With local employment on the rise and median home prices well below the national average, multifamily in Tucson is seeing considerable renewal. Construction of new inventory in The Old Pueblo reached staggering heights this year, jumping from around 100 unit completions in 2011 to just shy of 500 unit completions projected for 2012.
Hendricks & Partners reports that multifamily developers brought 85 new units online in the first three months of the year, making it the strongest first quarter since 2005. Furthermore, much of the new development is to be purpose-built student housing along the Modern Streetcar line, a $200 million, 3.9 mile light rail project that will connect major activity centers such as the University of Arizona, the Arizona Health Services Center and the Congress Avenue Shopping and Entertainment District.
The Modern Streetcar project is expected to generate around 1,200 new jobs and open for service in late 2013.
Additionally, OptumRx—a leading pharmacy benefits management organization for UnitedHealth Group—recently announced that it will be opening a new facility in Tucson, adding at least 400 new jobs over the next 12 to 18 months. The metrowide unemployment rate declined 90 basis points over the last year to 7.6 percent, well below the national rate of 8.4 percent.
With urban development and employment leading to increased demand for apartments, it’s not surprising that the vacancy rate has been falling steadily over the past few years, from 12.2 percent in 2009 to 9 percent in 2012. However, with the massive delivery of new inventory, rents have not increased by much over the past year.
Hendricks & Partners’ most recent quarterly report shows average rent for the metro overall climbing just $4 between Q1 2011 and Q1 2012, from $625 per month to $629 per month. The West Tucson submarket saw rents stay steady at $688 per month, while the East Tucson submarket actually posted a $3 decline—from $623 to $620. East Tucson also saw its vacancy rate climb from 10.1 percent to 10.4 percent over the last year.