MARKET HIGHLIGHT: NEW MEXICO NEW MEXICO IS PRIMED FOR INDUSTRIAL GROWTH Tim With Senior Vice President, Colliers tory. In comparison, Albuquerque’s inventory grew by less than 1 percent over the past five years, while vacan -cy rates decreased by almost 550 ba-sis points. Most new construction has been build-to-suit activity. Tenants, meanwhile, are challenged with a lack of choice as a considerable amount of the existing vacant space is function-ally obsolete. The average overall asking lease rates for existing warehouse/distribu-tion space was $6.58 per square foot, triple net, at the end of 2020. New projects will be offered from $8.50 to $9.50 per square foot due to escalating construction costs. In response to the tightening market conditions, Brunacini Development has just commenced construction on a 150,000-square-foot, high-bay facil-ity within Meridian Business Park in Albuquerque’s West Mesa submarket. This will be the area’s first complete -ly speculative, large-scale project in more than a decade. Another experienced local devel-oper has also begun planning efforts in the South Valley submarket. This project includes a 65,000-square-foot The amount of empty space in New Mexico’s industrial market has shrunk to unforeseen levels. Albuquerque, the state’s largest MSA, reported a total of 41.5 million square feet of industrial space and only a 2.4 percent vacancy rate at the end of 2020. Absorption levels have increased through the first quarter of 2021, and available inven-tory is becoming difficult to find as the vacancy is down to 1.9 percent. Albuquerque has been on the brink of new construction for some time, with the need for new Class A space far outweighing the current availabil-ity. The nationwide industrial supply posted record deliveries in 2020 that totaled more than 300 million square feet. This represents about a 2 percent year-over-year increase in total inven-Conceptual rendering of 150,000 square foot facility currently under construction at 7200 Bluewater Rd. NW. building with the ability to accommo-date another 250,000 square feet on an adjacent parcel. Despite a small amount of industri-al product in the pipeline, several de-velopment sites are well-positioned to capitalize on future growth demands for distribution, manufacturing, and research and development space. The following master-planned developments can accommodate 30,000-to 1-million-square-foot in-dustrial uses, generally within a 12-to 18-month timeframe: • Sunport South: a 165-acre planned business park development near the Albuquerque International Sunport • Westpointe 40: 112 acres of develop-ALBUQUERQUE’S MULTIFAMILY INVESTMENT SALES MARKET HEATS UP, BUT LACK OF SUPPLY SLOWS TRANSACTION VOLUME The red-hot Albuquerque apart-ment market is experiencing ex-tremely high demand for investment properties, but it is an incredibly tight market. Owners are receiving a pleni-tude of bids for the limited number of assets for sale. An abundance of capital is seeking to be deployed in Albuquerque’s ro-bust multifamily market, substantial-ly driving up pricing and compress-ing cap rates. Since multifamily has outperformed many other commer-cial real estate asset classes during the pandemic, it is considered a lucrative investment, fueling investor demand and pouring new capital into an al-ready competitive landscape. Albuquerque is also seeing signifi -cant pent-up demand from the deal pause that occurred in 2020. Fewer deals came to market at the start of 2021 due to the uncertainty around COVID-19 and the rescheduling of the National Multi Housing Coun-cil (NMHC) Convention, the typical launch pad for many assets to the market. About six months into the pandemic, however, investors began aggressively looking to place capital in order to get returns, which started the velocity in the multifamily sector. sorts. That’s because many would-be sellers are wondering what they can trade into with so many markets being ultra-competitive and tight. A buyer in a 1031 exchange, for exam-ple, may find it difficult to secure a replacement property in this current environment. That doesn’t even take into account the impact of potentially ending the 1031 like-kind exchange, something Pres. Biden has men-tioned. Cynthia Meister Vice President, NorthMarq’s Albuquerque Investment Sales Office ment-ready land along Interstate 40 in the West Mesa submarket • Cordero Mesa Business Park: 132 acres of developable land remaining for industrial uses. The park is home to TempurPedic and Shamrock Foods • Los Morros Business Park: 200 acres of fully improved land in Los Lunas that is suitable for industrial and other uses. Located just south of Albuquer-que, this area is home to Facebook’s new data center and a Wal-Mart Dis-tribution center Activity in the southern part of the state has been very strong, specifi -cally around the border town of Santa Teresa. About 500,000 square feet of space was recently added, providing one of the largest blocks of spec space in the Borderplex region. In addition, Prent Thermoforming and W Silver Recycling have each committed to build 120,000-square-foot buildings. The Santa Teresa region accounts for 60 percent of New Mexico’s total ex-ports to the world, according to recent reports. Though the pandemic isn’t over yet, many New Mexico regions are experi-encing — and anticipating — further industrial growth. SOCAL INDUSTRIAL from page 14 ing, transloading and last-mile de-livery — should continue to drive demand and increase pricing for functional industrial product. With that, we are seeing skyrocketing industrial land values, lower rent concessions, higher annual rent increases (now often ranging from 3.25 percent to above 4 percent) and a frenzied demand to purchase existing assets — with almost noth-ing on the market. Over the next few years, be on the lookout for more tempered rent growth, compared to current projections of 5 percent to 7 per-cent annually over the next one to three years. There is also a signifi -cant amount of new players in the logistics and warehousing sector, many just recently established with minimal financial history. Be aware of changes in the ecommerce world that might negatively affect these tenants who recently signed up for long-term leases with large security deposits. Who are Investors? Local players, out-of-town buy-ers, institutional funds and investors across the board are pursuing apart-ment deals in Albuquerque. Instead of calling, many investors want to meet face to face to establish rela-tionships with local brokers. They understand that a record number of off-market transactions are occurring and want to be part of that deal-mak-ing. Albuquerque Fundamentals are Off the Charts Gridlock The New Mexico multifamily market is experiencing a gridlock of Albuquerque’s multifamily market has outperformed in rent collections, rent growth and occupancy levels throughout 2020. Rent collections are down only 1 percent to 2 percent city-wide. This is compared to other mar-kets that are down anywhere from 5 percent to 20 percent. The Albuquer-que market experienced a spike in rent growth of 4 percent to 6 percent during the pandemic, while occupan-cy remains stable at 94 percent to 96 percent. Investors are also drawn to the region thanks to Albuquerque’s longer-term growth. Tech giants like Facebook, Amazon and Netflix are investing and expanding here, bring-ing with them new high-paying jobs. Netflix recently announced it will pump $2 billion into the local econo-my over the next 10 years and bring 2,000 jobs. Facebook is doubling the size of its data center in Los Lunas. Amazon is building a 2-million-square-foot fulfillment center that will bring even more jobs. Intel also announced it is investing $3.5 billion into its Rio Rancho facilities and will hire at least 700 new positions. This robust job creation is a strong signal to investors that there will be new apartment renters, which continues to drive demand for multifamily assets. 22 • May 2021 • Western Real Estate Business www.REBusinessOnline.com