Archives for September 2019

ABQ City Council Candidate Interview Results

September 18, 2019 by CARNM

Getting to know 2019 Albuquerque City Council Candidates through REALTOR® Interviews.
To keep REALTORS® informed for the upcoming City Council Elections on November 5th, members of the Real Estate Community PAC (RECPAC), made up of volunteer REALTORS® from GAAR and CARNM, held interviews with Albuquerque City Council candidates on September 12th and 13th. Ten of the fourteen candidates attended appointments and shared their vision for the future of Albuquerque. In total there are nine Council Districts and Districts 2, 4, 6, and 8 are up for grabs.
The interviews were based on six questions the committee felt were relevant and timely. Questions were sent to each candidate in advance of the interview.

City Council Candidate Interview Questions

Please tell us your top 3 priorities you wish to achieve as a City Counselor and how you intend to accomplish them.
There is an ongoing problem of crime and homelessness in Albuquerque. What would you propose to deal with these problems? Are you familiar with what is already being attempted?
Do you support the renewal of the Transit Tax?
There are quite a few abandoned properties throughout Albuquerque. They create an attractive nuisance. What would you propose to deal with these properties?
The IDO ZONING CHANGES have been of great concern to both residential and commercial property owners. Are you familiar with these zoning regulations and the changes that affect property owners? Which of the changes do you see as creating problems for the owners and what would you propose to do about them?
Do you support Councilor Pat Davis’s proposal to amend the IDO to make Liquor Retail a Conditional Use, versus a Permissive Use, in the MX-M Zones?

The interviews were scored on the following criteria: (1-5, 5 being favorable)

Electability – Is the candidate running in a district where success is possible or likely?
Knowledge – Does the candidate have an understanding of the topics?
REALTOR® Champion – Does the candidate understand and align with protecting homeownership and private property rights?
Incumbency – Does the candidate currently hold the office?
Approachability – Is the candidate willing to listen?

Thanks to those who took the time to conduct these interviews over a two-day period:

Carol Bernstein – RECPAC Trustee, Candidate Interview Committee Chair
Tim House – RECPAC Board of Trustee Chair
George Torres – RECPAC Trustee
Dan Hernandez – RECPAC Trustee
Damon Maddox – RECPAC Trustee
John Lucero – RECPAC Trustee
Amanda Champine – RECPAC Member
Kent Cravens – GAAR EVP

Please note that the views of the interviewers are subjective and may differ among members. The interviews were conducted with the intention of learning more about each candidate, but more importantly, establishing a relationship with each and creating visibility of GAAR, our members and the issues important to REALTORS®.

District	Candidate	Score

2	Connie Vigil	2.33
2	Joseph R. Griego	Did not show for interview.
2	Robert Nelson	5
2	Issac Benton (Incumbent)	2.5
2	Zachary A. Quintero	4
2	Stephen Baca	No response to invite.
4	Brook Bassan	4
4	Athena Christodoulou	1.4
4	Ane Romero	3.8
4	Haley Josselyn Roy	No response to invite.
6	Patrick Davis (Incumbent)	4
6	Gina Naomi Dennis	0.4
8	Trudy Jones (Incumbent)	5
8	S. Maureen Skowran	Responded, unable to attend.

By: GAAR
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ABQ Industrial Vacancy Hits a Record Low

September 18, 2019 by CARNM

Albuquerque’s vacancy rate on industrial buildings reached its lowest recorded level earlier this year, but that doesn’t mean residents should expect to see a bunch of new warehouses going up anytime soon.

CBRE Group Inc. released a report on Albuquerque’s industrial market during the first half of 2019, that notes that metro Albuquerque’s industrial vacancy rate stood at 3.3%, the lowest rate since the real estate firm began gathering data on the market in 1983, according to JJ Peck, research manager for CBRE.

Since the start of the year, the market has added nearly 948,000 square feet of new development, driven by projects like the 107,550-square-foot FedEx truck terminal west of Albuquerque, according to the report.

The decline in available space however has not led to an uptick in new development or a rise in lease rates so far. Indeed, the report notes that the median listed lease rate actually declined slightly since 2018, to $6.66 per square foot.

