The Tucson industrial market finished the third quarter with its healthiest numbers of the year. BRD Realty puts Tucson industrial vacancy at 7.9%.
In April, BRD Realty noted that vacancy was at or near its peak. By July, the market had turned a corner. The Q3 data confirms both. But the headline needs context: a single large lease drove most of the quarter's absorption. What's happening underneath, in the small bays, the IOS yards and the high-power manufacturing space, is the more important story for most Tucson businesses and owners.
The Q3 Numbers
BRD Realty puts Tucson industrial vacancy at 7.9% at the end of the third quarter. One large lease did much of the heavy lifting, reversing small occupancy losses earlier in the year. No new industrial space delivered during the quarter, which gave the market a breather, and asking rents have held roughly flat.
The big-number market is stabilizing, not booming. The real tightness is in specific product types and the Northwest and Vail markets.
Small Bays Under 10,000 SF Are Still the Squeeze
The market reports lump every building together, but a 3,000 SF contractor suite and a 300,000 SF distribution box are not competing for the same tenant. For businesses that need 1,500 to 10,000 SF with grade-level doors and three-phase power, Tucson is tight and getting tighter.
The supply side is shrinking for reasons that have nothing to do with demand:
More than 50 small warehouse bays near Grant Road and I-10 have been demolished for the redevelopment around the Pascua Yaqui Tribe's new casino at 1055 W Grant Road.
The I-10 widening near Country Club and Palo Verde is taking additional industrial properties through right-of-way acquisition.
New construction can't replace them. At today's land, construction and financing costs, small-bay rents would need to roughly double to justify building new 1,500–10,000 SF suites.
At Grant & I-10, vacancy has moved from 20% one year ago to 4% today.
Just within the past three months, the 5,000-20,000 SF market has tightened significantly as well.
IOS Is Still the Tightest Product in Tucson
Industrial outdoor storage remains the hardest thing to find in this market, full stop. The profile tenants want hasn't changed: at least an acre of usable yard, a functional shop or office building on the edge of the lot, oversized doors, room to turn a 53' trailer, and quick access to I-10.
Three demand drivers are stacking on top of each other:
Homebuilding in Marana and Vail. Every large subdivision brings graders, utility crews, framers and suppliers who need a place to park equipment and stage materials for years, not months.
The Western Gateway Pipeline. With the roughly $5 billion refined-products line moving to construction and expected to pass through Pima County, contractors are already calling BRD Realty about yards with highway access.
Equipment rental and fleet operators. PacWest Rentals' lease of the 2.06-acre yard at 2110 N Dragoon earlier this year is a good example of a Phoenix-area operator entering Tucson specifically for IOS.
Supply is limited by zoning, land and how cities view outdoor storage, so this imbalance is not going away soon. The IOS market has been very stop and go but we expect it to ramp up again heading into 2027.
Power Is the New Clear Height
In 2021 the questions were about clear height and dock doors. Today, for a growing share of tenants, the first question is amperage. Small and mid-sized manufacturers running CNC and EDM machines need three-phase 480-volt service, and a bay without it often isn't a bay they can use.
That changes the math for landlords. Tenants are asking for help taking a suite from 100 amps to 600 amps at 480 volts as a condition of renewing. A $30,000–$60,000 electrical upgrade sounds expensive until you compare it to a vacancy, and the upgraded power stays with the building for the next tenant. Owners who invest in panels and service now will lease faster and at better rates than those who wait.
Power demand is mostly coming from manufacturers in the aerospace and defense industry.
Big Bays and the Construction Pipeline
The large-bay segment is where the market's vacancy actually sits. The Class A spec buildings from the 2024–2025 development wave have been leasing slowly, and the one big Q3 deal shows there are still users out there for that product. No new space delivered in Q3, which gave the market a breather.
That breather is temporary. The construction pipeline has grown again this fall, with several new projects underway. Add in five-year leases signed at the 2021–2022 peak that are now rolling, and big-bay vacancy could tick back up in 2027 even as small bays and IOS stay tight. Expect landlords of 30,000 SF+ space to keep offering concessions while small-bay landlords hold firm.
Recent 50,000 SF + sales like the former Sam Levitz building on 36th Street and the former Copenhagen building in Butterfield that sold to Arizona Steel have helped positive absorption as well.
Who Owns Tucson Industrial Is Changing
The biggest ownership move of the year was Catalyst's $165,750,000 purchase of the former Equus portfolio: about 1,245,000 SF across more than 500 warehouse, R&D, retail, flex and office units throughout Tucson. BRD Realty is now handling leasing and renewals on that portfolio, led by Max Fisher and Ryan Shirley.
On the sale side, inventory remains thin. Local operators, local investors and funds are competing for a small pool of listings, and users keep buying larger buildings when they come up, including the 400,000 SF+ Flint building at Tangerine & I-10 and the former Sam Levitz building on 36th Street. Now it is getting difficult to find vacant land to purchase, especially in the Central and Northwest market and Vail land is selling at a steady pace. We expect Vail land sales to be one of the most active parts of the market.
What It Means Heading Into 2027
Tucson is really two industrial markets right now. Big-bay space has room to negotiate. Small bays, IOS yards and high-power space do not.
For tenants:
Start your search six months or more before you need to move, especially in Marana or for anything with a yard.
Know your true requirements before you tour: square footage range, power, door count and size, yard size, fleet count and zoning.
Separate must-haves from preferences. Flexibility on location or configuration is the biggest advantage you can have.
If your lease expires in 2027, start the renewal conversation now.
For owners:
Small-bay and IOS owners have leverage, but well-located, well-maintained space is what commands it.
Electrical upgrades, fenced and paved yards, and wider gates are the improvements tenants are paying for.
With sale inventory this thin, it's a good time to find out what your building is worth.
If you're looking for warehouse space, a contractor yard or IOS property in Tucson or Marana, or want to talk about leasing or selling your building, contact Max Fisher at BRD Realty.