The prospect of new commercial construction looks pretty dim in the Albuquerque metro area’s office and industrial real estate markets, which continue to sputter along in step with the stagnant local economy, according a panel of local experts at a NAIOP luncheon on Monday.
For that to change, Debbie Harms of NAI Maestas & Ward said, “Something is going to have to happen.”
Harms was one of three speakers at the annual analysis of office and industrial property by the New Mexico chapter of the Society of Industrial and Office Realtors. Their update sounded a lot like the one the society gave last year at the commercial real estate development association’s November luncheon.
After three straight quarters of improvement, the local industrial market “is showing increased stability with fewer tenants downsizing and closing,” said panel moderator Dan Newman of CBRE.
The theme in the industrial market, where the biggest parts of the building inventory are warehouses and distribution centers, is that finding modern space larger than 10,000 square feet is becoming harder, said panelist Erick Johnson of Johnson Commercial.
The average asking lease rate for a warehouse is $5.88 a square feet, roughly where it’s been for four straight years. The average asking rate is too low to cover the cost of building a new warehouse, Johnson said. The rate will have to increase 25 percent to 30 percent before new construction is justified, he said.
At a 22 percent vacancy rate, Albuquerque’s office market is clearly in the doldrums, Harms said. In a typical pre-recession year, about 700,000 square feet of office space would be leased annually, she said. That threshold has been reached only twice in the past six years.
There is activity in the office market, but Harms described it as companies that are already here “trading spaces.” As with the industrial market, demand for office space is focused on well-maintained buildings with modern amenities at good locations, she said.
The society’s market update is an annual event at NAIOP. Membership in the society is based largely on experience and performance, rather than completion of an education curriculum. There are only 21 members in New Mexico.
By: Richard Metcalf (Albuquerque Journal)
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