SIOR New Mexico Chapter Presents at NAIOP & N-I25 Business Association Meetings

The SIOR New Mexico Chapter recently hosted its Industrial and Office Market Update at the November 25th NAIOP luncheon held at the Uptown Marriott hotel. Tim With, Jim Smith and Tom Jenkins were the presenters at this year's event. Click Here to download a copy of their powerpoint presentation.

Key Presentation Points

  1. Industrial vacancies Albuquerque-wide now are about 9%, with large variations in 
  2. Unemployment rates are dropping but vacancy rates are staying the same or 
  3. Class A office space is starting to recover because lessees are trading up, while the 
    price and vacancy delta between Class A and Class B spaces is widening.
  4. There appears to be an undersupply of high quality space and newer industrial 
  5. Albuquerque's Central Business District (downtown) has the highest vacancy rate 
    in the country, although with smaller square footages than many cities.
  6. When Gap leaves downtown in late 2014, the CBD will have a 65% occupancy 
    rate unless some other tenant moves downtown.
  7. Of the top 10 real estate projects recorded in 2013, only one was new 
  8. The negative trend of tenants moving out seems to have hit bottom.
  9. For industrial space, tenants are looking for 24-foot and higher ceiling heights, 
    high pressure (ESFR) fire suppression systems, and a trailer parking to dock 
    door ratios of 2 or 3 to 1. Most older spaces do not meet these requirements.
  10. Unknown if the move to building ownership from leasing will continue as the 
    economy strengthens.
  11. Possible that lease rates for desirable properties could be as much as 20% 
  12. Predicting a 3 to 4% growth in rental rates annually.
  13. Infrastructure/utility limitations in some areas, particularly South I-25, could push 
    down land prices and growth in the industrial sector.
  14. The pattern of office use has changed -- no more atrium lobbies, marble entries, 
    and large executive offices.
  • Trend for office space now is high density - 500 people in a 100,000 square foot building 
    that previously housed 300.
  • Increased density has impacts for restroom facilities, HVAC capacity.
  • Of the 14.1 million square feet of office space in Albuquerque, the higher quality 
    office space is found:
    • 34% North I-25 area
    • 21% Uptown
    • 1% Downtown
  1. Why consider new development of high quality space?
    • he market currently has a limited amount of the higher quality space 
      many tenants require
    • Because other high quality spaces have been absorbed, there are fewer high quality spaces available
    • Companies looking to relocate here will require multiple space options with large floor plates.
  2. Predictions for the office sector:     
    • Office users will continue to migrate to high quality space
    • Rental gaps will increase between Class A, B, and C spaces
    • We will see redevelopment and repurposing of existing spaces
    • At least two new, substantial office buildings will be developed in the near future.

3rd Quarter Market Trends Reports Now Available

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Demand for office space is directly correlated to employment levels. Albuquerque's job growth has not been high enough to make a positive swing in the occupancy rate. In addition, office tenants are utilizing space more efficiently and the remote workforce is expanding as employees in many companies are starting to work from home. The office market is expected to be stagnant throught the balance of 2012, but will hopefully improve in early 2013 if we see more vibrant job growth. Click Here to download the 3rd Quarter 2012 Office Trends Report>>

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Albuquerque's industrial market is holding steady, however, the vacancy rate for older, functionally obsolete buildings is significantly higher than for more modern facilities. Many tenants are "right-sizing" their space requirements and occupying warehouses in a more efficient manner than in previous years. Most recent activity is in the 2,000-5,000 square foot range and is primarily from medical supply companies and service-based businesses. Industrial spaces that have less than 25% office build-out tend to have better occupancy levels than those with higher office concentrations. Click Here to download the 3rd Quarter 2012 Industrial Trends Report>>

"First Quarter 2011 National Logistics-Market Does Not Disappoint"

Nationwide, nearly 18 million square feet of logistics space was absorbed in the first quarter. Although the logistics market did not see the same acceleration of demand we reported for the overall industrial sector, the logistics segment consistently outperformed the other property types throughout the downturn and recovery. New completions totaled 3 million square feet for the fifth consecutive quarter, and just 23 projects totaling 10 million square feet remained under construction across the country. Most of the projects currently under construction are build-to-suit projects, with preleasing averaging 89 percent. Construction on the largest speculative building started during the first quarter, a 616,000-square-foot distribution warehouse located in the fast-rebounding Inland Empire market. This market has seen its supply of available, large blocks of space go from 17 to seven over the course of one year. At least two more buildings will break ground in the Inland Empire market this year. Measured by net absorption, Inland Empire was the best performing market during the first quarter, with approximately 25 percent of total demand occurring in the market. Other large logistics markets also performed well, with 88 percent of total demand occurring in the nation’s top six logistics markets: Southern California, Atlanta, Chicago, Central Pennsylvania, Dallas and Northern New Jersey. Strong demand and minimal new deliveries continue to drive vacancy downward. During the quarter, vacancy dropped 40 basis points to 12.2 percent, while availability declined 50 basis points to 15.9 percent. Asking net rents grew 3.2 percent on an annualized basis. The first quarter Grubb & Ellis Industrial Broker Market Sentiment survey identified third-party logistics providers as the most active industry across the nation. This market-level intelligence coupled with economic indicators paint a continuously brighter picture for the national logistics market.