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Rebekah Martinez

Q1 2022 Santa Fe Market Review

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As we go into spring, the flowers are not the only items seen blooming in the beautiful landscape of Santa Fe. Apartment complexes are under construction, new businesses are emerging, and many new homes are being built. This first quarter made a statement in which the continuous growth of population in Santa Fe complements the increasing demand in Commercial Real Estate. The COVID variants continue and without a doubt, so does commerce as the economy is supplemented by tourism.

As we move forward, leaving the pandemic behind, we believe that the real estate market is stabilizing and will bring good opportunities for investors, sellers and business.

Click here to read more about the current market trends for Hospitality, Retail, Office, Industrial, and Commercial Land in Santa Fe.

Interest Rates and Inflation: What to Expect in 2022?

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As we ended the 1st quarter of 2022 and quarter reports are being published, I found that Albuquerque is positioned very well to withstand the Federal Reserve’s recent 50 basis points rate increase. 

While interest rates are not likely to come down soon, they are still at historic lows.  Federal Reserve Chairman Jerome Powell has apparently ruled out more aggressive rate hikes in the future announcing that “anything higher than 50 basis points is not something we are actively considering.  I think we have a good chance to have a soft or softish landing, or outcome if you will.”  Despite the increase, the expected trajectory is still below historical levels, according to Marcus & Millichap researchers.  While the Feds rate has hovered around zero for more than a decade, the planned Fed hikes will still keep interest rates at relative historic lows. It may have an impact on a market that has seen cap rates compress and construction costs rise, due to low interest rate environment.  However, history demonstrates it is possible to have a strong commercial real estate market in a higher rate environment than many currently contemplate making assumable debt incredibly valuable and accretive to the future buyers.  Additionally, more business has gone to debt funds but also banks and life companies.  Life companies have been particularly aggressive especially for the modest leveraged, longer-term fixed rate financing, institutional products. 

Inflation means different things to developers, investors and tenants.  Hard assets such as commercial real estate tend to retain their values during periods of high inflation.  Inflation shows little sign of peaking as some economists had thought would happen by this time.  What impact will this have on Commercial Real Estate (CRE) assets and investment behavior?  Well, some assets are better able to withstand price increases than others.  Investors should be able to benefit while developers are facing persistent pricing challenges for materials and labor.  Commercial real estate tends to appreciate in value proportional to inflation, writes PBMares an accounting and consulting firm.  “Inflation as a response to strong economic growth is a good thing when it comes to CRE; inflation because of persistent unemployment and stagnant demand is not. In the current environment, inflation as it stands will be good for CRE, to what level depends upon the property type and stakeholder. Tenants who are able to lock in a long-term lease with guaranteed low rent increases will see a similar benefit as owners of existing developed properties. The positive effect of inflation on commercial real estate tends to show up as increases in market rents and what tenants are able to pay.  The negative effects will most often show up in operating expenses, not to mention the overall erosion of the purchasing power of the income stream being received by the owner as inflation erodes the value of the dollar.  According to Chad Kurz, EVP at Matthews Real Estate Investments, “during normal inflationary periods, commercial real estate is impacted the same as any other industry with higher costs typically being passed down to the next consumer.  What we do know is the point of the Federal Reserve raising rates is to lower demand which will impact pricing.  If inflation and interest rates continue to increase for the foreseeable future, that will in turn have an impact on values.  However, if interest rates can settle, then cap rates will adjust, and the market will quickly get back to a normal market environment.  Many experts believe  future rates increases have already been priced into the market, and interest rates will not continue the pace of increase we have experienced since the start of the year.”

Hybrid Work. People have spoken and they are overwhelmingly in favor of hybrid work according to a new report from Cushman & Wakefield, office demand is returning.  In the two years since the first COVID-19 lockdown, much of the world has returned to pre-pandemic employment levels.  The firm sats that long-term, US office-using employment is expected to grow 50% faster than total employment by the end of 2030 with high-tech jobs forecasted to grow twice as much.  With leasing activity up, the majority of companies who have made decisions are currently planning on hybrid, agile work environments as their leases expire.  Despite the work from home rhetoric, market data shows office leasing volume globally is surging.  The hybrid solution is galvanizing the corporate need for office space as the workplace gets reimagined.  Cushman says the companies that thrive will be the ones that provide employees the choice of where to work, which could require businesses to continue the balancing act they have found themselves in since the onset of COVID.  “Employees need the office to support their desire to learn, make meaningful cultural connections to their organizations, and to engage more deeply with colleagues,” the report notes adding “many employees rate in-office experiences higher than remote work, and the workers who have the most meaningful experiences – typically millennial and Gen Z workers – are the ones who come into the office multiple days a week.”  To compete with talent, corporate leaders will need to create office environments that inspire employees and draw them in by blending home and office environments, as well as the addition of technology, access to clean fresh air, and amenities such as outdoors spaces and multi-use spaces and flexible schedules.  

