Tucson is Arizona's second-largest city and one of the most strategically positioned commercial real estate markets in the American Southwest. With a metro population of roughly 1.05 million residents, the city anchors a regional economy driven by the University of Arizona's 42,000-plus students and research enterprise, Raytheon Missiles and Defense (a division of RTX Corporation), and Davis-Monthan Air Force Base. These three institutions alone generate tens of thousands of jobs and billions of dollars in annual economic activity. Pima County's cost of living sits approximately 6.2% below the national average, and commercial property prices remain well below those in Phoenix, making Tucson an increasingly attractive destination for investors seeking stronger yields and lower entry points.
This guide covers everything Tucson commercial real estate borrowers need to know, from current loan rates and available programs to submarket conditions and step-by-step guidance on securing financing in this growing Southern Arizona market.
Need Financing for This Project?
Stop searching bank by bank. Get matched with 6,000+ vetted lenders competing for your deal.
What Are Current Commercial Loan Rates in Tucson?
As of early 2026, commercial mortgage rates in Tucson start as low as 5.11% for stabilized properties financed through agency or life company programs. The rate you receive depends on property type, loan structure, borrower profile, and the specific program you select. Here is a breakdown of what borrowers are seeing across major loan categories:
- Multifamily (Agency): 5.18% to 5.64% for stabilized apartment complexes with strong occupancy
- Bank Loans (Arizona): 5.8% to 6.5% across multifamily, mixed-use, and owner-occupied properties
- Life Company Loans: 5.5% to 6.2% for core stabilized assets in prime locations such as Oro Valley and the Catalina Foothills
- CMBS Loans: 6.2% to 6.8% with spreads of roughly 200 to 275 basis points over treasuries
- Bridge Loans: 8.5% to 12.0%, with Tucson often pricing favorably compared to coastal markets
- Construction Loans: SOFR + 275 to 475 basis points, translating to approximately 7.0% to 8.5%
- SBA 504: Fixed-rate second mortgage at around 6.0% to 6.5% for owner-occupied properties
- Hard Money: 10% to 14% for asset-based, fast-close transactions
Tucson's lower cost basis compared to Phoenix, Scottsdale, or major California metros means investors can often secure higher debt service coverage ratios on comparable properties, which translates into more favorable underwriting and potentially better loan terms.
Use our commercial mortgage calculator to estimate monthly payments and total interest costs based on these current Tucson rates.
Which Loan Programs Are Available for Tucson Commercial Properties?
Tucson borrowers have access to a full range of commercial financing programs. Each program is suited to different deal types, property conditions, and borrower profiles. Here are the most common options:
SBA Loans
SBA loans are particularly well suited for Tucson's large base of small and mid-sized business owners. The SBA 504 program combines a conventional first mortgage with a 20-year, fully amortized second mortgage guaranteed by the SBA, allowing borrowers to put as little as 10% down on owner-occupied commercial properties. SBA 7(a) loans offer more flexibility for working capital, equipment purchases, and smaller acquisitions. Tucson's entrepreneurial ecosystem, fueled by University of Arizona spinoffs and the growing Tech Parks Arizona campus, creates strong demand for SBA financing.
Learn more about SBA loans for commercial real estate and how to structure your application for approval.
Bridge Loans
For investors who need to close quickly or are acquiring value-add properties that do not yet qualify for permanent financing, bridge loans fill the gap. Tucson bridge loan rates typically range from 8.5% to 12%, with terms from 6 months to 3 years. These loans focus on property value and upside potential rather than personal financial history. Bridge financing is particularly useful in Tucson for acquiring older retail centers along Broadway or Speedway, repositioning industrial assets near the Tucson International Airport submarket, or securing properties in rapidly appreciating areas like Marana and Oro Valley before permanent financing can be arranged.
Estimate your bridge loan costs with our commercial bridge loan calculator.
