Western Real Estate Business

MAY 2018

Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.

Issue link: https://westernrealestatebusiness.epubxp.com/i/978056

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Page 42 of 66

M A R K E T H I G H L I G H T: N E W M E X I C O 40 • May 2018 • Western Real Estate Business www.REBusinessOnline.com ALBUQUERQUE'S INDUSTRIAL MARKET CONTINUES UNABATED The metro Albuquerque industrial market reported more than 39 mil- lion square feet of total industrial space as of year-end 2017. The two largest categories of occupied space were warehouse/distribution (12.5 million square feet with 5.5 percent vacancy) and manufacturing (12.55 million square feet with 3.5 percent vacancy). The overall market vacan- cy rate at the end of 2017 was 5.7 per- cent for all industrial uses in build- ings with more than 10,000 square feet. New Mexico added about 11,000 non-agricultural jobs from Febru- ary 2017 through February 2018. The Albuquerque MSA added 5,800 jobs — a 1.5 percent increase — over this period, or more than half of the new jobs added in New Mexico. Albu- querque's unemployment rate was 5 percent as of February, which is a no- table improvement over the 6.2 per- cent unemployment rate in February 2017. During this period, the private service-providing industries grew by 3,100 jobs, or 1.2 percent, while the goods-producing industries (ware- house and manufacturing users) add- ed 2,300 jobs, representing a gain of 6.2 percent. Albuquerque's industrial market experienced positive net absorption of more than 261,000 square feet dur- ing the fourth quarter of 2017. This was the highest net absorption since the fourth quarter of 2015, and the second-highest net absorption level since the end of the economic down- turn of 2007/2008. The largest single industrial lease for the fourth quarter was Flagship Foods, which occupied 75,000 square feet in the West Mesa submarket. Another large expansion included a new 72,000-square-foot lease by Raytheon in the Southeast Heights submarket. The largest va- cated space for the quarter was MSR- FSR, which left the Albuquerque market and vacated more than 55,000 square feet in the Mesa del Sol sub- market, south of the Albuquerque In- ternational Sunport airport. The North I-25 Corridor submar- ket continues to attract the most in- dustrial demand in the metro area. This submarket absorbed more than 148,000 square feet of space during the last quarter of 2017. The West Mesa submarket also experienced notable positive absorption of nearly 132,000 square feet by the end of 2017. The amount of vacant space among distribution/warehouse properties with more than 10,000 square feet de- clined to its lowest level in at least the past 20 years. Expectations for 2018 are modest. The increased activity in 2017 will likely lead to a general slowdown in development activity for the next year or so; and there are no large ex- pansions or new industries expected to enter the market over the next few quarters. However, there have been reports from Albuquerque Economic Development of companies inquir- ing about the availability of large in- dustrial spaces to enter the market or expand within it. The gradual tight- ening of the distribution/warehouse segment should also lead to new de- velopment pressure by 2019. Joel White Senior Advisor, Walt Arnold Commercial Brokerage, SVN NEW MEXICO'S RETAIL MARKET GIVES A STEADY PERFORMANCE The New Mexico commercial real estate market continues to be a safe play for owners and devel- opers in the Southwest. Albuquer- que, which contains 50 percent of the state's population, continues to drive the market with more than 80 percent of the commercial real es- tate transactions. A moderate supply-demand im- balance currently exists. This imbalance will allow vacant real estate to be matched up with occupier requirements relatively quickly, taking the vacan- cy rate lower or continuing to place upward pressure on the need for new construction. The New Mexico market, like many others, has experienced little to no development on the periphery of the city. Instead, owners and occupiers remain focused on the core areas of the market where density can be increased for a more efficient use of retail or office space. Albuquerque's tech sector is also picking up momentum through the or- ganic growth of existing companies and a large push from the University of New Mexico in partnership with the business community. New Mexico has one of the highest per capita concentrations of doctorate degrees in the U.S. The vacancy rate for retail space sits at 12.5 percent as of the first quarter of 2018. The outlook will be trending lower toward the end of 2018 as retail boxes vacated by Macy's, Toys R Us and Babies R Us are almost immedi- ately back-filled with either new market entrants or existing retail occupiers looking to improve their positioning within the market. The first quarter's 232,500-square-foot gross activity was 25 percent higher than last year's an- nual gross activity, while the 107,800 square feet of total space vacated in the first quarter was about one-tenth of last year's total space vacated. Jim P. Dountas First Vice President, Investment Properties, CBRE NEW COMPANIES BRING LARGER NEEDS FOR MULTIFAMILY HOUSING IN ALBUQUERQUE Albuquerque is a hidden gem. It isn't a huge market when com- pared to places like Seattle, Austin or Denver, but that doesn't mean there isn't room for growth and development. The Urban Land In- stitute predicts Albuquerque's de- velopment will trail other metros with stronger economies in 2018. But there are positive trends and developments for Albuquerque and the surrounding areas, which can make us competitive. A new Facebook data center was built in Los Lunas, a 30-minute drive from Albuquerque. This has created new jobs for the Los Lunas and Albu- querque areas. Anywhere from 800 to 1,000 workers go through the data center every day, and 80 percent of them are from New Mexico. The center will have a $2 billion impact on the state and metro areas, lead- ing to more jobs and opportunities for the region. Albuquerque will also take part in the "Facebook Community Boost Program." The program helps the community by offering free workshops, business training and network- ing to boost careers. More companies like Facebook can be recruited to New Mexico as long as we make the area business-friendly and retain talent so everyone can suc- ceed. With more jobs and opportunity, there will be an immediate need for housing. Albuquerque has a lower cost of living, so finding housing that fits a family or individual's budget is easier than in bigger markets. There is a great need for studio apartments. Young professionals and stu- dents find studio living very appealing. It is affordable, packed with ameni- ties like free WiFi and utilities, and usually centrally based so major areas are easily accessible. Allen Sigmon Real Estate Group owns two renovated motels that were converted to studio living. Both complexes are typically more than 90 percent occupied. David Miles Director of Marketing, Allen Sigmon Real Estate Group HT Micro renovated a facility at 4301 Masthead NE. off Jefferson NE in Albuquerque that was previously home to Assaigai Analytical Laboratories Inc.

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