For the second consecutive month, lenders and banks owned more than 2,000 homes in the Tucson region that have not yet been listed for sale. These pre-market real estate owned (REO) homes, referred to as "shadow inventory," are up 35 percent since January.

New data from Tucson Foreclosure Source showed the REO inventory totaled 2,018 homes in September. Neighborhoods in the southern parts of the city had the largest shadow inventory at 843 homes, followed by northwest Tucson with 342 (see chart).

Except for a slight dip in July, pre-market REOs have increased steadily since January when there were 1,498 units. In August there were 2,020 homes.

Among active listings, there were 869 foreclosures and 788 short-sale units in September. Together, the two categories made up 68 percent of all homes listed for sale.

Looking ahead 10 to 12 months, local job creation remains the key to recovery.

"As housing prices become more accessible, employment will be the primary engine driving Tucson's real estate economy," said Bryan Hill, owner of Tucson Foreclosure Source. Homes in the region are now selling at price levels last seen in February 2001.

Regarding September sales, Hill said about 730 of the 1,050 closings he tracked were foreclosures and short sales. Most of these distressed properties were in the city's southern neighborhoods where about 280 homes sold. The second most-active area was northwest Tucson with about 150 sales.

Airport area sells

To no surprise, neighborhoods near Tucson International Airport, which have the most distressed homes for sale at 280 units, sold best in September.

In the 85706 zip code, mostly southeast of the airport, 55 of 96 listed homes sold for a sales ratio of 57 percent. To the west, basically between Interstates 19 and 10, zip code 86756 was the second-best selling area where 43 of 93 homes sold, a 46 percent rate.

Third-best, at 43.5 percent, was zip code 85746 where 51 of 117 listings sold. The zip code is on the far southwest side in the Ajo Way-Mission Road area

Since January, home sales have averaged 1,093 per month. During 2010, the monthly average was about 940 homes. For September, the value of all homes sold was $160.3 million.

As for inventory, zip code 86718 in the Catalina Foothills had most listings at 286 homes and to the east of it, zip code 85750 in the Sabino Canyon area, was the second-highest with 258 listings.

The third highest was the 85739 zip code with 249 homes. It's the area along North Oracle Road area from Catalina State Park to the junction of state routes 77 and 79.

The listings and sales data are from the Tucson Association of Realtors Multiple Listing Service.

Although prices continue to fall, it is taking longer to sell homes. Coldwell Banker Residential Brokerage reported the average sales period increased to 100 days in September from 94 days in August. The average was 90 days in September 2010.

Within the Tucson city limits, the selling price per square foot fell to $79 in September from $83 in August. The September drop is down nearly 16 percent from September 2010 when the selling price per square foot was $94, according to Coldwell Banker.

RV center defaults

A large recreational vehicle and storage center in Marana has defaulted on a $6 million note and is scheduled for foreclosure sale in January. The complex, located on two parcels in the Orange Grove Interstate 10 Plaza at 6260 and 6275 N. Travel Center Drive, is being foreclosed on by Bank of Oklahoma, according to public records.

Businesses at the site include Lance's RV Center and a climate-controlled RV facility, capable of storing 300 motor homes. The complex is affiliated with National RV Central, owned locally by NSS RV Central OG Limited Partnership, 535 N. Wilmot Road, Suite 201. According to the Pima County Assessor's office, the taxpayer of record is the Schomac Group, 6418 E. Tanque Verde Road, Suite 105.

Built in 2006, the site also includes a retail store, car wash, and commercial parking lot. The trustee's sale is set for 10 a.m. Jan. 12 at the law offices of Quarles & Brady, 1 S. Church St., Suite 1700.

Apartments improve

If conditions hold, the multi-family sector in Tucson will record its best year since 2008. Although not a blockbuster performance by any means, apartments appear headed to a net absorption of about 1 percent for 2011.

"Citywide vacancies, which stood at 9.4 percent at the end of the first quarter, dropped to 9.1 percent for the third quarter. This is the lowest vacancy rate since the 2008 first quarter," said Bob Kaplan, a principal and apartment specialist with Picor Commercial Real Estate Services.

Over the past three years, 2008 ended at about 11 percent vacancy, 2009 ended at about 12 percent, and 2010 was at about 10 percent. The 2011 third quarter had a positive absorption of 941 units.

Retail rolling

The region's retail real estate sector continued a tedious progress toward stabilization during the third quarter, posting positive absorption of about 47,000 square feet.

"As pent-up demand and stabilizing rental rates continue to converge, positive absorption should continue in the Tucson retail market," said Greg Furrier, a principal with Picor Commercial Real Estate Services. "With the holiday season approaching, the sector expects to see a stronger fourth quarter than 2010 and end the year with healthy positive absorption."

Year-to-date, absorption is a positive 226,000 square feet for a vacancy rate of 8.7 percent. Although the second quarter vacancy mark was 8.6 percent, some 100,000 square feet of new space was delivered to the market since then. Basically, new leases have kept pace with new construction, Furrier said.

