Howard S. Wright Accomplishes Major Milestone at WestWorld As 6 Massive Steel Roof Trusses are Erected

  Howard S. Wright, a Balfour Beatty company, successfully installed six, 280-foot steel double roof trusses at the North Hall addition of the Tony Nelsson Equestrian Center expansion project at … CONTINUE READING

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Retail real estate in the digital age: A conversation with Michael Lagazo

If you’re active in the commercial real estate social media sphere, you’ll recognize Michael Lagazo as @Michael_MBA. If you’re not active, take this opportunity to hear insights beyond 140 character tweets from a bright mind in the space, one with depth in the retail and mixed use environments from Southern California throughout the Southwest.

Retail real estate in digital age


Q. With most of the markets shifting to equilibrium after many years of distress, where do you see the opportunities to buy at value and create value?

A. Value is found in quality core real estate with quality income that can outpace inflation with long term performance. Despite lower yields, adhering to core and quality with both assets and location is the traditionally safe play.

Value can be found as well in good secondary assets in locations outside central metro areas. Secondary projects with productive tenants and long leases have delivered higher returns than better quality properties with less durable incomes. In a article, “Class B, C Retail Sees Strong Demand,” Jennifer LeClaire comments that demand is strong from private capital for B and C class retail opportunities as investors seeking yield are responding to improving leasing fundamentals.

Primary lenders I have talked to in the past week mentioned that income-producing projects in nonmonetary default for delinquent taxes, for example, retain value. Tax sales are attractive to potential investors. Urban infill is in demand, as well, and can presently be acquired at value.

Value creation is largely a function of growth, not current yield. Investors should avoid pursuing growth indiscriminately; true value creation comes from growth without a commensurate increase in risk. Merlone Geier Partners, a private REIT I met with last week is developing Delta Shores, a mixed use project in northern California, by incorporating strong retail with other types of real estate – office, multifamily, hotel, and even healthcare.’

Q. What impact has the digital age had on the role of the property and asset manager?

A. Asset and property management are challenged by changing tenant needs. The use of commercial real estate itself has been impacted by e-commerce, alternative work place strategies, virtual meetings/collaboration, and innovations in logistics.

Cloud Computing

Enterprise Mobility


Real-time portfolio visibility and enterprise information flow across diverse geographic locations improving decision making and potentially increases investor visibility.


Mobile engagement empowers people to take the next most likely action in their moments of need.


Increased transparency with informed, ultra-connected clients and tenants using revolving devices interacting with peers as well as your competition.

Improved business agility – efficient deployment, faster execution, greater flexibility and scalability.


System of engagement: Guide an action or a decision. Get a quick status or a quick search.


Higher brand value. Positions group as always addressable.

Elastic – users can access as much as required, on demand.  Improved operational efficiency. Reduced resource costs. Fully managed by the service provider.


Engagement is about treating someone differently because you know something about them. Mobile is an important driver in investor engagement.


Immediacy, simplicity, and context. Proactive service not just self-service.

Cost effective tenant programs and campaigns elevate quality of service and tenant retention.


Moving from a database world to a user experience world. Velocity of change and feedback increasing rapidly. Virtually ubiquitous across all markets and plays a disruptive role.

Gain an intimate understanding of clients’ and tenants’ needs and behaviors.

Q. I’ve recently read about what seems to be a ‘rebound effect’ or backlash against e-commerce, particularly from millennial shoppers. What are you seeing, and how do property owners capitalize?

A. Anecdotally, I am seeing broader adoption of showrooming and increasing e-commerce retail sales growth. The Urban Land Institute (ULI) reports in MediaPost that Millennials (ages 18-35) are crazy about shopping at brick-and-mortar stores valuing the novelty and social experience. ULI found that Millenials get bored easily and crave pedestrian-friendly shopping centers, malls, and venues.

Property owners can draw interest by reinventing centers with new concepts offering extensive omnichannel support and specialty foods. The passing of the Marketplace Fairness Act is anticipated to diminish the price advantage e-commerce holds. Gap and Banana Republic shoppers can now reserve products available in stores online. CEO Glenn Murphy uses online and offline inventory pools “to give customers access to business anywhere they want.”

