Tucson Commercial Office Space for Rent

Q4 2025

Tucson Commercial Real Estate Market Report

Focus: Q4 2025 Market Trends

Executive Summary

The Tucson commercial real estate (CRE) market in late 2025 is characterizing a "pivot" phase, balancing steady local economic drivers against broader national cooling [6]. The Retail sector demonstrates resilience with rent growth outperforming national trends, despite a slight vacancy tick from big-box closures [5]. Industrial fundamentals faced a temporary setback in Q3 with negative absorption driving vacancy to 6.3%, though asking rents continued to climb [3]. Multifamily is working through a supply peak, resulting in softened rents and a drop in sales pricing [2]. Office remains the most challenged sector, seeing negative absorption and declining lease rates as it rebalances [4].

TenantBase Proprietary Data [7] highlights the distribution of active tenant demand over the last 90 days:

  • Retail/Storefront led market activity with 61.70% of all searches [7].
  • Office was the second most active sector at 27.66% [7].
  • Warehouse accounted for 12.77% of total search volume [7].

Office Market

Market Overview Tucson's office market experienced a contraction in late 2025, with negative absorption pushing vacancy rates higher as the sector rightsizes.

  • Vacancy & Absorption: Net absorption turned negative in Q3 2025, causing the vacancy rate to jump 110 basis points [4].
  • Rental Rates: The direct average asking full-service gross (FSG) lease rate decreased by 4.5% quarter-over-quarter to $23.22 per sq. ft. [4].
  • Development: No new office projects have broken ground in the metro area in the last 3.5 years, which should eventually help stabilize vacancy as existing inventory is absorbed or repurposed [4].
  • Outlook: The market is slowly rebalancing, with future stability expected to come from the region's expanding workforce in technology and aerospace, rather than speculative leasing [6].

TenantBase Activity [7]

  • Demand Share: Office accounted for 27.66% of total search volume [7].
  • Lease Term Preference: Demand is split between flexibility and mid-term commitment:
    • Less than one year: 33.33% of deals [7].
    • 2-3 Years: 33.33% of deals [7].
    • 3-5 Years: 16.67% of deals [7].
  • Size Requirements: Tenants seeking short-term leases (<1 year) have an average lower requirement of 1,500 SF, while those looking for 2-3 year terms need significantly smaller spaces averaging 300 SF [7].

Industrial & Warehouse Market

Market Overview Tucson's industrial sector faced a "modest cooling" in Q3 2025 due to specific large tenant move-outs, but the long-term growth story remains intact.

  • Vacancy & Rent: Vacancy rose 90 basis points to 6.3% following negative net absorption of (355,839) sq. ft. [3]. Despite this, the average asking NNN rent increased to $0.84 per sq. ft. [3].
  • Submarket Performance: The Southeast submarket drove the vacancy increase due to large departures (e.g., Black & Decker), while the Airport submarket posted positive absorption [3].
  • Construction: The pipeline remains active with over 1 million sq. ft. under construction, largely speculative, which is expected to facilitate future leasing [3].
  • Leasing Highlights: TenantBase data shows a concentrated interest in short-term leases for the limited number of active warehouse inquiries [7].

TenantBase Activity [7]

  • Demand Share: Warehouse accounted for 12.77% of total search volume [7].
  • Lease Term Preference: Of the deals with specified terms, 100% sought 1-2 Year leases, indicating a cautious approach from industrial tenants [7].
  • Size Requirements: The average lower size requirement for these 1-2 year leases was 1,200 SF [7].

Retail Market

Market Overview The retail sector is a top performer, characterized by tight small-shop availability and strong rent growth driven by consumer spending.

  • Vacancy & Availability: Overall vacancy rose slightly to 6.0% due to big-box closures, but vacancy for spaces under 4,000 sq. ft. is an incredibly tight 2.1% [5].
  • Rental Rates: Asking rents climbed 4.8% year-over-year to approximately $20.00 per sq. ft., outpacing national growth trends [5].
  • Market Drivers: Demand is centered on value, experiential, and fitness-oriented tenants. The affordability of Tucson's retail space continues to attract regional and national brands [5].
  • Tenant Interest: Retail dominated search volume in Q4, confirming the sector's vibrancy [7].

TenantBase Activity [7]

  • Demand Share: Retail/Storefront activity dominated with 61.70% of all search volume [7].
  • Lease Term Preference: Retail tenants show a balanced appetite for lease structures:
    • 1-2 Years: 31.25% of deals [7].
    • 3-5 Years: 31.25% of deals [7].
    • 2-3 Years: 12.50% of deals [7].
  • Top Locations: Tenant interest is highest in Tucson (11 deals) and Downtown (3 deals) [7].

  1. Multifamily Market

Market Overview The multifamily market is navigating a supply-induced softening, with rising vacancy and stabilizing rents.

  • Vacancy & Occupancy: Vacancy rates have risen to approximately 7.8% (some sources cite up to 8.76%) largely due to new supply delivering [2].
  • Rents: Rents have leveled off or softened in some areas, with owners offering targeted concessions to maintain occupancy [2].
  • Sales Activity: Sales pricing declined sharply to an average of $112,747 per unit, as investors focused on older, value-add assets rather than institutional-grade properties [2].
  • Supply: The market saw 255 new deliveries in Q3 2025. The supply wave is expected to crest, setting the stage for recovery in 2026 [2].

2026 Outlook

Looking ahead to 2026, the Tucson market is positioned for strategic growth in specific high-demand niches.

  • Industrial Expansion: Industrial growth is expected to remain the standout performer, driven by the aerospace, defense, and renewable energy sectors, particularly along the I-10 corridor [6].
  • Retail Evolution: Growth will shift toward mixed-use environments and service centers, with strong demand for medical retail tenants and grocery-anchored centers in suburban areas like Oro Valley and Marana [6].
  • Population Drivers: Steady migration from high-cost states will continue to fuel demand for services, medical facilities, and housing, underpinning the broader commercial real estate recovery [6].

Sources

  1. Baker Tilly: Commercial Real Estate Market Report Q3 2025
  2. Cushman & Wakefield | PICOR: Multifamily Q3 2025 MarketBeat
  3. Real Estate Daily News: CBRE Tucson Industrial Market Q3 2025
  4. CBRE: Tucson Office Figures Q3 2025
  5. Cushman & Wakefield | PICOR: Retail Q3 2025 MarketBeat
  6. Breaking AC: Tucson's Commercial Real Estate 2026 Outlook
  7. TenantBase Proprietary Market Data (Tucson - Last 90 Days)

Information in this report is aggregated from various third-party sources and synthesized using artificial intelligence and other research tools. While we believe these sources to be reliable, we cannot guarantee the absolute accuracy or completeness of the data. This report is intended for informational purposes to provide market insight and should be independently verified prior to any use in a real estate transaction or legal commitment.