Albuquerque Office Space Market Overview

Albuquerque’s office space market has remained steady, contrary to national trends.  Although governmental employees have returned to the office, both governmental and private sector employees continue to enjoy remote and/or hybrid work, creating a flex environment. As Albuquerque continues to adapt to these changes, the office real estate landscape is undergoing a transformation. Here’s a breakdown of the major factors influencing the market:

1. Vacancy Rates and Demand

Current Vacancy Trends: Vacancy rates for office space in Albuquerque are about what they were pre-pandemic. Currently, vacancy rates are fluctuating around 13-15%, which is a about equal to pre-recession as well as pre-COVID levels.  Rental rates continue to push in the upward direction due to Operating Expenses as well as demand in the small to mid sized office spaces. The overall trend suggests that businesses, especially smaller and mid-sized firms, are opting for more flexible arrangements.  At the present time, the majority of vacant office space is in blocks larger than 8,000 square feet.

Class A vs. Class B/C: Class A office spaces (high-end buildings with modern amenities) are facing more demand than lower-tier Class B or C buildings, but not by much. The main issue across all office spaces is the shift toward hybrid or fully remote work, causing some companies to reduce their physical footprints. This is particularly true for companies with large office needs in the central business district (CBD), leading to higher vacancies in older, less attractive office spaces in our Downtown submarket.

Suburban vs. CBD: The suburban office market has been relatively more resilient compared to the CBD. The rise of remote work means more companies are moving to suburban locations to reduce overhead costs and meet employee preferences for easier access to office spaces. Suburban areas such as Rio Rancho, Cottonwood, and Northeast Heights have seen more activity in comparison to downtown Albuquerque.

2. Shift Toward Flexible and Adaptive Reuse

Flexible Office Spaces: Co-working and shared office spaces (like WeWork, Regus or locally-operated spaces) are seeing increased demand. These types of spaces cater to businesses seeking flexibility without committing to long-term leases. In Albuquerque, local co-working spaces are growing in popularity, particularly among startups, freelancers, and remote workers.

Adaptive Reuse: There’s growing interest in repurposing older office buildings into mixed-use developments, residential complexes, or entertainment hubs. Some office spaces that were previously too large and outdated for the market are being converted into residential units or mixed-use spaces with retail on the ground floor. This trend is particularly common in the downtown area, where historic office buildings with classic architecture can be transformed into apartments or creative hubs.

3. Lease Structures and Tenant Expectations

Lease Terms: Traditional office leases of over 5 and up to 10 years are becoming less common. Businesses are increasingly looking for more flexibility, opting for shorter leases, month-to-month arrangements, or flexible terms. This shift is especially seen in the Class B and C markets, where landlords have to be more flexible to attract tenants. 

Tenant Concessions: To entice tenants into office spaces, landlords are offering attractive lease concessions. These can include:

Rent abatement (reducing or waiving rent for the first few months).

Tenant improvement allowances (allowing businesses to make improvements to the space at no extra cost) vs turnkey delivery by Landlord.

Flexible lease terms and move-in incentives.

Amenities and Adaptability: Businesses are looking for office spaces that offer more than just a desk and a chair. They want amenities that can support hybrid work models and employee well-being. Key features include:

High-speed internet and tech support.

Private meeting rooms and breakout spaces.

On-site fitness centers or proximity to gyms.

Coffee shops or food options in or near the building.

Parking availability (particularly in suburban areas).

4. Market by Location

Downtown Albuquerque: As mentioned, the CBD has been facing the most pressure. Some companies are downsizing their office footprints or moving to smaller, more flexible spaces. However, some large law firms, financial institutions, and government agencies continue to operate in the area. There has been a slow but steady push toward converting outdated office buildings into mixed-use developments—combining office, residential, and retail spaces in the same building. This can help revitalization efforts in the CBD, with a focus on attracting younger residents and a more diverse demographic.

Suburban Markets: As hybrid work models become the norm, suburban office spaces have seen more traction. Areas with good access to transportation routes, such as Rio Rancho, Northeast Heights, and Cottonwood (near I-25), are becoming increasingly desirable. Many companies are looking to reduce costs and offer their employees easier commutes while still maintaining a physical office presence. Suburban offices tend to be cheaper, have more parking, and are often seen as more accessible for employees who are commuting part-time.

Medical and Tech Sectors: Medical office spaces and tech-related offices have remained somewhat insulated from the broader office market trends. The University of New Mexico (UNM) and its medical school continue to drive demand for medical office space. Meanwhile, tech companies (often startups or regional hubs) are still seeking office space, but they tend to favor modern, flexible work environments that accommodate a variety of work styles.

5. Future Outlook (Second Half of 2025)

Stabilization Expected: The office space market in Albuquerque is expected to stabilize in the second half of 2025, especially if employee-desired hybrid work continues to be predominant. This might mean that companies still need office space, but not at the same scale as before the pandemic.

Flexible and Hybrid Spaces: Demand for flexible office environments (like co-working spaces) will remain strong, especially for tech startups, small businesses, and remote teams. Expect landlords to offer more short-term leases and tech-enabled spaces that cater to hybrid models.

CBD Revitalization: Downtown Albuquerque will continue to face challenges, but adaptive reuse and mixed-use development projects could start to breathe new life into the area. Local government and private developers may push for initiatives to bring more residential or commercial activity back to the CBD.

Suburban Expansion: The trend toward suburban office spaces will likely continue, especially as companies embrace flexible work models and reduce real estate footprints. However, suburban areas may not face the same level of oversupply or vacancies as the CBD does, leading to steadier demand in certain suburbs.

Key Takeaways:

Hybrid Work is the primary force reshaping office space demand, with businesses downsizing or seeking flexibility.

Suburban markets are seeing growth, while downtown Albuquerque faces higher vacancies.

Flexible office space (co-working) and adaptive reuse projects are becoming increasingly popular.

Tenant concessions are crucial for landlords to remain competitive.

Investors are focused on high-quality, well-located office spaces or those that can be repurposed for mixed-use developments.

If you’re considering leasing or investing in Albuquerque office space, it’s essential to carefully evaluate the space’s location, adaptability, and alignment with the needs of the current workforce. Let me know if you'd like more information on specific buildings or upcoming developments!  In these changing times, it’s important to remain informed so that you and your business can make appropriate business decisions.

 

By Shelly Branscom