Hints of positive signs - commercial developments in Albuquerque Metro - Real Estate Quarterly

New Mexico Business Journal, Sept, 1993 by E. David Grenham

Albuquerque metro's residential and commercial real estate markets are showing signs of growth with even a hint that industrial properties may be showing minute indications of a healthy future.

There has been a severe lack of industrial space in the Albuquerque metro area for the past four or more years and industry leaders hope lending institutions will ease up with loans.

The key is whether the institutions start circulating funds needed for substantial industrial growth -- and right now there's no telling when that will happen.

"Right now we're suffering from a lack of enough available space in all sizes," says David Roche, associate industrial specialist with CB Commercial Real Estate Group Inc.

"This can have a negative effect if companies moving in can't find the space," he says, "but overall, we're looking at the healthiest market we've had in several years."

With about 29.5 million square feet, the industrial vacancy rate is about five percent. Last year the vacancy rate was about 4.6 percent, says Roche.

"Last year, we saw a real uptake in activity overall in the net absorption, and it should continue over the next several years," Roche says. "With some of the large expansions, we'll see more growth. We're not out of space."

But those in search of industrial space can't be too choosy, either.

The growth that has been evident in industrial building has come mostly from existing, healthy companies expanding.

Companies like Intel and Amtech account for some of the growth.

"The Intel expansion will have a ripple effect, and Motorola will be doubling its plant. Most of the activity has been in enlargements and expansions of existing facilities," Roche says.

David Scott, executive vice president of Albuquerque Economic Development, says lease space for industrial use is hard to come by and developing industrial land is difficult under the cautious market.

Economic leaders in the Albuquerque area have identified the lack of space as a very real problem.

"Albuquerque Economic Development has a piece of land we've been trying to build a speculative building on as a means to help attract some industry here," says Scott.

"I can't make the statement and back it up that we've lost companies because of a lack of buildings," he says, "but when many people ask how many buildings we do have, we no longer hear from them.

"I think part of the reason we've lost some is because we don't have the space."

Roche, however, says that in the last 12 to 15 months, the metro area has seen an increase in build-to-suit activity, something that should continue as long as the market stays competitive.

In the first quarter of 1993, 719 building permits for single family homes were issued in the metro area with low interest rates and the rising demand pushing the market ahead, according to data from the Home Builders Association of Central New Mexico.

Sales of existing homes also jumped about 17.8 percent in June compared to the same period last year, and the future looks bright for both new construction and sales of existing homes.

"Overall it's going extremely well," says Jim Folkman, executive officer of the Home Builders Association of Central New Mexico.

About 46 new homes will take a large chunk of property on Indian School and Washington, and building is starting up on Cutler Street on the same piece of land.

"Low interest rates continue to stimulate the market," says Folkman. "It broadens the market and Albuquerque continues to grow because of the evenly divided activity of the public and private sectors."

The breakdown for single-family permits issued during the first quarter of 1993 includes Rio Rancho, 203 (41 percent of market share; Bernalillo, 118 (13.5 percent of market share); Albuquerque, TABULAR DATA OMITTED 398 (-7.7 percent of market share; total metro, 719 (5.9 percent of market share).

It almost seems growth in Rio Rancho is unlimited.

"We're doing anywhere from 60 to 70 houses per month, and we're running behind," says Richard Williams, director of communications at AMREP Southwest Inc.

"We're selling so many, but the problem with building the houses is we can't find enough bodies to build them," says Williams. "I think it's a problem with other builders as well. We're cursed by our blessing, but we like it that way rather than the other way."

AMREP is selling homes mostly in River's Edge III north on State Highway 528. It's the third segment of a three-phase project that will eventually hold about 1,800 homes. The company is also building at North Hills at the end of 20th street in Rio Rancho.

"This past year and a half, we've been doing in-fill buildings on smaller plots of land, too," says Williams. "It's looking like it's going to be this way indefinitely, especially with this Intel expansion and other businesses moving in. The new jobs really help our home sales."

Apartments are at about a 98 percent or more occupancy rate in the Albuquerque area, but no major apartment complex plans are under construction yet.

In the commercial markets, both in office and retail, industry players are experiencing solid growth and it is expected to continue.