Local restaurants Urban Plates and Burlap offer open kitchens, farm fresh organic foods, and fresh ideas that have activated a shopping center.

Q. Despite this, e-commerce is here to stay. Comment on the impact of online shopping on tenant mix in neighborhood shopping centers.

A. Time-starved consumers still value a sense of place and experiential shopping that cannot be matched online. Daily needs merchants with healthy gross sales are reliable majors. Hardware and home improvement merchants offering products that are difficult to distribute online continue to perform well. 

Q. If you were advising an owner of a well-located neighborhood center to position their property for improved success and profitability for their investors and merchants, what would you recommend?

A. Diversify the merchant mix to distribute risk. The format has to be exciting to the shopper by being unique or well merchandised. The unique value proposition of the location has to fit the demographic of the trade area and be more than a distribution channel. The economics of the leases have to be right for both the landlord and the tenant.

Mike, your perspective is keen and forward-thinking. Appreciate your taking the time to share your views with our subscribers.

Barbi Reuter, Principal/Marketing & Operations
Cushman & Wakefield | PICOR 

Michael Lagazo retail real estateMichael Lagazo is a commercial broker in San Diego, CA specializing in designing and implementing creative leasing strategies which optimize the value of the client’s asset as well as executing strategic leasing and investment sale transactions. Prior to this role, Lagazo held a variety of management and leadership positions with Four Seasons, Forest City and Westfield. Lagazo began by managing regional malls ranging from 1.25 to 2 million sf, later overseeing a luxury resort. Lagazo holds an MBA and a dual B.S.



Sources, Class B, C Retail Sees Strong Demand, June 4, 2013

Deloitte, Commercial Real Estate Outlook: Top Ten Issues in 2013

National Real Estate Investor, Retailers Must Deliver on Customer Service and Experience to Compete with Online Merchants, May 31, 2013, Steve Jones

Wall Street Journal, More Consumers Prefer Online Shopping, June 3, 2013

MediaPost, Marketing Daily, Gen Y’s Favorites: JCPenney, Target, Walmart, Kohl’s, Monday, May 20, 2013

Image credit:


US Retail Sales vs. Industrial Leasing Activity | CushWake Industrial Research

The rise in United States retail sales bodes well for industrial leasing, as the latest “fact of the week” released by Cushman & Wakefield’s research team indicates: 

US Retail Sales vs Industrial Leasing Activity


  • As the above graph shows, there is a strong correlation between U.S. retail sales and U.S. industrial leasing activity. Retail sales continued to rise and totaled $1.3 trillion in the first quarter, an increase of 3.8% over this time last year. Although the economic backdrop continues to slowly improve, consumer confidence remains low. Consumer confidence levels lagged first quarter, dropping 7.0% from this time last year.
  • Contributing to the rise in retail sales, over the last few years, e-commerce grew faster on a year-to-year percent change basis than total economic activity. E-commerce growth for Manufacturers, Retailers, and Selected Service businesses significantly outpaced overall economic activity in their respective sectors.
  • U.S. leasing activity during the first three months of the year for C&W markets measured 93.2 msf. Four major U.S. markets (Greater Los Angeles, CA; Chicago, IL; Inland Empire, CA; and Dallas, TX) reported leasing activity greater than 5.0 msf first quarter. Positive absorption is expected to continue in the coming quarters and the current forecast bodes well for the economic climate.  847-518-3235

* Source – Moody’s Analytics, U.S. Census Bureau, Cushman & Wakefield Research.  Only markets tracked by Cushman & Wakefield offices are included in this analysis. 


Please click here to access the electronic version of this information


Tina Arambulo
Los Angeles

James Breeze
Los Angeles

Ted Harrison

Steve Harris

Robert Hoefer

Jared Jacobs

Amanda Ortiz

Jason Price
New Jersey


Global Supply Chain Services: How does Tucson fit in?

In the realm of supply chain services, as with any growth-oriented product or service, constant innovation is a critical component to differentiate and create distance from the competition.

Global Supply Chain Services

Global commercial real estate firm Cushman & Wakefield is constantly investing in tools to stay at the forefront of the commercial real estate services arena and availing its brokers of the best resources available to advise an increasingly global client base. Among those innovative and unique services is the Global Supply Chain Services group (GSCS). 

