Archives for 2018

New Mexico has netted more than $13 million from this month’s oil and gas lease sale.
The State Land Office says most of the proceeds from the December sale will go to public schools and the rest to other state trust land beneficiaries.
Land Commissioner Aubrey Dunn says the office has generated nearly $100 million from lease sales over the past six months and that he’s proud of the work his team has done in recent years.
Dunn’s term wraps up at the end of the year. He’ll be succeeded by Democrat Stephanie Garcia Richard, the first woman to hold the office.
A total of 31 tracts were offered in this month’s sale. The parcels covered more than 8 square miles (21 square kilometers) in Lea and Eddy counties.
By: Associated Press (ABQ Journal)
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New Apto national survey reveals the majority of brokers will transact another cannabis-related deal.

With voters recently approving the legalization of marijuana in three more states – Michigan legalized marijuana for recreational use, and voters in Missouri and Utah legalized the use of medical marijuana- Apto, a commercial real estate software company, released the results of its latest “National Broker Buzz Poll.”
Among the brokers who have already been involved in a cannabis real estate transaction, 85% said they would do another one, while 15% said they would not.
“Yes, I will continue working with this sector of the market,” says Kent Channing, Partner, NAI Puget Sound Properties. “I believe we will continue to see a viable industry that will grow over the coming years as producer/processors in the state expand their operations or look for upgraded locations. After completing several sales and lease transactions involving cannabis related businesses, I see it as an industry that fits very well within my focus of industrial commercial real estate.”
A cannabis deal can be more difficult than a conventional deal, says surveyed brokers. They rated it an “8” on a scale of 1 to 10, with 1 being less difficult and 10 being more difficult. For example, one of the main obstacles is finding a title company to complete the transaction. “At this time, I only know of one national title company that is currently issuing title insurance for cannabis-related sales. Even then it is on a case by case basis,” says Channing.
There are other obstacles involved with a cannabis-related real estate deal. Brian K. Coakley, SIOR, with Donohoe Real Estate Services/CORFAC International has represented two cannabis retail tenants in Maryland, where medical marijuana can be sold on a regulated basis. In both cases, Coakley was able to identify locations for the dispensaries, but there were minefields at every turn, including state regulations that kept changing while site identification and negotiations were under way, Coakley tells GlobeSt.com.
“Nearly all REITs, institutional owners and anyone with institutional banking relationships refused to entertain the use, effectively eliminating 60-70% of all landlords from the market, since federal law criminalizes profiting from the sale of marijuana,” says Coakley. “Consequently, the remaining landlords in many cases charged a premium for their space.”
When asked “How well are supply and demand matching up for industrial cannabis real estate space in your market?” Brokers, on average, said “4” on a scale of 1 to 10, with 1 being “not in balance” and 10 being “in perfect balance.”
Apto also asked “How are cannabis deals pricing in your market (leases and sales)?” brokers responded with the following answers.
• 76% said above-market pricing • 21% said at-market pricing • 3% said below-market pricing
“The slow but steady legalization of marijuana across more states is beginning to have an impact on real estate markets as local jurisdictions grapple with zoning and other issues that affect the availability of sites, be they for cultivation and storage or for retail sales of cannabis. The survey results suggest that there is somewhat of a shortage of sites, likely because allowable zoning has not caught up with demand,” says Tanner McGraw, Apto’s founder.
Another apparent issue is financing for businesses engaged in marijuana cultivation, distribution and sales. Conflicting laws, at the federal and state levels, present regulatory compliance issues for participants in this industry. “Commercial real estate brokers are definitely affected by these issues, be it location and siting, or capital and credit, as they work to serve the market,” remarks McGraw.
By: Tanya Sterling (GlobeSt)
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This level of new leasing is likely due to higher-than-expected economic growth.

