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.

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M A R K E T H I G H L I G H T: N E W M E X I C O www.REBusinessOnline.com Western Real Estate Business • May 2018 • 41 New Mexico's office market has held steady along with the rest of the country throughout 2017. New de- velopment in areas outside of metro Albuquerque, like the Facebook de- velopment in Los Lunas, is attracting retail- and service-related businesses. While it remains to be seen what this means to the general commercial real estate industry, it is encouraging to see increases in activity in areas where there had been little to no growth in recent years. Albuquerque, the heart of New Mexico's office market, saw positive absorption start to increase from the past two quarters. The market is see- ing organic tenant movement and, more importantly, there has been a swelling interest in Albuquerque met- ro areas from out-of-state companies looking for a Mountain Time Zone lo- cation that is economically attractive. Co-working spaces have gained in momentum with several crop- ping up since the end of 2016. New co-working spaces include Gravitate, which has expanded into two new lo- cations near FreeRange and the new Tramway Plaza. We expect this trend to continue as the state focuses on in- vesting in entrepreneurs and startup companies. New construction is expected to increase the overall Class A inven- tory over the course of 2018 and 2019. Compared to many other metros, Al- buquerque has a very small propor- tion of Class A space. It also has a rela- tively high downtown vacancy rate when it comes to Class A office. By comparison, downtown Class A space in the Western region of the U.S. is 11.1 percent vacant, while Albuquer- que's downtown Class A space is 31.2 percent vacant. Downtown's vacancy is volatile and somewhat deceptive as the inventory is only made up of two buildings. The movement or loss of a single large tenant can result in a change of more than 300 basis points to overall Class A vacancy. Albuquerque's suburban Class A vacancy is much more in line with the regional suburban Class A vacancy. Albuquerque's suburban Class A va- cancy is 10.1 percent compared to the regional 11.5 percent vacancy. All new planned Class A office space will be in suburban submarkets where occupan- cy is higher, but it will help to stabilize the Class A vacancy rates. Sales of smaller office proper- ties, particularly office condos, saw a healthy increase in 2017. Business owners increasingly have an opti- mistic outlook about the economy and lower taxes in the future, making them more willing to commit to com- mercial property ownership instead of continuing to lease. This trend is likely to increase in the coming year. The Tax Cuts and Jobs Act (TCJA ) of 2017 lowered corporate tax rates by 14 percent by the end of 2017, with the intent to promote the creation of new jobs and new investments. Though the office market has been flat throughout last year, the state's growing GDP and the TCJA are anticipated to promote new development and expansion in Albuquerque's office market. An ac- celerated depreciation timeline for certain capital improvements during the next five years will be a boost for much-needed capital investments in many of our dated buildings in the near-term. With high-quality space readily available, the Albuquerque of- fice market is full of opportunity for investors and new tenants and the city is poised for new growth in 2018. ALBUQUERQUE'S OFFICE MARKET CONTINUES TO GROW Scott Whitefield Managing Director, Colliers For more information, please contact: 505.346.0022 www.pegasusretail.com Visit us @ ICSC RECon X Team Booth S276R Street New Mexico's Largest Retail Brokerage Firm Representing tenants and developers throughout New Mexico, Oklahoma, West Texas and Colorado. A FEW OF OUR CLIENTS: WINROCK TOWN CENTER ALBUQUERQUE, NM PLAZA ENCHANTED HILLS RIO RANCHO, NM VENTURA PLACE ALBUQUERQUE, NM LEASING DEVELOPMENT SALES

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