Essentially the GSCS platform was created and exists to help corporations, institutional owners, developers, REIT’S, logistics providers, transportation companies, and other entities attain peak effectiveness by focusing on upstream business issues and related factors, then providing strategic, comprehensive solutions.  From manufacturing and transportation to warehousing and delivery of product to retail and other outlets, Cushman & Wakefield’s GSCS platform exists to help clients improve speed to market, provide cost and risk reduction, and maximize location and labor requirements.  Among those entities that can best benefit from GSCS solutions would be major employers, import/export firms, third party logistics (3PL) firms, and locally the Levin Family, owners and developers of Century Park Research Center and the Port of Tucson. The GSCS platform is unique to Cushman & Wakefield, and C&W ensures that its member brokers are sharply trained and attuned to the vast assets of the C&W network for the benefit of local clients.



A select 10% of Cushman & Wakefield industrial brokers carry the GSCS designation, among those Russell W. Hall, SIOR, GSCS, a principal and industrial specialist with Cushman & Wakefield | PICOR’s commercial real estate headquarters in Tucson, Arizona. The GSCS group formally supports our clients’ supply chain activities and allows them to maximize their performance. Brokers attend specialized training sessions to further develop their specialty knowledge base relative to supply chain activities, and hone their skills. The most recent session was held as part of Cushman & Wakefield’s Industrial Forum conference in Las Vegas earlier this month. 

The GSCS platform of brokers are also studying trends very closely.  The reshoring movement represents a growing trend, whereby domestic companies formerly actively manufacturing in Asia and other remote locations see increasing economic benefit to relocate manufacturing activities closer to home.  Nearshoring is a similar concept which again brings manufacturing to such locations as Mexico, whose economic competitiveness with China and other overseas locations continues to grow.  Companies are looking at these factors, and others to help determine how real estate will complement changing trends in the way goods and services will be produced and moved around the world in years to come.  Change is constant, and the GSCS group studies and stays abreast of trends to help our clients best anticipate where opportunity will reside in the future.

For information on supply chain services, please contact Russ Hall by email or at 520.546.2747.


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Reis Q1 2013 Tucson & Phoenix Commercial Real Estate Data Analysis

On May 1, Reis published data and reports for both the month of March and for the first quarter of 2013.* The following is an update on the Tucson office market and the Phoenix office market and trends to watch. 

Commercial real estate Tucson

Asking Rates have Leveled Off in Tucson

Entering into 2013, the Tucson office market is finally seeing some stabilization in terms of asking rent.  After a startling decline for the full-year 2012 of 0.6% and a Q4-12 drop of 0.3%, asking rents have leveled off.  At the end of Q1-13 the mean asking rent of $21. 38 remained unchanged from the end of 2012.  Vacancy, however, continues to be somewhat of a concern for Tucson.  Vacancy, however, continues to be somewhat of a concern for Tucson, increasing 30 bps during the first quarter to 15.8%. With no new construction coming online during the first quarter, Tucson is struggling to absorb existing inventory.  Given that asking rent has remained flat, this uptick in the vacancy rate is responsible for the decrease in gross revenue per square foot by 0.4% from Q4-12 (compared to a 0.8% increase nationwide).

Vacancy Still the Big Story in Phoenix

Tucson Phoenix office vacancy 2013

While Phoenix did not experience the same rate of asking rent growth during the first quarter as was exhibited throughout 2012 (0.7% for the year and 0.4% for Q4 2012), rent growth remained positive during Q1 2013 ending the quarter at $22.40, a growth rate of 0.1%.  Vacancy is still the big story in Phoenix.  With a vacancy rate of 26.0% for Q1 2013, compared to 17.0% nationwide, Phoenix is ranked 79 out of the 82 total metros nationwide covered by Reis.  Total net absorption in Phoenix in Q1 2013 was negative 144,000 square feet, erasing the 122,000 square feet absorbed in Q4 2012. Job growth continues to be key to future vacancy declines in Phoenix. It remains to be seen whether sequestration will hinder the tepid progress that has been made so far in that regard.  