DSCR Loans
Debt Service Coverage Ratio loans have become increasingly popular among Tucson rental property investors. Unlike conventional loans, DSCR programs qualify borrowers based on the property's rental income rather than personal income. This makes them ideal for investors with complex tax returns or growing portfolios. Tucson's affordable price points and strong rental demand, driven by the university's student population and military personnel at Davis-Monthan AFB, provide the cash flow foundation most DSCR lenders require. Current DSCR loan rates in Arizona generally range from around 7.15% to 8.25% fixed, depending on LTV and property type.
Check your property's qualification using our DSCR calculator.
Hard Money Loans
Hard money loans are asset-based lending solutions ideal for fix-and-flip investors, distressed acquisitions, and projects requiring speed over cost. These loans fund in days rather than weeks, making them competitive in situations where traditional financing timelines would cause a deal to fall through. Rates are higher, typically 10% to 14%, but the speed and flexibility often justify the cost for time-sensitive transactions in Tucson's increasingly competitive market.
Permanent Loans
For stabilized commercial properties generating consistent cash flow, permanent loans offer the most favorable long-term rates and amortization schedules. These loans typically feature fixed rates for 5 to 25 years with 25 to 30 year amortization periods. In Tucson, permanent financing works well for stabilized multifamily communities, fully leased retail centers, and owner-occupied industrial and office properties.
How Is the Tucson Commercial Real Estate Market Performing?
Tucson's commercial real estate market is shaped by several powerful forces: the university and research ecosystem, defense and aerospace employment, cross-border trade proximity, and steady population growth. Understanding these dynamics is essential when structuring your financing.
Industrial Market
Tucson's industrial sector is one of the metro's strongest performers. As of Q3 2025, industrial vacancy stood at approximately 6.6%, though it has edged up slightly as speculative deliveries hit the market. Modern, well-located space in the Airport submarket, Northwest Marana corridor, and along the I-10 logistics route continues to lease faster than older product. Lincoln Property Company recently completed the $80 million I-10 International Phase I project, adding 373,811 square feet of Class A warehouse and distribution space near Tucson International Airport. The facility sits within a Foreign Trade Zone, positioning it to capture demand from nearshoring and cross-border trade through the Nogales port of entry along I-19. Companies like Amazon, FedEx, DHL, Raytheon, and Intuit already maintain operations in the Airport submarket.
Multifamily Market
Tucson's multifamily market remains resilient with solid fundamentals. As of Q2 2025, the metro-wide vacancy rate hovered around 8.65%, with average gross rents at approximately $1,156 per unit. Catalina Foothills posted the lowest vacancy at around 6.55%, while Flowing Wells had the highest at roughly 10.52%. Class A properties performed especially well, with vacancy dropping to approximately 6.2%. Looking ahead, around 2,800 new units are slated for delivery in 2026, primarily in the first and second quarters, which will create a competitive leasing environment. Average rents by unit type range from roughly $797 for studios to $1,690 for three-bedroom apartments.
Office Market
The Tucson office market is heading into 2026 as a "steady but selective" environment. In Q3 2025, overall vacancy stood at approximately 10.2%, reflecting stable conditions that are performing better than the national average. Asking office rents have shown slow but positive growth, with full-service averages in the mid-$20s per square foot and select Class A product in the Foothills reaching around $30 per square foot. Medical office and well-capitalized tenants continue to drive the strongest demand, while hybrid work patterns keep conditions competitive and tenant-favorable in many Southern Arizona submarkets.
Retail Market
Retail has quietly emerged as one of Tucson's steadiest sectors. In Q3 2025, retail vacancy sat at approximately 6.0%, with the average asking rent at around $20.03 per square foot. High-performing submarkets such as Oro Valley command around $26.23 per square foot, while Downtown Tucson averages approximately $21.11. Neighborhood and service-oriented centers continue to perform well, buoyed by consistent local demand and population growth along the I-10 and Oracle Road corridors.