 

ABQ Q1 market trends:

Office sector performance has indicated that we have absorbed more office vacancy in Albuquerque in the 1st Quarter of 2022, an improvement over the national reports.  

As more companies join forces to introduce collaborative office space, hybrid work plans or return to office timelines, material changes in the office sector could boost performance metrics in the near future.   

What’s Next for Commercial Real Estate? – by Shelly Branscom

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As the nation begins to open up, children returned to the classroom, and international travel resumes, we can expect more of the same commercial real estate activity in 2022. According to NBC News, at the end of the first quarter of 2021, more than 70 countries are fully open to US travelers and tourists, while 16 are completely closed to Americans. The remaining countries fall somewhere in between. Most require a negative COVID-19 test, some sort of quarantine requirement and many have some sort of curfew in effect.

According to Moody’s Analytics REIS, transitions will affect all property types – including retail, hotel, office, industrial and multifamily. “Clarity is on the horizon.” Prices haven’t fallen enough to register real “transitions on any great scale and transaction volume has increased in the past few months.” In fact, an economist I heard speak indicated transaction volume is on the rise; especially in the tertiary markets where Cap Rates are higher than large cities.

Most companies, including Amazon, are targeting the second half of 2022 to return to the office. A CNBC report has indicated Google employees have to apply to work remotely for more than 14 days per year. On the contrary, Facebook and Twitter are allowing remote work indefinitely. Human Resources leaders across the nation are eyeing office reopening later in the year; likely 3rd Quarter. As more vaccinations reach the general public, leaders are re-assessing their position on exactly when employees across the nation can safely return. Here at home, many Albuquerque employers are fully open with employees coming and going from the office daily.

As growth in the life sciences sector hits historic levels, demand for lab space across the nation, and right here in New Mexico has exploded. “Insiders know that office absorption has been positive and rising for three quarters in a row,” says Marcus & Millichap’s researcher John Change. In fact, the Albuquerque office vacancy rate dropped to 13.85%, down 18 basis points from the previous quarter, and the lowest it’s been since 2009, reports Colliers International.

When assessing the space office users will need, the majority do not expect large reductions, rather many reported the need for a slight increase in space. Employers are still requiring employees to be present in the office at least part time. This requires space, and even if the share of desks becomes the norm, these desks are likely to be socially distanced. It is also probable that more collaborative space will be needed as office using employers lean toward brings in teams on the same days in the hopes of sparking creativity and innovation that my not be replicated on a virtual platform. Moody’s Analytics predicts the professional and business service sectors will grow by more than 20% over the next decade, a forecast that will bolster office demand.

Moody Analytic’s forecast is supported by the reports of significant gains of tenant office tours across the nation, both in person and virtually. While we saw some growth in demand the last half of 2020, the exponential increase in the first two months of 2021, combined with the announcement from the Biden Administration that all Americans are eligible for the vaccine, is providing confidence that a meaningful recovery is on the horizon. At some point, all things will go back to normal and it’s going to look more like the old normal than most people think. 

 

Shelly Branscom, CCIM is an NAI SunVista commercial real estate specialist who provides substantial long-term strategies and business planning services to her clients.  She prides herself on thinking outside the box, enabling her to contribute unique solutions and outcomes specific to each of her clients.  Learn more about Shelly and her listings.   

NAI SunVista is a full-service commercial real estate company serving New Mexico since 1996. The company is a dynamic commercial real estate firm offering best-in-class real estate services in brokerage, property management, asset management, business brokerage and development services.

Meet Your Property Manager – Dana Norris

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Good property managers are professional problem-solvers. They are artists at making the best out of bad situations. And they are masters of good communication. Senior Portfolio Manager Dana Norris has been recognized by many of her property owners as one who handles challenges with strength, knowledge, and professionalism. 

Dana has been managing properties for 15 years. Additionally, she received her ACoM designation (Accredited Commercial Manager) in 2018 and her CPM® designation (Certified Property Manager) in 2019 from IREM (Institute of Real Estate Management).

