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Sales of Tucson apartments surge 236 percent

Sales of Tucson apartment complexes have soared this year, largely because of California investors who are attracted to the region’s improving economy, relatively low prices and opportunities for profits, says a Phoenix brokerage company.

Tucson-area sales rose by 236 percent to $365 million in the first nine months of this year, compared with the same period in 2015, said ABI Multifamily, a Phoenix brokerage and advisory firm that specializes in apartment transactions.

Investors began snapping up apartment complexes in around 2010 in eastern and western coastal cities. As prices peaked, they began spreading to different parts of the country, according to ABI.

“The increase in Tucson multi-family purchases picked up in earnest this year but started in the latter half of 2015 as a result of prices spiking in Phoenix and all across the country,” said Tom Brophy, ABI’s director of research.

Another factor sparking more interest in Tucson was the steady stream of job announcements over the past year, relatively low rents that can be raised and the fact that new construction is relatively low. Average rents in Tucson for complexes with ten or more units are $777 a month, according to ABI. Occupancy averaged 94.5 percent.

“Tucson is really starting to see a lot of economic activity. And with Caterpillar (Surface Mining and Technology Division) moving in, you have a lot of good job announcements. And there’s still not this corresponding, typical ‘Let’s build a lot of things.’ And so all that kind of enticed investors who are looking for yield. Tucson provides that for them,” Brophy said.

Tucson apartment purchases have been especially popular with California investors, who snatched up 2,680 units in the first nine months of this year, a 54 percent increase over 2015. In contrast, their purchase of 15,265 units in metro Phoenix this year was only a 27 percent higher than last year.

Arizona investors came in second place for Tucson purchases, buying 1,325 units this year, a decrease of 43 percent, according to ABI. And Colorado investors came in third by buying 1,280 units – a whopping 556 percent increase.

Brophy said the purchases don’t necessarily mean rents will rise and that so far, rental increases have been subdued, compared with Phoenix. In part, that is because Tucson owners have not been as aggressive in buying and renovating older properties, at least not so far.  

“But I could see that becoming more of an issue in the next year or so,” he said.

Cushman & Wakefield PICOR in Tucson last month reported similar findings and said investor activity is at an all-time high in the Tucson market. “Tucson is a seller’s market, as inventory remains very low and demand is extremely high,“ the company said.

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