Which Tucson Submarkets Offer the Best Investment Opportunities?
Tucson's geography, stretching from the Santa Catalina Mountains in the north to the Sonoran Desert plains in the south, creates distinct submarkets with different investment characteristics. Here are the key areas investors and lenders are watching:
Downtown Tucson and 4th Avenue
Downtown has experienced significant revitalization, anchored by the Sun Link streetcar, adaptive reuse projects, and new mixed-use developments. The 4th Avenue corridor connects downtown to the University of Arizona campus and has attracted major investment, including the 323-unit Ari on Fourth development with ground-level retail space. Office rents downtown average around $21 per square foot, and the area draws a mix of creative office, hospitality, and student-oriented retail tenants. Cap rates for repositioned downtown properties typically range from 6.5% to 8.0%.
Oro Valley
Oro Valley is Tucson's premier suburban submarket, home to higher-income demographics, a skilled workforce, and strong medical and technology-driven real estate demand. Retail rents here reach approximately $26.23 per square foot, the highest in the metro. Oro Valley attracts medical office tenants, life science companies, and national retail brands, making it a top choice for investors seeking quality tenants and lower vacancy risk.
Marana
Marana is one of Southern Arizona's fastest-growing communities, driven by access to I-10 transportation routes and abundant developable land. Industrial and retail development have surged, and the town is attracting new residential communities that support commercial demand. Investors targeting industrial properties and retail pad sites along the I-10 corridor find strong opportunities here.
Tucson International Airport Submarket
The Airport area is expanding due to logistics and aerospace demand. Lincoln Property Company's I-10 International campus, Amazon's distribution operations, and proximity to Foreign Trade Zones make this submarket the epicenter of Tucson's industrial growth. Industrial cap rates in this corridor generally range from 6.0% to 7.5% depending on asset age and tenant quality.
East Side and Pantano Corridor
The East Side benefits from proximity to Davis-Monthan Air Force Base and established residential communities. Retail centers along Broadway, 22nd Street, and Kolb Road serve a stable consumer base, while multifamily properties near the base enjoy consistent occupancy from military personnel and civilian employees.
Catalina Foothills
The Foothills submarket commands Tucson's highest office rents, reaching around $30 per square foot for Class A space. The area's affluent demographics support premium retail and medical office tenants. Multifamily vacancy in the Foothills is the metro's lowest at approximately 6.55%, reflecting strong demand and limited new supply.
What Role Do Tucson's Major Employers Play in the CRE Market?
Tucson's commercial real estate market benefits from a diverse employment base anchored by several major institutions:
Raytheon Missiles and Defense (RTX Corporation): Tucson's largest private employer, Raytheon's campus south of the city employs thousands of workers in defense technology and advanced manufacturing. The company's presence supports industrial, office, and multifamily demand across the south and east sides of the metro, and defense spending provides a countercyclical buffer against economic downturns.
University of Arizona: With over 42,000 students and a research enterprise generating hundreds of millions in annual expenditures, the university drives demand for student housing, mixed-use development, and innovation-driven office and lab space. Tech Parks Arizona, the university's research park, incubates companies that create additional commercial real estate demand as they grow.
Davis-Monthan Air Force Base: Located within Tucson's city limits on the southeast side, Davis-Monthan employs over 10,000 military and civilian personnel. The base supports consistent demand for housing, retail, and services in surrounding neighborhoods, and its long-term presence provides stability for nearby commercial properties.
Education and Health Services Sector: As of mid-2025, education and health services became Tucson's largest employment sector with approximately 72,600 employees, followed by government at around 71,300 and trade, transportation, and utilities at roughly 70,400. Banner Health, Tucson Medical Center, and other healthcare systems are major commercial real estate occupiers.
What Are Typical Cap Rates for Tucson Commercial Properties?
