Tucson’s commercial real estate market seems to be slowing along with the rest of the economy. All sectors (retail, office, apartment, and industrial) seem to be in line to see slowdowns in expansion (new construction). Higher vacancy rates are expected as well.

Though retail real estate should start to see slowdowns due to the overall weakening economy, I do see Tucson holding up better than many other areas of the country. Its growing population puts direct demand on all sectors of real estate. Large retailers, however, will be very cautious about taking on new space. Smaller retailers feeling the pinch will most likely look for concessions from landlords to help get them through if the downturn is more severe than predicted.

Don Bourne, CEO of Bourne Partners — one of the largest commercial investors and developers in town — has purchased the AOL building located at 5401, 5421, 5431, and 5451 E. Williams Centre. The buildings total approximately 196,179 square feet of premium office space. Bourne, the original developer of the buildings, completed their construction in 2001 and sold them to a New York based investment group for $30.6M. After a few years of ownership, the group decided to sell because this one office complex was their only asset west of the Mississippi River. They wanted to limit their holdings to properties closer to their base. Don Bourne stepped up and repurchased the property. He stated, “We think it’s great real estate, and we thought there would be good demand for lease space in those buildings for a long time to come.” The major tenant of the complex is AOL, who occupies three of the buildings — about 100,000 square feet. When a major investor and presence in the Tucson real estate marketplace such as Don Bourne takes a stance to step up and buy a very large office complex, that has to set the bar. Markets will take notice that though Tucson’s commercial market, like its residential market, may be soft right now, in the long run, the market is a buy. Buying now may seem like jumping off a cliff, but the biggest money in real estate is always made when everyone is running out of it and no one wants to buy. Well, except Don Bourne and a few others who dominate the local Tucson market, such as Chris Kemmerly and Steve Quinlin, who recently purchased all of the local assets of national homebuilder Standard Pacific. Kemmerly also sold his interest to Standard Pacific a couple years ago, only to buy it right back.