Jim Smith, first vice president for CBRE’s Albuquerque office, said that rate is nearly $1.50 below what many developers would look to see before they’re comfortable building warehouses on spec: without a tenant lined up. Even with an economy that’s improved in recent years, Smith said it’s going to be a challenge to find space for companies looking for quality warehouse space to expand into.

“There isn’t any place to put anybody,” Smith said.

Smith added that the vacancy rate peaked in Albuquerque around 2010, when the Great Recession emptied out warehouses and slowed development for years to come. Since then, Albuquerque, along with other large Southwestern markets, has seen a steady decline in the amount of available warehouse space. Peck said that declining vacancy rate has intensified since 2016, when the effects of a recovering national economy took hold in the Southwest.

Peck said data centers, like the massive 440,000-square-foot facility that opened in Los Lunas in February, have played a big role in this expansion across the region.

“There is a big expansion in data center construction in Las Vegas, (Nev.), in Phoenix, in Salt Lake,” Peck said.

Unlike in Las Vegas, however, Peck said the new development hasn’t translated into more speculative development in Albuquerque. Smith added that Albuquerque’s smaller population and small number of property transactions makes it harder for developers here to justify speculative building.

“It’s just all those little nuances that make people cautious,” Smith said.

Smith attributed the slight decline in lease rates to the fact that most of the newer industrial buildings have already been leased, meaning that companies are largely choosing between older, less-desirable buildings.

Looking ahead to the rest of the year, the report notes that built-to-suit construction is expected to continue to stay strong, accounting for roughly 80% of the 741,589 square feet currently under construction. Even with limited space, Smith noted that New Mexico has seen more relocations since 2016.

“We’re on more people’s radar,” Smith said.

By: Stephen Hamway (ABQ Journal)
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Flex Office Space: Much More Than WeWork

September 16, 2019 by CARNM

A new CBRE report traces a trend that’s growing well beyond a niche offering from a handful of players, while new business models could attract even more and larger tenants.

Under a mid-range scenario, flex space could represent 13 percent of the total U.S. office space supply, or nearly 600 million square feet, by 2030, according to a new report from CBRE. Under this scenario, typical base clients for flex space are supplemented by enterprise users, which could lead to office space shortages unless some traditional leases convert to flex.
Though flexible office space has been growing dramatically, it still comprises a small portion of the total market, 4.0 percent in San Francisco and 3.6 percent in New York. London and Shanghai, however, have each hit 6 percent.
WeWork remains the powerhouse among flex-space operators, having added nearly 11 million square feet year-over-year. Spaces and Knotel each add more than 1 million square feet in the same time frame. Of the more than 700 flex-space operators, the top 10 account for 68 percent of the 71 million-square-foot market—and WeWork by itself accounts for 33 percent. The others of the top five operators are IWG (Regus and Spaces), Knotel, Industrious and Convene.
CBRE highlights four operators that aren’t in the top 10, but are among the fastest-growing operators:

CommonGrounds has more than 300,00 square feet, mostly on the West Coast; reportedly has 50 locations in the pipeline, and in January secured $100 million in funding.
Venture X is adding more than 150,000 square feet and — uniquely — has a franchise model.
Serendipity Labs is focusing on smaller markets, while Common Desk operates only in Texas.

The top flex markets tend to overlap with the top tech markets. Examples include Atlanta, Boston, Denver, Manhattan, San Francisco, Seattle, and Washington. Though flex is sometimes assumed to be Class A, 38 percent of the flex space tracked by CBRE is in Class B and C buildings.
EXPANDING POSSIBILITIES
Business models for flex office are starting to broaden substantially:

In some cases, landlords and flex operators are creating partnerships and operating agreements, so they can better share the risks and rewards of the flex space expansion.
In the “captive” model, some major landlords are introducing their flex offerings, such as Studio by Tishman Speyer and Flex by Boston Properties.

All this flex-space activity seems to be affecting the overall office market in a few ways. For one, in markets with a significant share of flex office space, the volume of small traditional leases is falling. Some evidence suggests that, under pressure from flex-space operators, landlords are accepting shorter-term leases from smaller tenants (5,000 square feet and under), as well as offering concierge services.
By: Scott Baltic (Commercial Property Executive)
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Five CRE Economists Offer Advice for Today's Real Estate Investors

September 12, 2019 by CARNM

1. Richard Barkham, global chief economist with CBRE

“Hold your nerve, be ready to buy from those that lose theirs. Don’t initiate development projects and be ready to compromise on lease-up.
Favorite property types are workforce housing and luxury high street retail. Workforce housing because there is too little supply and endless demand. Luxury high street retail because there is limited supply, sustained demand, and lots of creativity.
Time to revise our notions of what is secondary and what is tertiary. Lots of tech demand in smaller markets that I don’t think is going away. Invest in high-amenity locations wherever they are. Consumers are confident, and the service sector is doing well. Interest rates should strengthen these trends and boost office and retail sectors.”