She believes that her biggest strength is “being able to recognize that tenants may be experiencing a challenge with a circumstance (a heating or cooling issue or plumbing issue) and I am link between the issue and the solution.  The majority of our tenant calls are for service order requests – this is a time the tenant wants us to solve their problem and as quickly as possible.  A good property manager can recognize the need to provide good customer service and separate challenges that may accompany.  It also helps to have an amazing team and to work for a company that is passionate about doing things right.”

Dana is involved in local property management leadership. She continues to remain involved in IREM by giving back and serving on the IREM NM Chapter 46 Board of Directors (2020-2022) as the Membership Director.

When asked what advice she could pass on to property owners, she stated, “No matter how much we plan ahead, issues beyond our control will happen. Having a professional property management company in place with endless resources will definitely reduce your liability and burden. We manage your property as if it is our own. We make decisions not only for the maintenance and care of your asset, but we are always considering your lease obligations to your tenants as well. We are always thinking several steps ahead so you don’t have to.”

We are so grateful and proud to have Dana on our team!

Meet Your Property Manager: Judy Clifford

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When a Property Manager takes on a new property, they aren’t just making sure the grass gets mowed. There is so much more to it. Balancing budgets, maintaining a property’s physical health and appearance, and acting as a liaison between owners and tenants are just a few of the many things our talented Property Management team brings to the table. We would like to introduce you to one of our team’s skilled and appreciated individuals. With over 18 years of experience, Judy Clifford manages a large portfolio of property with care and grace. 

When asked what Judy’s strength and focus is as a property manager, she replied, “Being organized. It enables me to juggle all of the necessary balls at once.”

Being able to remain organized and adapt to the daily challenges of a property owner’s needs is a priority among our group. This includes being able to handle emergencies quickly, efficiently, and effectively. Judy is a master of dealing with disaster; like a ballerina, always kept on her toes, but taking every challenge and making it look easy.

We asked Judy what one piece of advice she would pass on to a property owner. She said, “I have had many different types of owners and property types throughout my years. My favorite owner is one who communicates their goals and intentions and trusts that I’m going to carry their goals out to the best of my ability. If there is an open line of communication I can only succeed in ensuring a property owners success in retaining tenants and making the most and best of their investment for years to come.”

Shout out to Judy for always going above and beyond for her property owners, tenants, and SunVista.

Albuquerque Starts off 2022 with a Bang

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Welcome to 2022!  January started off with a bang!  The activity in the market has continued to remain strong creating a positive impact on the Albuquerque market. 

Given the US economy grew at it fastest pace since 1984, demand remains strong, the labor market is tight, and we are poised for another year of solid, above-trend growth.  In an effort to slow the economy, the Federal Reserve plans to raise interest rates more than once this year; albeit at a slow rate.   

It should be noted commercial real estate performance has been good during periods of high inflation with returns more closely correlated to growth than inflation.  The overall economic strength of the environment is much more important than whether inflation may rise or fall going forward.  “If the economy is doing well, real estate will do well, no matter what happens with inflation.  Inflation is not critical in itself for commercial real estate” remarked Greg MacKinnon, research director of the Pension Real Estate Association.

Spikes in GDP and inflation have been caused by a culmination of events started by the pandemic.  Here at home the housing demand wears on creating multiple bid scenarios and sale transactions over asking price. 

JLL noted their research supports the fact that investors are relaying on innovation and talent metrics when making strategic decisions about which cities are the best targets for investment.  “Investors also have a crucial role to play in rejuvenating city centers and helping to shape cities’ spatial dynamics with mixed use transformational projects.”  Gratefully, there are many of these types of projects on the drawing boards for Albuquerque.  Take MaxQ, the area near the Amazon fulfillment center and the up-and-coming Mesa Del Sol, all present unique mixed-use opportunities.

Office performance over the last five years is highly correlated to the innovation-centric and talent-rich cluster, while over the longer-term period, gateways have always been the top performers.  It’s clear there’s a correlation between corporate expansions into new markets, where talent and innovation metrics are prioritized, and the office market performance as these choices play out.  With talent a very important factor in where companies will relocation, Albuquerque is well positioned to benefit from new companies setting roots in our beautiful Land of Enchantment. 