Cap rates in Tucson generally range from 5.5% to 8.5%, varying by property type, submarket, and asset condition. Tucson's lower cost basis compared to Phoenix means investors can achieve higher yields while maintaining strong debt service coverage. Here is what investors are seeing across major asset classes:
- Industrial (Airport/I-10): 6.0% to 7.0% for newer warehouse and distribution assets
- Industrial (Older/Value-Add): 7.0% to 8.5%
- Multifamily (Class A): 5.5% to 6.5% in Catalina Foothills and Oro Valley
- Multifamily (Class B/C): 6.5% to 7.5%
- Retail (Well-Leased): 6.0% to 7.0% with stable tenants in strong corridors
- Office (Class A Foothills): 7.0% to 8.0%
- Office (Class B/C): 8.0% to 9.5% given elevated vacancy risk
These cap rates directly influence the loan terms you can secure. Lenders typically underwrite to a spread above the cap rate, so assets with lower cap rates in strong submarkets tend to receive more favorable financing.
How Do You Qualify for a Commercial Loan in Tucson?
The qualification process for Tucson commercial loans follows a structured path, though requirements vary by program type. Here is what most lenders evaluate:
Property-Level Metrics:
- Net Operating Income (NOI) and cash flow projections
- Current and projected occupancy rates
- Property condition, age, and recent capital improvements
- Environmental and zoning compliance
- Proximity to demand drivers such as the university, Raytheon campus, or Davis-Monthan AFB
Borrower-Level Metrics:
- Credit score (typically 660+ for conventional, 580+ for some bridge programs)
- Net worth and liquidity (many lenders require net worth equal to the loan amount)
- Real estate investment experience
- Personal and business tax returns (2 to 3 years for conventional programs)
DSCR Requirements: Most Tucson lenders require a minimum DSCR of 1.20 to 1.25, meaning the property's net operating income must exceed debt service payments by 20% to 25%. Multifamily deals with strong occupancy near the university or military base can sometimes qualify at 1.15.
Ready to discuss your Tucson commercial property financing? Contact our lending team for a personalized rate quote and program recommendation based on your specific deal.
What Is the Step-by-Step Process for Getting a Commercial Loan in Tucson?
Securing commercial financing in Tucson follows a predictable process, though timelines vary by loan type. Here is what to expect:
Bridge loans and hard money can close in as few as 7 to 14 days, while SBA loans typically take 60 to 90 days. Conventional bank loans and CMBS financing fall in between at 30 to 60 days.
Having your financial documentation organized before you start, including property financials, personal financial statements, entity documents, and a business plan, will significantly speed up the process regardless of which program you pursue.
Why Is Tucson a Strong Market for Commercial Real Estate Investment?
Several structural advantages make Tucson one of the most compelling secondary markets in the Southwest for commercial real estate investment:
Diversified Economic Anchors: The combination of a major research university, one of the nation's largest defense contractors, an active Air Force base, and a growing healthcare sector creates multiple demand drivers that protect against single-industry risk. Tucson added approximately 1,000 new jobs in the most recent annual period, with unemployment sitting at around 3.5%.
Affordability Advantage: Tucson's cost of living is roughly 6.2% below the national average, with housing costs approximately 8.9% lower than the national figure. For commercial investors, this translates to lower acquisition costs, higher yield potential, and more accessible entry points compared to Phoenix, where cap rates are tighter and competition more intense.
Cross-Border Trade Proximity: Tucson sits along the I-19 corridor connecting to the Nogales port of entry, one of the busiest U.S.-Mexico border crossings for produce and manufactured goods. As nearshoring accelerates, Southern Arizona is becoming a natural staging area for warehousing, light assembly, and distribution operations that serve the U.S. market.
Infrastructure Investment: Major infrastructure projects are underway, including the $600 million I-10 widening between Park Avenue and Alvernon Way, the $80 million I-19 interchange replacement at Irvington Road, and the $56 million Grant Road widening project. These investments improve connectivity and support commercial property values along key corridors.
