Copyright © 2021 Albuquerque Journal
If you’re running a company that’s looking for a large, move-in ready warehouse in Albuquerque, you may be out of luck.
Albuquerque’s already low industrial vacancy rate dipped below 2% during the second quarter of 2021, which represents a new record low for the market.
According to a market report from real estate firm NAI SunVista published earlier this week, the vacancy rate for industrial space in metro Albuquerque stood at 1.98% in June, down from 2.29% a quarter prior. Just over 775,000 square feet of industrial space was available across the entire city, according to the report.
“It’s a historic low, from our view,” said Jim Wible, senior director for the land and industrial team at NAI SunVista in Albuquerque.
The low availability has driven up costs, which experts say could encourage more industrial development without tenants lined up. Until then, however, the limited availability has made it more difficult to recruit companies looking to locate to or expand in Albuquerque.
“There are some proposals that we can’t even respond to, because we don’t have a space big enough to deliver in time,” said Danielle Casey, president and CEO of Albuquerque Economic Development.
Jim Smith, first vice president for CBRE’s Albuquerque office, said available industrial space in Albuquerque has been trending down for years, a consequence of limited new construction since the Great Recession and high demand for new space.
He said COVID-19 helped accelerate trends that were already occurring. With customer access to traditional shopping limited during the pandemic, Smith said retailers looked to shift away from traditional brick-and-mortar sales toward e-commerce, which requires additional warehouse space.
Smith added that markets like Albuquerque have increasingly been the recipients of that development. As Amazon and other giant retailers begin to reach market saturation in larger cities, Smith said they’re increasingly looking at smaller cities like Albuquerque, Tucson and Colorado Springs.
“There’s more demand nationally than there has been for a while for third-tier cities,” he said.
Amazon announced plans to build a 465,000-square-foot fulfillment center, slated to open this year, on Albuquerque’s far West Side. Alexandra Pulliam, industrial adviser for NAI SunVista, said Amazon and other new developments in the area have been a catalyst for more activity along Interstate 40 west of the Rio Grande, which offers easy access to markets in Texas and Arizona.
“There’s been a lot more eyes on that west I-40 corridor,” Pulliam said.
Casey said the low vacancy rate means Albuquerque is less competitive when recruiting companies seeking large, move-in ready industrial spaces. Casey said AED has responded to project inquiries from multiple companies seeking a combined total of more than 715,000 square feet of industrial space since the start of June alone. Of those projects, she said just one was seeking less than 40,000 square feet. While it’s too early to say that Albuquerque will miss out on those projects, Casey said companies will choose a city with move-in ready space if everything else is equal.
“We want to be ticking all the boxes,” Casey said.
The low vacancy helped drive the median lease rate up to around $8 per square foot, up from $7.50 last June. Smith and Wible agreed the increase should help spur some much-needed speculative development.
In June, Goodman Realty Group announced plans to build a multiphase industrial development at the corner of Central Avenue and 118th Street. Vice president Scott Goodman said Friday that the combination of rising rents and interest in the development gives him confidence it will be fully leased out before the 140,000-square-foot first phase breaks ground at the end of the year.
“I’m honestly a little shocked there’s not more industrial development,” Goodman said.