centers, and general strip centers. As the household incomes and population grow in Tucson, so do the asking rents for retail space in the Tucson metropolitan area. Meanwhile, retail vacancy rates continue to decline with only 123,000 square feet of new retail product in the pipeline.
Tucson, AZ Office Sales Volume
Data provided by Yardi Matrix, for properties larger than 50K SF, which sold at over $5M.
Tucson, AZ Office Transactions
Data provided by Yardi Matrix, for properties larger than 50K SF, which sold at over $5M.
Tucson City, AZ Commercial Inventory Breakdown
Total: 11,452,711 SF
By square footage range:
- 50k to 100k SF: 4,336,135 SF / 37.86% of total office
- 100k to 500k SF: 7,116,576 SF / 62.14% of total office
- Class A: 3,707,415 SF / 32.37% of total office
- Class B: 5,705,387 SF / 49.82% of total office
- Class C: 704,909 SF / 6.15% of total office
Employment in Tucson, AZ
The availability of affordable labor force in Tucson has kept the growth of jobs consistent, with the top three growth industries in Tucson being the aerospace and defense, optics industry, and green and renewable energy segments. Over 30% of the work force is employed in management, administration, and sales divisions, alone.
The top 10 employers in the Tucson metropolitan area are:
- Raytheon Missile Systems, with over 12,000 workers;
- University of Arizona, with over 12,000 employees;
- Davis-Monthan Air Force Base, with over 10,000 workers;
- Walmart, with nearly 8,000 workers;
- Pima County, with nearly 7,000 employees;
- Tucson Unified School District, with over 6,700 employees;
- Banner University Medical Center Tucson, with nearly 6,500 employees;
- U.S. Army Intelligence Center & Fort Huachuca, with over 6,000 workers;
- U.S. Customs & Border Protection, with 6,000 employees;
- The City of Tucson, with nearly 5,500 employees.
Education in Tucson, AZ
The Tucson Unified School District is the largest school district in Arizona by enrollment. The district operates over 30 primary schools, 15 middle schools and nine high schools. There are also a number of private and publicly funded charter schools with specialized curriculum.
Located in the City of Tucson, the University of Arizona is not only a major contributor to the economy and various public-private business partnerships, but is also the second-largest university in Arizona, by enrollment. The Tucson metro area has numerous other post-secondary colleges and universities, including Pima Community College, Tucson College, Northern Arizona University - Tucson campus, Art Center Design College, and Arizona State University's College of Public Service & Community Solutions.
Commuting Time in Tucson, AZ
Commute times in Tucson are shorter than the national average of 24.8 minutes, coming in at just over 21 minutes each day, with less than 2% of the workforce having a super commute of 90 minutes or more. Nearly 11% of the work day drivers carpool and over 4% take advantage of public mass transit.
- The Sun Tran bus system provides standard, express, regional shuttle and on-demand bus service in the Tucson metro area.;
- The Sun Link street car systems links the University of Arizona campus with the Central Business District and the Mercado District.;
- Interstate 10 and Interstate 19 connect Tucson with the rest of Arizona, New Mexico, Texas, Mexico and beyond.;
- Amtrak provides national passenger rail service and Union Pacific provides freight rail service in the metro area.;
- Tucson International Airport is the second-largest in the state, providing both passenger and freight air service, and also supporting the fleet of F-16s stationed at the Tucson Air National Guard Base.
- Total Population530,905
- Male Population(49.8 %) 264,469
- Female Population(50.2 %) 266,436
- Median Age33.40
- Average Household Income$52,974
- Median Household Income$39,617
- Median Income Under 25$20,761
- Median Income 25-44$42,497
- Median Income 45-64$46,449
- Median Income Over 65$36,264
Residential Rents in Tucson, AZ
More than half of the residents in Tucson rent where they live, giving the metro area one of the highest percentages of renters in the country. Overall residential rental vacancy rates in Tucson continue to decline year over year, while rents continue to steadily increase.
Apartment rents in Tucson are a bargain, compared to many other parts of the country, with a studio unit going for under $500 per month and a three-bedroom unit renting for just barely over $1,100/month. The three most expensive rental neighborhoods in Tucson are El Presidio, Blenman-Elm, and West University, while the three most affordable areas to rent in Tucson are Miracle Manor, Myers, and Drexel Park where overall rents average just over $538 a month.
Tucson City, AZ Average Rental Price, September 2019
- $ 762/mo
- Studio: $ 514
- 1 Bedroom: $ 610
- 2 Bedrooms: $ 808
Tucson City, AZ Rent Trends
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