Apartment projects in Tucson's core canceled

Three major apartment projects announced in the past year near the University of Arizona have been canceled or postponed.

And for the first time in 10 years, no new student housing projects have been scheduled in Tucson.

A combination of increased construction costs, a drop in enrollment at the University of Arizona, and cooling rental prices are all contributing factors to developer hesitation.

Construction prices remain about 40% higher than in 2020, and skilled labor is in short supply.

Last year, UA’s enrollment of first-year students dropped by 19%, mostly due to declines in out-of-state and international students, for an overall 4% drop in total student enrollment.

And, after peaking at over $1,500 a month in 2022, the average apartment rental price in the Tucson market dropped to around $1,100 at the beginning of 2026.

The Tucson law firm of Lazarus & Silvyn has represented large multifamily developers in the Tucson market for more than 25 years.

“The multi-family market in Tucson right now is challenging, particularly in the areas where lease/rental rates are lower,” the firm said in a statement to provide some perspective. “Interest rates are still high compared to the past five years, and materials and labor costs have continued to be high, partly due to tariffs."

The firm’s statement said new student housing development is more challenging with the higher costs and uncertainty of enrollment.

“Any number of things can help this trend turn around,” they said. “There are indications the University of Arizona’s drop in enrollment last year was an anomaly and an increase in this year’s freshman class enrollment would prove that to be true.”

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Projects that were called off include:

• California-based Ascent Property Co. plans for a five-story apartment complex at the site of The Rock, 136 N. Park Ave.
• Minnesota-based Mortenson Development plans for a 19-story building on the northwest corner of Speedway and Campbell Avenue.
• Tucson-based developer Sloane McFarland and St. Louis-based Ridgehouse Companies plans for a 4- and a 5-story complex, Welcome Broadway, on the southeast corner of Broadway and Euclid Avenue.

Attempts to reach the different developers to inquire about the reasons for the decision to back out or delay the developments were not successful.

Local real estate brokerage firm Picor says in its Multifamily Market Report that climbing vacancy rates, due to new apartment competition, are cooling rental prices across the Tucson market.

“Vacancy rose to 9.56% driven by a measurable expansion in available units across multiple submarkets,” the report says. “Average rents declined to $1,130 per unit with concessions climbing to $61 per unit — the highest incentives offered in more than fifteen years — highlighting the increased pressure on owners to attract new residents and retain current ones.”

Concessions include things such as one or more months of free rent, discounted security deposits or free parking and utilities to attract renters.

Unless and until there is some reversal of tariffs on construction supplies or lowering of interest rates, the tide has shifted to a renters' market.

“Even a modest downward trend in rates could meaningfully increase investment inventory while simultaneously attracting a fresh wave of capital ready to transact,” the Picor report says. “Property managers, however, express concern around longer rental lead times, extended vacancy periods, and slower lease-up velocity.

“As a result, concessions and tenant retention strategies will be key themes in the coming quarters.”