The Road Ahead Shows Improved Rent Growth

Looking ahead, fundamentals will continue to improve in both Tucson and Phoenix.  Asking rent is expected to increase in the two metros by of 0.9% and 1.9%, respectively, in 2013. The recovery effort in both Tucson and Phoenix should, however, lag national rent growth, which is expected to increase 2.5% by the end of this year.

Credit: CRE Data & Video provided by Reis, Inc., photo credit Sirlin/Shutterstock.

Editor’s Note: Market statistics vary from those quoted in C & W | PICOR’s quarterly reports, due to differing data sources and data sets. For details on Reis, Inc.’s survey criteria, please visit the Reis, Inc. FAQ page.

*ReisReports now offers monthly reporting, giving subscribers access to both sets of information.



Tucson industrial market: Back-to-back quarters of strong activity

From an economic standpoint, the State of Arizona reported significant job gains for the local market in February, with Tucson’s unemployment rate improving to 6.7% from 7.3% in January. In the past year, 3,500 more jobs were added, largely in the education, leisure/hospitality and construction sectors.


For the first time in two full years, absorption was positive for consecutive quarters in the Tucson industrial market, signaling a trend toward firming fundamentals. First quarter 2013 absorption of 166,778 square feet (sf) was consistent with absorption in more balanced times. Contractions gave way to more business relocations and some expansions. Lease activity has been fairly broad based, with the largest transactions in the 8,000-20,000-sf range and no large, dominant deals among the quarter’s transactions. Small incubator-type space started the quarter strong and tapered into March.

Call centers, the mining sector and construction supply have been the most promising user groups, with residential suppliers beginning to fuel business park occupancy.

Except in the very competitive 15,000 to 20,000-sf space range, availabilities began to narrow, creating a sense of urgency for firms which may have been biding time before a move.

Tucson industrial market statistics


Tucson Sale MarketPrices remained under pressure, in part because underlying fundamentals began improving very slowly. In addition, lender-owned inventory continued to enter the market, receiving significant interest from users and investors alike. 

Aging building stock left behind, in both lower class and less well-located properties, may impact competitiveness for inbound requirements, and with no demand for new buildings, industrial land activity remains idle.


While the market remains tipped in favor of the tenant, it is trending toward equilibrium. If current activity continues apace, we anticipate long-awaited upward pressure on rents in another 12 to 18 months. Pressure on values may lag this time frame, as rents must firm first.



What’s in store for the Tucson retail market? Q1 Update

As with the national scene, quarter after quarter, the need remains for jobs to fuel a Tucson retail market rebound. The State of Arizona reported significant job gains for the local market in February, with Tucson’s unemployment improving to 6.7% from 7.3% in January. In the past year, 3,500 more jobs were added, largely in the education, leisure/hospitality and construction sectors.


Tucson Retail MarketFor years, Tucson’s retail vacancy has inched up and down with little overall change, and Q113 was no exception. Vacancy of 8.2% matched the previous quarter and movement varied within only one percentage point since Q309. While not enough to push down vacancy, net absorption for the quarter totaled 102,088 square feet (sf). With sustained positive absorption, upward rent pressure will occur in approximately twelve months. Asking rents did not move appreciably.

It is the best of times and the worst of times, with the lease transaction market in a state of contradiction. Well-located properties with low vacancy rates in desirable submarkets negotiated landlord-friendly deals. Less fortunate landlords with above-market vacancy rates and average locations remained at the mercy of aggressive tenant expectations. Developers loosened up with tenant improvement money based on a more favorable long-term economic outlook.

Active categories citywide include mattress, fitness and drug, with restaurants’ appetites largely restricted to the Campbell corridor and downtown submarkets.  Mattress activity included a southeast BedMart, a Mattress Firm in Sahuarita, and an R&S Mattress in the Park Place trade area, with Phoenix-based R&S planning additional stores in 2013. America’s Best Contacts & Eyeglasses opened three local stores in Q113 to strong numbers, with the potential for additional locations. CVS obtained a key eastside corner, displacing El Mercado merchants to other market locations. 