Population and Growth Trends: Tucson's population is projected to grow at approximately 0.8% annually, steady growth that supports sustained demand for commercial space across all property types. The metro is also attracting remote workers and retirees drawn by the affordable cost of living, Sonoran Desert lifestyle, and access to outdoor recreation.
Looking to capitalize on Tucson's growth? Get in touch with our team to explore financing options tailored to the Tucson market.
Frequently Asked Questions About Commercial Loans in Tucson
What is the minimum down payment for a commercial loan in Tucson?
Down payments typically range from 10% to 35%, depending on the loan type. SBA 504 loans offer the lowest entry point at 10% down for owner-occupied properties. Conventional bank loans generally require 20% to 25% down, while bridge and hard money loans may require 25% to 35% equity. Tucson's lower property values mean the absolute dollar amount of down payments is often significantly less than in Phoenix or coastal markets, making the market accessible to a broader range of investors.
Can I finance properties near Davis-Monthan Air Force Base?
Yes. Properties near Davis-Monthan are actively financed by national and regional lenders. The base's presence is generally viewed positively because it provides a stable demand base for multifamily, retail, and commercial properties, reducing vacancy risk. Lenders may give favorable consideration to properties with a track record of military tenant occupancy. However, properties located within noise contour zones may face additional appraisal scrutiny.
How does the University of Arizona affect commercial loan underwriting?
The university's presence strengthens Tucson's overall risk profile for lenders. Properties that serve the student population, such as purpose-built student housing and nearby retail, benefit from predictable demand cycles. Lenders evaluate proximity to campus, rental demand history, and the seasonal nature of student housing occupancy. Properties within walking distance of the 4th Avenue streetcar corridor tend to receive favorable treatment from underwriters.
Are commercial loan rates in Tucson lower than Phoenix?
Tucson and Phoenix commercial loan rates are generally comparable for similar property types and quality levels. However, Tucson's lower property costs mean investors can often achieve higher debt service coverage ratios, which can lead to better loan terms and lower rate tiers. Some national lenders may apply a small secondary-market premium to Tucson properties compared to Phoenix, but working with a broker who has relationships across multiple lending platforms helps ensure competitive pricing.
What types of commercial properties can I finance in Tucson?
Virtually any income-producing commercial property can be financed in Tucson, including multifamily apartments, industrial warehouses, retail centers, office buildings, medical office buildings, hotels, self-storage facilities, mixed-use developments, and special-purpose properties. Tucson's proximity to the Nogales border crossing also creates opportunities in logistics-specific property types like distribution centers and cross-dock facilities that serve the international trade corridor along I-19.
Do I need to be a local investor to get a commercial loan for Tucson property?
No. Many lenders that finance Tucson commercial real estate work with out-of-state investors. Tucson's strong fundamentals, university-driven demand, and defense employment base attract investors from across the country. However, having a local property management team or operating partner can strengthen your loan application, particularly for value-add and development deals. National lenders, CMBS conduits, and many bridge lenders routinely fund Tucson deals for investors based elsewhere.
Take the Next Step on Your Tucson Commercial Loan
Tucson's combination of university-driven demand, defense and aerospace employment, affordable entry points, and proximity to cross-border trade makes it one of the most compelling commercial real estate markets in the Southwest. Whether you are acquiring an industrial property near Tucson International Airport, refinancing a multifamily complex in the Foothills, or seeking bridge financing for a value-add retail center, having the right financing partner makes all the difference.
Contact Clear House Lending today to discuss your Tucson commercial real estate financing needs. Our team specializes in matching borrowers with the right loan program, from SBA and conventional options to bridge, DSCR, and hard money solutions, so you can move forward with confidence.
Market data sourced from Cushman and Wakefield Tucson MarketBeats Q3 2025, PICOR Tucson Multifamily Market Reports 2025, Commercial Real Estate Group of Tucson Market Outlooks, Select Commercial Mortgage Rate Data, and City of Tucson Planning and Development Services.