Tucson apartment market still of high interest to investors

The high volume of Tucson apartments bought by investors in 2016 is expected to continue this year as up to 80 percent of local complex owners’ loans come due.

Many 10-year loans for multifamily projects were generated between 2005 and 2008, when the market was hot and lending accessible, said Art Wadlund, a senior managing director at Berkadia, which last year represented owners on 70 percent of sales of properties with 100 units or more.

Data from ABI Multifamily Apartment Brokerage & Advisory Firm shows 2016 saw $426 million worth of sales of complexes with 100 units or more — a 24 percent increase from 2015.

Last year’s $76 million worth of sales of complexes, with 10 to 99 units, was an increase of 42.4 percent from 2015.

Wadlund expects that level of activity to continue in 2017 because not a lot of new market-rate apartments are expected to come online this year.

“Half of Tucson’s apartment complexes were built in the 1980s,” he said. “The impact of investors entering the market is that those will be upgraded.”

For renters, he said, the impact should be minimal. Leases will be honored and for those living in complexes that get upgraded, rents won’t rise dramatically.

New complexes are being constructed by local developers as national builders prefer bigger markets where they can build several projects at once.

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The combination of job announcements and solid occupancy rates makes the Tucson market attractive to investors, Wadlund said.

Two market-rate projects are expected to open downtown — HSL Properties development at La Placita and Aerie Development’s 100-unit complex next to Tucson’s tallest tower at 1 S. Church Ave.

Other residential projects downtown are affordable housing for seniors and veterans.

HSL is also planning a new complex at Cortaro Farms in Marana and Alta Vista Communities is currently constructing a 232-unit complex at the former Rancho Los Amigos mobile-home park on Orange Grove Road, just west of Oracle Road.

Other multifamily projects in the pipeline are for senior living and student housing.

Data from the Tucson Association of Realtors shows the average monthly rent for market-rate apartments in the Tucson area is $573 compared to $1,228 for a single family residence.

Combined with condominiums, mobile homes and town homes, the average vacancy for rentals is 47 days.