2. Barbara Denham, senior economist with Reis Inc.

“I still think the apartment market is the best bet, and more recession-proof than others. Consider outlying areas near transportation centers or tertiary markets in places that few are considering. Look to local statistics, such as employment, as a guide. Lots of millennials and young families are considering more affordable cities than the coasts. Look to some of these in the mountain states or south Atlantic.
Next, I would consider office in either gateway or non-gateway cities. Office properties have not seen rent growth as they have in the past, but there are fewer buyers chasing office. Again, location matters for office. Investing in better technology and amenities will help with tenancy.
Industrial is still pretty safe, but many might feel risk-averse right now with the trade war. Eventually things should settle and the strength in industrial should resume.”

3. Jim Costello, senior vice president with Real Capital Analytics

“Do not let the day-to-day noise in the headlines distract you and force you into a panic. Yes, there are risks in the world, and yes, we should face a recession at some point … next year, two years from now, even further away? You cannot let fears of what might happen in the future get in the way of making good decisions now. And if we do have a downturn, and that is meant to be a pretty big if, it will not be like the last one. Will not be like the last one in the sense of the drives or magnitude.
Whether we have a recession driven by the real economy… or one from the financial economy, the answer on how to survive a downturn is similar. Do not be too highly leveraged going into the downturn. The better question to ask though is what opportunities will come for commercial real estate investors out of any potential downturn… I think people are too negative about retail today. Yes, there are certain malls that are facing challenges, and people ascribe it all to the Internet. But the weakness is from another source… Housing demand is still there, but new investments in any market considering rent control are facing challenges… Larger markets not facing rent control changes would be better in my mind.
Economic growth will come to the innovators. Just because a market is small and inexpensive, [does not mean it will] see economic growth. All these secondary and tertiary markets, which were once horse towns, populated by the innovators of the 19th and 20th century, they cannot participate in the 21st century economy in the same way… Innovations in the 21st century are about action in the digital realm and requires highly skilled labor. Some secondary and tertiary markets will flourish based on good partnerships with local universities and city boosters. Some, but not all, however.”
4. Peter Muoio, chief economist with Ten-X Commercial
“In order to gauge the resilience or vulnerability of markets to a potential downturn, it really depends on how high vacancies are and how much development is occurring. That said, we are long into this cycle and property prices have been generally bid up in gateway and major markets, which are typically the first to attract investment earlier in a cycle. This leads investors to search for yield in secondary and tertiary markets. So, for example, buyer trends data that we capture shows waning activity in the so-called smile states and increasing investment activity in the central part of the country in the apartment segment.
The yield curve inversion is a very strong signal of a potential recession. It has preceded each recession in the modern era and has not flashed a false signal over that time. Many investors were already cautious in the face of the length of this cycle and bid up property values; the inverted yield curve heightens the issue of considering investments in the face of a possible downturn, which entails factoring in higher vacancies, weaker rents and [weaker] NOI. It also underscores the importance of considering how resilient or not different markets might be in the event of a recession.”

5. Jim Berry, U.S. real estate sector leader at Deloitte

“In our Deloitte 2019 CRE Outlook, our survey of 500 global investors showed strong support of the investing community in continuing to see the importance of real estate as a long-term and strategic part of their placement of capital. As we move to the latter parts of 2019 and look to 2020, the impacts of global volatility have created more caution in making major capital commitments, including development in certain markets, which combined with certain labor and supply shortages, has in some cases elongated completion of development projects, also creating harder looks at returns and how best to allocate capital by commercial real estate companies. The commitment of allocated capital and desire to find longer-term returns while also seeking safe harbors in key markets such as the U.S. bodes well for certain smaller or tertiary markets and emerging parts of real estate such as non-traditional and mixed-use assets.”

By: Sebastian Obando (NREI)
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