On the user and investment sale side, Q113 activity cooled, after a year-end flurry of closings. Excepting Krausz’s Rillito Crossing Marketplace purchase at $16.9 million, sales were dominated by smaller transactions, including bank-owned properties under $1.0 million. SBA activity gained traction. Low interest rates and small business optimism fueled many buyers to acquire buildings before the prices rise again.  With properties healthy enough to recast the debt, refinance activity remained strong, thanks to available fixed rate money in the low 4.0% to high 5.0% range.

Tucson Retail Market Statistics


Musical chairs will continue for the near term as retailers move for lower rent or higher quality locations, most repositioning to regional trade areas with access to improved demographics.

Continued economic improvement has slowed the growth of the once hot discount retail category in the region and nationally, though Goodwill is carving a niche at the higher end.


Tucson office market follows on a strong 2012 finish in Q1

As with the national scene, quarter after quarter, we have cited the need for jobs to fuel a Tucson office market rebound. The State of Arizona reported significant job gains for the local market in February, with Tucson’s unemployment improving to 6.7% from 7.3% in January. In the past year, 3,500 more jobs were added, largely in the education, leisure/hospitality and construction sectors.


Tucson OfficeFollowing on a strong finish to 2012, lease activity in the first quarter continued at a more active pace. Rents began to firm, with asking rates virtually unchanged over the prior quarter. For better properties, concessions tightened, while secondary and tertiary properties still struggled for attention at lower rates and deeper concessions.

Slight positive absorption of 37,829 square feet (sf) occurred, ticking the overall vacancy rate down to 11.9% – 10.4% downtown, and 12.3% in the suburban Tucson market. This followed Q4 2012 positive absorption of 82,506 sf.

The ‘flight to quality’ afforded by years of rent compression has left a significant inventory of space challenged by dated improvements and deferred maintenance.

Medical space remained the demand leader as the trend toward Accountable Care Organizations (ACOs) materialized in legitimate market demand. Tucson Medical Center’s state-of-the-art West Pavilion opens in May, freeing some 50,000 (sf) of medical office space on the TMC campus for new medical-related occupancy. This large amount of well-located space will put pressure on properties challenged by access to hospital campuses.

Tucson Office Market Statistics



High year-end investment sales momentum carried forward into 2013’s first quarter. The sale of 333 E. Wetmore (a class A, 142,000-sf multi-tenant property) in late March represented the largest stabilized investment sale in the Tucson market post-recession. Online auction has become a popular vehicle for disposition of foreclosed assets, most recently Wilmot Professional to a local investor at below $50 psf.


With tenant appetite for Foothills space and scarce supply, we still anticipate a user to trigger construction on a planned development. We also forecast outright sale of closed Tucson Unified School District (TUSD) school sites.

Downtown revitalization continued apace with two private projects under construction, Plaza Centro and 1 East Broadway, complemented by both planned and initiated projects including student housing, traditional apartments, retail, restaurant, and hotels. Development of the Tucson Modern Streetcar project will continue to keep all eyes on properties along its route.



Photo credit: chelle


Our Commercial Real Estate Professionals in Action

Our team members have been active and visible in support of the market and industry. Read on for recent and upcoming events featuring Cushman & Wakefield | PICOR’s professionals.

Mike Hammond, President and CEO, was recently featured on Dean Greenberg’s Money Matters. Here’s an audio clip from his guest spot last month, where Mike talks about the Tucson commercial real estate market’s return to health.

Denisse Angulo, Regional Marketing Specialist for C&W | PICOR, joins a panel speaking at Tucson Commercial Real Estate Women (CREW) on April 18th on Doing a Deal in Mexico the pitfalls and opportunities of cross border real estate. It’s an open luncheon program, with online registrations open through April 15th.Rob Tomlinson, Retail Specialist, moderates a panel for members of the American Planning Association on April 18th forecasting the downtown Tucson real estate scene in five years.

Bob Kaplan, Principal and Investment Specialist, speaks to the Metropolitan Pima Alliance on April 19th, as a panelist providing a Student Housing Update. Visit MPA’s website for more details and registration.

Rob Glaser and Mike Hammond are moderating a Mentorship class for the Urban Land Institute (ULI) Arizona, in which one of Arizona’s most significant owners/investors of business park property will be speaking to young professionals about that segment of the industry.

