As a the owner of a commercial retail center with a tenant that moved out in the middle of the night, I’m a tad bit concerned about the current retail leasing market.  The phone hasn’t exactly been ringing off the hook. The national and local downturn is hitting our center as it’s hitting retail spaces around the our region.  In a growth cycle, housing booms, commercial follows rooftops and all is well. In a downward spiral the retail slows after housing. Well retail has ground to a halt in a matter of months. Read  more here:

More retail closures, and vacancies, loom in Tucson area

By Josh Brodesky

Arizona Daily Star

Tucson, Arizona | Published: 11.07.2008

As the economy slumps, the list of retailers closing in Tucson will likely get longer, making vacant storefronts and empty big boxes common sites across the Old Pueblo.

Already, American Home furniture stores, Linens ‘n’ Things and Mervyns have announced closures. Retail vacancy in and around Tucson has risen to more than 8 percent, and many working in commercial real estate say they expect that number to keep rising.

As it does, they said, rents will likely decline and many commercial projects will be put on hold.

“I don’t think we’ve hit bottom,” said Linda Montani, a retail specialist with Commercial Retail Advisors. “It’s a real volatile time right now.”

Most estimates through the second quarter place retail commercial vacancies at about 8.5 percent, up from 6.9 percent at the end of last year, according to the commercial real estate firm CB Richard Ellis.

“I think that between now and the end of the year that number will climb higher,” said Pete Villaescusa, first vice president for CB Richard Ellis. “Consumers are not spending like they were a year ago, and the retailers are feeling that. People are holding off on major purchases.”

Third-quarter reports from Picor Commercial Real Estate Services for office and industrial space in the Tucson area placed vacancies at 8.7 and 6 percent, respectively.

Many in the retail side of the industry are bracing for the closing of major retailers. Chains such as Mervyns use large commercial spaces, which in the current economy can be difficult to fill as fewer retailers are looking to expand.

American Home has four locations across Tucson, ranging in size from about 86,000 to 220,000 square feet. Messages left at its corporate headquarters were not returned, but the company recently filed for Chapter 11 bankruptcy and announced the closing of its Tucson stores, among others.

Greg Furrier, a principal with Picor Commercial Real Estate Services who is the broker for three of the four properties, said he is confident he can quickly find tenants for at least two of the spaces. American Home’s warehouse, 2020 W. Prince Road, is a prime location because of its proximity to Interstate 10 and the Oracle Road corridor.

“When you go into the industrial properties, being near the freeway makes them better,” Furrier said.

And a showroom at 4690 N. Oracle Road near the Tucson Mall also has a good location.

But the third showroom, at 9559 E. Golf Links Road, could prove trickier because the area has less commercial traffic and the building is a former Kmart.

If Furrier can’t find a tenant, it’s possible the building could be split into several different storefronts, he said. But that also has its challenges as prospective tenants may want only a small portion of the space, or the divisions could end up in awkward L-shapes.

Finding tenants to fill large spaces is daunting, but even more so in the current economy as there are few businesses expanding, Montani said.

“The tenants are large. It’s expensive to lease,” said Montani. “There are a lot less anchor tenants out there that are actually looking to expand now. So, you know, unfortunately they leave big vacancies.”

The growing number of vacancies has led to cheaper rents, but so far that hasn’t drawn very many tenants.

“It’s a good time to rent; however, the phones aren’t ringing,” Montani said.

Meanwhile, a number of commercial projects are being put on hold, and there is concern that, in the long term, foreclosures might start hitting the commercial market in the same way they have rocked the residential market.

“It is possible,” said Villaescusa, who said he has worked through times with higher vacancy rates. “I think that wouldn’t be noticeable until maybe a year from now.”

● Contact reporter Josh Brodesky at 573-4178 or jbrodesky@azstarnet.com.