In the last year, nearly a quarter of Albuquerque’s available 13 million square feet of office space has changed hands, and much of that activity is due to local rather than out-of-state developers, according to SVN Commercial agent Walt Arnold.
Arnold, along with a panel of three other real estate agents, spoke Monday during a NAIOP luncheon about the homegrown progress Albuquerque has experienced at the office and industrial level in 2018.
Arnold said the office market stalled between 2000 and 2010, which caused many companies to exit the market.
“They joined other markets that had a stronger growth rate,” he said. “That institutional money still continues to leave Albuquerque, but what’s keeping things alive are local investment groups.”
For example, the Garcia family of Garcia Automotive has purchased the 316,000-square-foot First Plaza Galleria building, with 50,000 square feet set aside for leasing.
“We are seeing people who recognize the opportunity to make an investment, and the interesting thing about it is that the ones who are making these investments believe in what is happening here and want to be here,” Arnold said.
Sheilah Garcia said she and her son, Ed, are excited about the possibilities a building like the First Plaza Galleria has to offer.
“We might build a combo hotel and apartments on the north wing running east to west,” Garcia said. “I just love the wood floors and the artwork on the inside of the building.”
She referred questions about the purchase price to her son, who did not respond by press time.
Another factor in the local market, Arnold said, is interest among call centers.
“There is just a lot of activity in that market,” he said. “The reason is because most call centers are looking for an economically viable lease space.”
Arnold said the recently vacated Molina Healthcare space in Downtown Albuquerque is a prime example of what a potential call center is seeking.
“Research from this last year indicates that call centers are going to drive a lot of our larger blocks of space and really utilize them,” he said.
Horizontal movement from one location to another within the city was another big component of large industrial real estate for 2018.
“We see a lot of people looking at other buildings,” Arnold said. “Maybe the company is wanting to update their image, but for whatever reason many companies have moved locations in the last year. This is why our occupancy has remained at 19 to 20 percent in the office market.”
Affecting the market is a significant lack of inventory when it comes to large industrial warehouse spaces.
“What people are looking for now are 32-foot ceiling heights, fire sprinklers and excess trailer parking,” said Jim Smith, vice president for CBRE. “The whole city probably has a handful of those and none of them are available.”
He added that construction costs for a new building are 20 percent higher than for an existing building with a large space.
“This means if a new user came to town and needed a 50,000-square-foot space, they would end up paying much more for a new building than smaller users of older space,” Smith said.