Remember last year when articles about the “death of the office” amid a work-from-home revolution were a dime a dozen? Turns out, a lot really can change in a year.
Colliers International released its third-quarter report for Albuquerque’s office market last week, which showed that lease rates in our fair city are comparable to where they were before the pandemic reached New Mexico. And the citywide vacancy rate dropped to its lowest point since 2009.
“I have a level of optimism that I didn’t imagine a year ago that I would have now,” said Scott Whitefield, partner and managing director of Colliers’ Albuquerque office.
The office market isn’t all sunshine and roses, but Whitefield said it has been a slow, steady recovery fueled by old buildings getting new life, new companies coming to town and an appreciation for returning to an office environment.
“It has been an absolute marathon to get the vacancy rate back to where it is today,” Whitefield said.
National outlets ranging from NPR to The New Yorker produced stories predicting, in various forms, that the traditional office would not return to normal, even after the COVID-19 pandemic abated, and those stories largely fit the situation in many markets. Heck, the Journal published a few, as well.
Restrictions related to the pandemic drove tens of millions of workers across the country to work remotely for extended periods of time, and some companies scaled back their office footprint to accommodate them. In such dense coastal markets as New York City and San Francisco, vacancy rates remain well above where they stood before 2020.
In little ol’ Albuquerque, however, Whitefield said the effects on the office market were less severe. He acknowledged that plenty of large firms shifted to remote work last year and foot traffic at large Downtown office buildings dropped significantly.
“But that didn’t last very long,” Whitefield said. “People wanted to come back to the office.”
The third-quarter report showed that 13,306 square feet of office space came off the market between July and September, due largely to small- and mid-sized transactions.
At one office building, located at 8500 Menaul NE, 11,466 square feet came under lease in the period, spanning four individual office suites, according to the release.
However, not everything is as it was before March 2020. Whitefield said the pandemic has prompted a number of companies to rethink how large or small their office footprint should be. Some companies have responded by finding smaller spaces as employees continue working from home full- or part-time, but others have moved into more spacious offices where employees can feel more at ease, Whitefield said.
Whitefield added that lease structures have also changed since the pandemic. With uncertainty still the norm, many tenants are seeking shorter lease terms or opt-outs that allow them to exit leases under certain circumstances.
“At this point in time, I think people just want the ability to be a little bit more quick-acting,” he said.
Additionally, a number of buildings have found new life as offices. He noted that some users, especially large medical providers, are taking former industrial and retail spaces, and repurposing them as offices.
“We are seeing little pockets of that,” he said.
Despite the optimism, there are still areas of concern. The report showed that the vacancy rate in the West Mesa sub-market was 47.5% in the third quarter, compared to 14% metro-wide.
Whitefield said that market has less space in general, and it may require a psychological shift for many Albuquerque business owners and managers to look for office space west of the Rio Grande.
Additionally, Whitefield said there’s essentially no new office construction in Albuquerque, which he attributed to the high cost of construction materials and labor.
“There is a gap there, and it’s just getting farther apart,” he said.
Stephen Hamway covers economic development, health care and tourism for the Journal. He can be reached at email@example.com.