The U.S. office market posted solid net absorption levels in the second and third quarters of 2018 of 18 million and 11 million square feet, respectively, says the NAIOP Office Space Demand Forecast, Fourth Quarter 2018. This level of new leasing is more than likely due to higher-than-expected economic growth and the subsequent demand brought about by jobs created in the office-using sectors.
“The economy has been very strong, growing at annualized rates above 3% for much of 2018 and many office using sectors, such as professional and business services, have seen employment growth at rates as much as 50% higher than the general rate of job growth,” says Joshua A. Harris, Academic Director and Clinical Assistant Professor of Real Estate at the Schack Institute of Real Estate. “Furthermore, co-working firms are also aggressively leasing space and starting to really drive down vacancy is some submarkets,” he tells GlobeSt.com.
There are limitations, though, to this growth. The growing lack of qualified employees to hire is a major factor. Another consideration: long-term growth will be determined by how the business sector reacts to rising wages and interest rates.
“In short, there are too many open jobs and not enough qualified, unemployed persons. In fact, for the first time in history, the US has more open positions than unemployed persons per data from the Bureau of Labor Statistics,” Harris says. “Further, issues such as the opioid epidemic have become so strong in many region of the country that labor force participation has declined for some demographics, such as younger men; this has led to an even greater shortage of qualified, employable people seeking work.”

The Tech Sector

Much of the office leasing is coming from technology and media companies. While Amazon got lots of press for deciding where to locate its second headquarters, firms like Google and Facebook (as well as many smaller enterprises) kept adding more and more square footage to their portfolios with much less fanfare. Many professional service firms (law, accounting, architecture, real estate, etc.) have also leased new space; however, they are going denser and taking less space per employee in many transactions. Creative space and co-working ventures are also becoming major users of office space in large markets and are now starting to lease in secondary/tertiary cities as well, Harris says.
The current macroeconomic expansion will most likely continue into the new year and beyond next summer making it the longest sustained economic growth period in US history.
“We think the economy will remain stable and growing for 2019, thus office net absorption should continue,” explains Harris. “Further, since many businesses have expanded sales without adding much office space, there comes a breaking point where the firm must expand facilities to keep growing. We think this explains some of the higher rates of net absorption and this trend can easily continue well into 2019,” says Harris.
By: Tanya Sterling (GlobeSt)
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A homegrown manufacturer is adding 180 jobs to its Farmington plant, with plans for a $7.5 million expansion.

PESCO, which designs and builds production equipment for the oil and gas industry, is expanding because of a new assignment to build reactor units for BayoTech of Albuquerque, Gov. Susana Martinez announced Monday.

“PESCO is a homegrown success story and an industry leader and I’m thrilled to see their continued growth and success,” Economic Development Secretary Matt Geisel said in a news release. “By expanding their manufacturing facility and creating more well-paying jobs, PESCO is expanding their impact on the local economy and helping New Mexicans find good jobs.”

Pay generally ranges from $12 to $22 an hour, with some engineering positions  earning up to $56 an hour.

The additional jobs will bring PESCO’s workforce to 500, the release said. PESCO President and CEO Kyle Rhodes said 70 percent of his employees are Native American.

BayoTech, which spun out of Sandia National Laboratories, has been working on technology to provide mobile production units for hydrogen, ammonia and fertilizer producers.

The reactors that PESCO will build are being touted as a replacement for mammoth centralized fertilizer plants.

Bayotech was the first New Mexico startup to receive funding from the state’s Catalyst Fund, a $40 million partnership that invests in early-stage technology companies.

“The new units will diversify PESCO’s operations, add new jobs, and contribute to New Mexico’s innovation economy,” the news release said.

The company will get up to $2.35 million in Local Economic Development Act funds, with San Juan County acting as the fiscal agent.

“Our future is bright, as we look to expand, partnering with BayoTech, another New Mexico company, to bring technology developed in our state in innovative products to the chemical and agricultural industries worldwide,” PESCO President and CEO Kyle Rhodes said.

By: ABQ Journal News Staff
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