ABI Multifamily Tucson MSA 3Q 2016 Quarterly Report: Tucson Rising

PHOENIX - Nov. 1, 2016 - PRLog -- Beginning in 2015, and significantly increasing throughout 2016, the Tucson MSA started to emerge from the economic stagnation which had long plagued the region from the onset of the Great Recession.  Fueled by 2,500+ new job announcements from the likes of Comcast, Afni and C3, Caterpillar's decision to move its regional HQ to Tucson, announcement of SpacePort, as well as, Banner-University's $500M investment in the region, has propelled Tucson towards the top of the economic charts.  As Elliott D Pollack stated in his October 24^th Monday Morning Quarterback publication, "Greater Tucson [employment] was up 2.1% for the month and now stands up 3.0% for the first nine months of the year.  This is a surprisingly strong showing in Tucson.  Prior to this year, the employment gains in Tucson had been very anemic."

Investor Profiles

Through the period ending 3Q 2016, the Tucson MSA multifamily market saw total sales volume increase 236% from 2013 to 2016's $365 million level.  The rapid sales volume increase was led by California-based investors who purchased 2,680 units, up 54%, from 1,736 units over the same period in 2015.  Arizona-based investors came in 2nd with 1,325 units purchased, down 43% from the previous year, and Colorado-based investors came in 3rd with 1,280 units purchased up a whopping 556% from 2015.

During the same period ending 3Q 2016, the Phoenix MSA saw $3.6 billion in total multifamily transactions (10+ units per property), which is a 51% increase from 2015 and 88% from 2013.  The most significant increase in activity came from California-based investors, who purchased a total of 15,265 units across Metro, an increase of 27% over the same period in 2015.  In fact, California-investors accounted for nearly 45% of total units transacted in 2016.  Arizona-based investors were a distant 2^nd with 8,027 units purchased which is a 21% decrease from 2015.  Rounding out the Top 3 were Canada-based investors who purchased 3,439 units, an 8% increase over 2015.

Conclusion

Far from the halcyon days of the early 2000's real estate market, Tucson is gaining significant traction among investors especially in light of its higher average Cap rates, trending 8%+ and contingent upon condition, low rents, currently $777 (up 6.3% YoY), high occupancy (94.5%) and little new construction.  Looking beyond the Arizona borders, where Central Banker induced NIRP (Negative Interest Rate Policy) and ZIRP (Zero Interest Rate Policy) policies pervade most of the developed world's markets has investors, the world over, on the hunt for yield.

Although there are those who disagree, I anticipate stasis of domestic interest rates and further dives into deeper negative rates for most of Europe/Asia which has the potential to set off massive capital flights to preservation as opposed to yield. In Phoenix, we're already experiencing some of that premium pricing setting in, however is not as extreme as those markets on the East/West coasts. As such, I would expect both the Tucson and Phoenix markets to continue their upward trends through the end of the year and well into next.

To view the entire Tucson MSA Multifamily 3Q 2016 Quarterly Report go to: http://abimultifamily.com/abinsight-tucson-msa-multifamil...