Barbi Reuter, Principal/Marketing & Operations, recently joined a panel with CREW Network to promote careers in commercial real estate. In this CareerZone video series, she and representatives from CBRE, Colliers International, Cushman & Wakefield and Windstar Partners talk about their entry into the commercial real estate brokerage business and strategies for success. She will also present two sessions on Twitter for commercial real estate professionals at ICSC RECon in Las Vegas next month.




Diagnostics: A new economic development strategy for the Tucson region

Guest post from Tucson Regional Economic Opportunities (TREO), on the launch of a new economic development strategy focused on the strengths of southern Arizona diagnostics.


TREO DiagnosticsThe realm of bioscience is really big. It’s kind of like saying, “I’m really good at sports.” The natural question one might ask is, “What sport do you excel in? Baseball? Football? Badminton?” The same question can be asked of bioscience. Does your community excel in biochemistry? Food science? Animal biotechnology? With a broad and expansive industry like bioscience, no one community can successfully deliver all aspects that industry encapsulates much like no one person can be the best in every sport.

In 2006, the TREO Blueprint identified bioscience as an industry cluster TREO and the community should focus on based on the strengths and assets of the infrastructure, research and talent that stems from the University of Arizona. For seven years that has served us well as companies like Roche, Sanofi and HTG Molecular have entered the market. However, there is a common thread amongst those companies: diagnostics. TREO recently published a report titled, “A Comprehensive Focus on Diagnostics Business Growth in Southern Arizona.” The report outlines why our region needs to specifically focus on diagnostics and what steps we need to take in order to attract companies and talent to become an epicenter for the diagnostics field.

TREO’s analysis of the economic opportunities for the region has identified diagnostics as a focus area for recruitment and retention of bioscience-related companies.

TREO commissioned Dr. Raymond Woosley, former Vice President for Health Sciences at the University of Arizona and Dean of the College of Medicine, and founding President of Critical Path Institute (C-Path), to obtain the guidance and consensus of the region’s stakeholders and identify specific steps that can advance the region’s economic strengths in biomedical sciences.

As part of the research and fact-finding conducted for this strategy, over 80 community thought leaders were consulted and numerous meetings of stakeholders were held. The broad expertise of this stakeholder group was critical for developing sound, specific strategies.

Download the complete report here

Michael Guymon TREOMichael Guymon, Vice President of Regional Development for Tucson Regional Economic Opportunities, is responsible for planning, developing and implementing the business development strategies of TREO to attract, retain and expand jobs and capital investment for the region. He provides direct client and project management services with site selection/expansion projects.


Positive Tucson Economic Development News Comes in Threes

We hopped onto Tucson Regional Economic Opportunities’ (TREO) website this week and found that three positive Tucson economic development and employment stories came rapid fire, within a week of each other.

Tucson Rated a Top 5 Metro in Mountain Region for 2012

The March 2013 issue of Site Selection magazine ranks Tucson in the Top 5 for Metros of all sizes in the eight-state Mountain Region. This ranking is based on the number of corporate relocation and expansion projects in the metro in all of 2012.

Click here to read the article in Site Selection Magazine.

Sorenson Communications to open new Tucson support center

Sorenson Communications, the leading manufacturer and provider of videophones customized for the deaf and hard-of-hearing, will employ 270 people at a 24,000 square foot technical support facility near Williams Center. 

Sorenson Communications® is a provider of industry-leading communications products and services for the deaf and hard-of-hearing. The company’s offerings include Sorenson Video Relay Service® (SVRS®), the highest-quality video interpreting service; the new Sorenson ntouch® VP videophone, designed especially for use by deaf individuals; ntouch® PC, software that connects users to SVRS by using a PC and webcam; ntouch® Mobile, an application empowering SVRS communication via mobile devices; ntouch® for Mac®, an application that provides Mac users with on-the-go VRS; and Sorenson IP Relay® (SIPRelay®), a text-to-speech relay service. Sorenson will initially expend $1 million on tenant improvements and equipment upgrades to the facility. 

