It's far from an ideal environment for multifamily landlords in Tucson, Arizona — and conditions aren't expected to get much better any time soon.
The most troubling trend in the market is vacancy, which spiked by 40 basis points from the previous three months and 60 basis points year-over-year to 8.8 percent, according to a report from Northmarq.
To make matters worse, there were just 207 multifamily units delivered at the end of March. Developments are expected to accelerate in 2025, with a total of 2,400 forecasted to be completed by the end of 2025, which would exceed the past two years' totals by hundreds of units, according to Northmarq. That's expected to exacerbate the vacancy level.
"The vacancy rate in Tucson is expected to tick higher from current levels as new units come online," the CRE firm wrote.
"Vacancy in Tucson is forecast to end 2025 at 9%, an increase of 60 basis points for the full year."
The high vacancy is putting pressure on rents. The average ask plummeted 2.4 percent year-over-year in the first quarter to $1,154. Also, the number represented a two percent decrease from the previous three months. Northmaq pointed out multifamily operators are offering concessions as they deal with high supply.
But there was one silver lining in Tucson's multifamily sector — transactions. In fact, there were more sales recorded in the first three months of 2025 versus the full first half of last year, as investors look to swoop up newer assets in the market.
"Traditionally, 1970s- and 1980s-vintage properties have made up the majority of sales in Tucson, but during the first quarter, properties built in the late-1990s and early 2000s accounted for about 75% of the sales, a trend that is likely to continue through the end of the year," Northmarq wrote in further context.
However, the activity still finds itself below historical averages in the city, and that trajectory will likely continue throughout 2025 as well. At least there might be an improvement somewhere because an expected spike in vacancy rates can lead to a "modest" decrease in rents, according to Northmarq.
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