Flat is the New Up in Albuquerque
- Aug 22, 2014
The Albuquerque Metropolitan Statistical Area is still lagging in its ongoing efforts to pull out of the deepest and longest recession since the 1930s. A growing list of casualties have included businesses that drowned because they couldn’t hang on any longer, those that pulled up stakes to try their luck somewhere else, and families who have left the state.
The interest the city once triggered among investors is much decreased. However, there are a few promising spots, specifically the three T’s: Tourism – returning tourists are helping to boost hospitality employment and earnings, as well as the retail trade; Transportation – 800 new jobs have been created through Union Pacific’s new terminal at Santa Teresa; and Technology – Innovate Albuquerque is a big positive. Additionally, the mining and extracting industries have been on the up side, and renewables are also advancing, including solar and wind energy, as well as algae and other biofuels—to say nothing of Mesa del Sol’s Smart Grid.
The state’s hotel sector, in fact, has posted its best showing in several years. And regional occupancy is expected to rise this year, although it is still a long way from its former peak occupancy levels. At 51.9 percent year-to-date in March, occupancy was 90 basis points higher than a year previous. Purchases of flagged hotels increased by more than 70 percent compared to last year.
Multi-family asking rents have been rising slowly but steadily in the past 12 months, from $748 per month in the second quarter of 2013 to $760 in the same quarter of 2014, according to Reis Inc.; the effective rent rose from $712 in early 2013 to $730 in 2014’s second quarter. Residential construction has remained low, although the vacancy rate dropped from 4.1 percent in the first quarter of 2013 to 3.3 percent in the second quarter of 2014.
Albuquerque’s industrial market remained consistent in the second quarter, with positive net absorption of 89,498 square feet, according to CBRE, and the overall vacancy rate decreasing by just 7 basis points from the previous quarter to 9.2 percent, the same rate as last year. The overall asking lease rate decreased by 25 cents to $6.50 per square foot annually on a triple-net basis.
Retail, too, stayed on middle ground, with the overall vacancy rate increasing by 47 basis points quarter-over-quarter and by 30 basis points year-over-year, according to CBRE. The asking lease rate for community shopping centers increased by 50 cents from last year, to $17 per square foot annually, with the range narrowing from $8.50 to $29.50 last year to $8.50 to $28 at mid-year 2014. The asking lease rate for strip centers increased by 40 cents from the previous year to $12.40 per square foot annually, with the lease rate range decreasing from $31 to $26. Neighborhood centers remained unchanged at $13 per square foot annually, but the lease rate range widened from $8.50 to $28 to $6 to $28.
The office market suffered the largest negative net absorption in market history in the second quarter, due to Presbyterian Healthcare relocating from leased space to an owned building. As a result, the overall vacancy rate increased by 167 basis points (21.1 percent) from the previous quarter and by 230 basis points from a year earlier. However, gross leasing activity was steady in the first half of the year, and the overall asking lease rate remained unchanged at $15 per square foot annually, with the lease rate for Class A buildings increased by a mere 25 cents from last year.