Infinity Insurance to hire 300 workers at new Tucson facility

Infinity Insurance will house 300 employees in 25,000 square feet of space near Valencia Road and Country Club Road. Infinity works with hundreds of independent agents to deliver auto insurance and other products in combination with their underwriting firms. Infinity’s underwriting companies are focused on financial stability, critical research, and processing efficiency in car insurance across the 44 states they serve.

The company will initially invest $1 million in the operation and hire 150 workers immediately; employment is to grow to around 300 in the next few years.

Infinity Insurance is part of Infinity Property and Casualty Corporation (Nasdaq: IPCC), a national provider of personal automobile insurance. Its products are offered through a network of approximately 13,000 independent agencies and brokers. Infinity receives an A (Excellent) Financial Strength Rating from A.M. Best. 

Click here for the latest news from Tucson Regional Economic Opportunities.

You might also be interested in last week’s Arizona Daily Star story detailing why Accelerate Diagnostics chose to locate in Tucson. 


The World (or Nation) According to Elliott

We like a concise weekly snapshot of economic activity that hits both the national and regional scenes, and thought we would share Elliott Pollack & Company’s latest with you. This week, Elliott Pollack & Co. weigh in on some positive national indicators and sequestration’s impact on Arizona. 

For a free email subscription, click the link in the following headline:

The Monday Morning Quarterback
A quick analysis of important economic data released over the last week 

The past week saw an overall increase in optimism as a result of improvements in the stock market and a positive jobs report. This occurred despite the passing of the “deadline” related to sequestration. Words like deadline and “final” and “budget” do not mean the same thing in Washington D.C. as they mean here. One needs to keep in mind that the improvement in the housing markets across the country this past year served as a bit of a foundation to this week’s newly found optimism. Consumer confidence still matters.

For the U.S. as a whole, the addition of 236,000 new non-farm jobs in February was unexpected but welcomed. This is in addition to a 7.7% unemployment rate for February (down from 7.9% in January and 8.3% from last year). Unfortunately, nonfarm labor productivity decreased at 1.9% annual rate in the fourth quarter of 2012. The forecast for real GDP for this year remains at 1.9%.

Consumer credit increased at a seasonally adjusted rate of 7% while revolving credit remained unchanged. Wholesale trade is up 3% over the previous year’s levels. The non-manufacturing sector saw growth for the 38th consecutive month in February 2013, with the ISM’s Non-Manufacturing Index at 56.9. On the other hand, U.S. manufacturers’ new orders decreased two of the last three months with a 2.0% decline in January 2013. U.S. NAR is reporting strong growth in median home prices for several metropolitan areas. Overall, the national price had the highest year-over-year growth in seven years with a 10% increase.

Arizona Economy

For Arizona the story remains the same. The economic data related to job creation and home prices will determine confidence in the local economy. Arizona will remain a top 5 state for employment growth this year as will the Greater Phoenix region. The impacts on the state’s economy related to sequestration will be noticeable but not debilitating. A revised estimate of 30,000 lost jobs occurring over a two year period represents only a fraction of the projected employment growth. However, specific sub-markets across the state that are disproportionately dependent on military spending will feel the impact. Does sequestration matter to Arizona? Yes. Will the state be strong enough to withstand the effects? Yes. Could the federal budget cuts occur in a more strategic manner? Again, yes.

About EDPCo
Elliott D. Pollack & Company (EDPCo) offers a broad range of economic and real estate consulting services backed by one of the most comprehensive databases found in the nation. This information makes it possible for the firm to conduct economic forecasting, develop economic impact studies and prepare demographic analyses and forecasts. Econometric modeling and economic development analysis and planning are also part of our capabilities. EDPCo staff includes professionals with backgrounds in economics, urban planning, financial analysis, real estate development and government. These professionals serve a broad client base of both public and private sector entities that range from school districts and utility companies to law firms and real estate developers.

