NAIOP poll: Private money driving Albuquerque commercial real estate

For many local commercial real estate projects, private dollars are doing most of the heavy lifting.

At least, that’s what NAIOP New Mexico members said in response to a poll the trade organization conducted last week — one in a series of polls NAIOP is regularly releasing in partnership with the Journal through its luncheons and newsletters.

NAIOP New Mexico is a chapter of NAIOP, or the Commercial Real Estate Development Association — a prominent organization for developers, owners and related professionals in office, industrial and mixed-use real estate. The local chapter comprises over 250 members serving the state of New Mexico.

The first question in last week’s poll asked NAIOP members to rate the current deal velocity in their segment of commercial real estate on a scale of 1 through 10.

Of 68 participants, the majority selected a rating of 8 — up from the 7 rating members chose in the February poll. The 7 rating was the second-most selected option last week.

“It does surprise me,” said Titan Development Vice President of Acquisitions & Development Sal Perdomo, who selected a rating of 7. “I'm glad to hear people are that optimistic, though.”

Titan is currently developing projects in New Mexico, Texas, Colorado, Utah, Arizona and California. Perdomo said that if New Mexico’s deal activity is an 8, then the Texas market would receive a rating in the 20s — largely because of “more freedom to support private industry” in that state, he said.

NAIOP also asked members to estimate the split between privately financed projects and those receiving public funding or incentives when thinking about their current pipeline.

The majority — 46% of respondents — selected “mostly private,” indicating that most of their projects are privately funded.

Historically, New Mexico’s slower population growth, higher poverty rates and greater reliance on federal and state funding have made public dollars a more prominent piece of the state’s funding landscape.

But seemingly not for commercial real estate and NAIOP’s members — of whom 24% said their projects are 100% privately funded and 19% said it was an event split between private and public dollars. None of the respondents said their projects were 100% publicly funded, and only eight said their projects were mostly publicly funded.

Casey Bresnahan — senior vice president of commercial lending for Sunward Federal Credit Union, a member of NAIOP — said he thinks the poll findings are largely a result of a lack of awareness and understanding of public funding opportunities.

Control and risk are also factors, he said, adding he used to shy away from public funding, fearing it would somehow place the organization or project in an unprotected position.

“I think most people, from a collateral standpoint, (risk is) the concern that they have,” Bresnahan said, citing more flexibility with private funding. “They don’t want to lose control of that.”

While an active private sector is often associated with economic vitality and strong market demand, Bresnahan thinks the poll findings represent an opportunity for commercial real estate leaders to tap into funding sources they’ve never explored before to make more projects viable.

Adam Silverman, vice president of local real estate firm Geltmore, agreed, citing Geltmore’s redevelopment project on Downtown’s former Wells Fargo building as an example. Of the $35 million to $45 million total project cost, about $15 million is supported by public funding, he said.

“We just need some more people in our industry to realize these government programs are available, and not be afraid to go try to find a project that fits their economic priorities,” Silverman said.

But Silverman said more could also be done by local governments to speed along decision-making and public funding processes to make public-private partnerships more of an option in New Mexico. While NAIOP members reported minimal use of public funding, Silverman said that source sometimes means the difference between projects coming to fruition or not.

“We have to have government to see some of this project volume get off the ground,” Silverman said. “I see avenues for traditional public funding to be put into private projects, and the private sector just hasn’t tapped into it hard enough yet, and I don’t think that’s unwillingness. I think that’s just lack of creativity.”

Kylie Garcia covers retail and real estate for the Journal. You can reach her at kgarcia@abqjournal.com.