The expansion of QuikTrip into the Tucson market now includes 12 sites. Paradise Bakery & Café opened during the quarter and is planning another location. Skechers entered the market re-purposing a vacated video store and Verizon Wireless increased its presence in the market with a new location near the University of Arizona campus.

Maracay opens Preserve

Maracay Homes has opened Dove Mountain Preserve in Marana, offering four home products ranging in size from 1,660 to 2,088 square feet. The Energy Star-certified builder has 61 sites, offering homes up to four bedrooms and three bathrooms.

The community's basic price points run from $198,000 to $222,000. Dove Mountain Preserve is located at 12222 N. Golden Mirror Drive, just off Tangerine Road on north Dove Mountain Blvd.

Sales and leases

Elcara Xtra LLC purchased 48,720 square feet of land for $346,500 at 7750 N. Oracle Road from Raymond M. Chavez Trust and Rupert L. Keesler Jr. Trust. The seller was represented by Terry Lavery, Tucson Realty & Trust, and Nancy Gansline, Oxford Realtors. The buyer was represented by Buzz Isaacson, CBRE.

Asarco LLC leased a 10,668-square-foot industrial building at 3660 N. Romero Road from Orcas Triad III LLC, represented by David Gallaher, Tucson Industrial Realty. Ben Becker, John Ash and Adam Becker, all with CBRE, represented the tenant.

BBC Entertainment leased 42,688 square feet at 4385 W. Ina Road from Bedrock Ina LLC, represented by David Carroll, Romano Real Estate.

Urgent Cares of America leased 4,500 square feet at 1895 W. Valencia Road from Amanda Leigh 1988 Trust, represented by Rick Borane, Volk Company Commercial Real Estate. The tenant was represented by Jesse Peron, CBRE.

Dr. William P. Kuhn, doing business as Opt-E, leased 4,404 square feet at 3450 S. Broadmont Drive from Tin Cup Properties LLC. The landlord was represented by Ron Zimmerman, Grubb & Ellis.

Urgent Cares of America leased 4,400 square feet from Cortaro Continental LLC in Fry's Continental Ranch Plaza at the northeast corner of Cortaro and Silverbell Roads, Marana. The landlord was represented by Craig Finfrock, Commercial Retail Advisors. The tenant was represented by Jesse Peron, CBRE, and Patrick Wathan, Equity Inc.

National Mentor Healthcare LLC leased a 4,177-square-foot office building at Old Farm Executive Park, 5997 E. Grant Road, from WMS Partnership LP. The landlord was represented by Buzz Isaacson, CBRE.

Spa Niva LLC leased 3,953 square feet at Paloma Village Center, 6330 N. Campbell Ave., Suite 200, from D. Wong & Associates Arizona LLC. The transaction was handled by David Hammack and Rick Borane, Volk Company Commercial Real Estate.

Pima Council on Aging leased 3,308 square feet at 1350 N. Kolb Road from Sunrise Office Investments, represented by Tari Auletta and Jesse Blum, Grubb & Ellis. Steffan Cione, Cionne Company, represented the tenant.

Genesis Natural Medicine leased 3,112 square feet at 3920 N. Campbell Ave. from T. Bryson Struse III Trust, represented by Bruce Suppes, CBRE. Tari Auletta, Grubb & Ellis, represented the tenant.

Dickman's Meat & Deli leased 3,000 square feet at Tucson Marketplace, 7955 E. Broadway, from Broadpan Properties LLC. The landlord was represented by Pete Villaescusa, Jesse Peron and Tim Healy, CBRE. The tenant was represented by Gary Best, Keller Williams.

New England Life Insurance Company leased 3,000 square feet at 4713 E. Camp Lowell Drive from Siempre Juntos LLC, represented by Richard Kleiner, Picor Commercial Real Estate Services. The tenant was represented by David Houge and Mike Gross, Tucson Realty & Trust.

S & R Arizona Holdings LLC leased 1,280 square feet at Colonia Verde Plaza, 7245 E. Tanque Verde Road, Suite 151, to open a Papa Murphy's Take ‘N' Bake Pizza. The landlord, FPI LLC, was represented by Ken Slachta of Romano Real Estate Corporation. The tenant was represented by David Hammack of Volk Company Commercial Real Estate.

Cricket Wireless leased 1,269 square feet at Oracle-Wetmore Shopping Center, 4302 N. Oracle Road, from Weingarten Realty, self-represented by Taylor Vaughn. Aaron LaPrise, Harpel Company, represented the tenant.

Wheatmark Inc. leased 1,264 square feet at 1760 E River Rd. from Cambric Corporate Center, represented by Colleen Petit of the Colton Co. Chuck Corriere of Keller Williams Southern Arizona represented the tenant.

Email news items for this column to ryohem@azbiz.com. Inside Real Estate & Construction appears weekly.