For more information, contact –

Elliott D. Pollack & company
7505 East Sixth Avenue, Suite 100
Scottsdale, Arizona 85251




Photo credit: Eller College



Retail Trends: Anchored Centers vs Mid-block Strip Centers

As the recovery slowly continues and the dust settles, we are seeing some clear and notable patterns. While overall Tucson vacancy rates have climbed from an all-time low of 3.1% in 4Q 2005 to a high of 8.8% in 1Q 2011, not all properties have fared equally. As landlord requirements on credit have loosened and occupancies see a shift from national to local tenants, a consistent “flight to quality” has occurred. Tenants are moving from mid-block, unanchored shopping centers to anchored–largely corner–properties, creating a dichotomy in occupancies and lease rates for these two distinct types of centers.

Fig.1 Comparison of Vacancy Rates: Overall Retail Vacancy VS Anchored Shopping Centers & Unanchored Strip Centers 2008-2012

Tucson shopping center vacancy rates

As shown above, unanchored strip centers are posting a 15.3% vacancy, while grocery-anchored centers are enjoying a vacancy rate of only 6.8%. This represents a major shift over the past three years. At the end of 3Q 2008, anchored centers were 11.8% vacant and unanchored strips held at 8.6%. Pre-recession, unanchored strips were the natural choice for local retailers, due to lower rent demands and easier landlord qualification based on credit history and overall financial condition. During that period, landlords of anchored centers had higher rent and credit expectations and a pronounced preference for national tenants with name and credit over local “mom and pop” stores.


  1. Availability: Since the height of the real estate market in 2007, space has became available in the higher quality centers due to national chain bankruptcies and other retail store closings; creating enhanced availability.
  2. Lease Rates: Grocery-anchored centers have been forced to reduce lease rates in an effort to stave of lenders. Landlords have had to accept smaller returns and lenders have been forced to accept lower debt coverage ratios as well. 
  3. Credit Qualification: Along with these lower lease rates, landlords have had to accept tenants with less attractive balance sheets and credit histories. For many, “any tenant is better than no tenant” and tenant type and class has been relaxed as well. Landlords that would not previously lease to non-traditional tenants such as medical offices, churches, and charter schools have had to reconsider these policies.
  4. Survival of the Fittest: Tenants maintaining sales during the recession have seen many competitors fall by the wayside. As the market thins, coveted consumer dollars are awarded to surviving retailers. While not a true windfall, this augmented cash flow has allowed local tenants to improve locations and visibility into centers previously out of reach.

The result? A “flight to quality” out of mid-block strips and into grocery-anchored centers by strong local and regional retailers. Unanchored strips have desperately slashed lease rates in an effort to compete (Fig. 2 below). Nevertheless, the superior visibility, foot traffic, and overall credibility of anchored shopping centers have stymied the efforts of smaller strip landlords to retain tenancy. Until vacancy rates in anchored centers drops into the 3% range, unanchored, mid-block shopping centers will continue to struggle.

Fig 2 Comparison of Asking Lease Rates: Overall Market Retail Asking Rates vs. Anchored Shopping Centers and Unanchored Strip Centers 2005-2011 

Tucson shopping center lease rates


  1. Keep your rates competitive. In a tough battle, do all you can to make your property financially attractive. Vacancy costs more. In addition to aggressive, competitive, rent pricing, also address pass-through expenses (NNN Charges). To the tenant- rent and NNN charges are all the same; they are property cost. Appeal your taxes, whittle away at landscaping and maintenance costs, and aggressively bargain with contractors. Low NNN Charges will help to keep your tenants solvent and your property occupied.
  2. Keep your existing tenants. Attend to tenant needs; manage and maintain your property and curb appeal. Numerous landlords would like to take your tenants from you. Make the concessions that you can- vacancy is very expensive in this market.
  3. Hire a good broker. Putting a sign up and posting on Loopnet or CoStar is the minimum, not the total effort. Your broker needs to actively call prospective tenants. He/she needs to be creative and aware of changes in the marketplace that can improve your position. They must have good relationships with other brokers to attract new tenants.

Rob Tomlinson PICOR Retail BrokerRob Tomlinson has been specializing in retail property sales and leasing with C&W | PICOR since 2005. Experience with assemblages coupled with education in Urban Geography, Site Analysis, and Land Use Planning has helped him to add value to challenging sites. A CCIM Candidate and International Council of Shopping Centers (ICSC) member, Rob has countless hours on land use commissions and committees and public/private development efforts.

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