We will return to the office more flexible than ever.  Employers have already begun offering amenity friendly environments in order to retain their best employees.  As such, office demand is expected to remain strong particularity in the tech, life science and healthcare industries.  The most advanced employers have tools in place to analyze data and strategize on how to best use their office space.  While managers are weighing the advantages and disadvantages of a 4 day work week to others have already moved past the Great Resignation and are utilizing the skillsets of new hires.  Ultimately both employers and employees agree company culture is their top priority. 

 

Shelly Branscom, CCIM is an NAI SunVista commercial real estate specialist who provides substantial long-term strategies and business planning services to her clients.  She prides herself on thinking outside the box, enabling her to contribute unique solutions and outcomes specific to each of her clients.  Learn more about Shelly and her listings.   

NAI SunVista is a full-service commercial real estate company serving New Mexico since 1996. The company is a dynamic commercial real estate firm offering best-in-class real estate services in brokerage, property management, asset management, business brokerage and development services.

Martha Carpenter Named Woman of Influence 2022

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NAI SunVista aims to exemplify community involvement, influence, and culture. So it is incredibly rewarding when one of our own is recognized within our community for doing just that. This year, Martha Carpenter was honored as one of Albuquerque Business First’s Women of Influence. This prestigious recognition is awarded to women in our community who “are passionate, ambitious and motivated to make both their industries and communities the best they can be.”

We asked Martha a little bit about what an award like this means to her. Read through her Q&A below:

Who has been YOUR biggest influence?
My biggest fan/influencer has been my best friend Sherri Wells. She is always telling me I can do anything, and she believes it. She continues to encourage me to reach out and just do it. It’s funny, but she thinks I can do everything I set my mind to do.

What was your reaction when you found out you had been named a Woman of Influence?
I couldn’t believe it. I don’t look at myself as an Influencer. I like to help women grow their confidence and grow in their careers. It’s like seeing your children succeed, it’s exciting. Therefore, I’ve never thought of myself as a Mentor, only as a friend/mother to these women.

What does an award like this mean to you?
I’m very honored to receive this award. I know that there are so many women out there that are doing the same thing as I am and they also deserve this award, so let’s don’t forget about all those women as well.

What future plans do you have in your professional life that will help you continue to be a positive influence?
Right now, I am focused on Mentoring my Partner Lisa Mercer and her career in commercial real estate, and my other big focus is the CREW Mentorship program. It’s a great program for up and coming commercial women, helping them advance in their career.

Congratulations Martha on this well-deserved recognition. We are proud to have you as a part of our team!

 

To read more about this year’s Women of Influence, check out the Albuquerque Business First news article here.

To learn more about Martha’s role here at NAI SunVista, check out her bio page here.

Alex Pulliam Featured in ABF Book of Lists & Leaders

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In January, Alex Pulliam was featured in Albuquerque Business First’s Book of Lists and Leaders.

She states: “This article details my love for our City and my optimism about growth. I believe there’s never been a better been a better time to be a New Mexican- Not only through the lens of the business community but because we have an incredible quality of life that you can’t always replicate. As a runner, I enjoy pacing through our city to slow down and take in the sights around me. Playing outside has always been my happy place, and it’s vital part to my success because it requires habit forming processes to achieve goals- something I apply in my profession.”

Read the article and more about Alex’s outlook on Albuquerque here.

My First Year in CRE

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When people tell you your first year is like drinking from a water hose they are not lying! Everyday, every person, every transaction is filled with successes, failures, challenges and learning experiences. It can be an emotional roller coaster where you either want to jump off or hold on tight and ride it out.  I’m grateful to have surrounded myself with a supportive brokerage, leadership and mentor.  I could not have accomplished what I did my first year if it wasn’t for the weekly and monthly support and education that NAI SunVista provided me.  I owe the biggest thanks to my mentor and partner who daily lifted me up, gave constructive and positive feedback, challenged me to take on tasks only she knew I could do.  She was never afraid to course correct me or even let me try something that was completely outside the box. If I failed she helped me pick up the pieces and learn from them and if I succeeded, she always made sure to celebrate with me. A selfless leader motivated to see me succeed. 

After a year of learning and failing, I have some big goals for me in 2022. Several include furthering my education as I’m a strong believer that knowledge comes from learning and wisdom comes from experience. I also want to move my business forward by increasing by business relationships in the community while partnering with my clients to achieve their commercial needs.  I believe social media and digital marketing is the way of the world; however, I’d like to challenge myself and others in 2022 to get back to the basics of good old fashion lunch meetings, coffee dates and hand shaking with clients.  However, don’t be surprised if you see me grow my business on social media platforms as well.  As time is everyone’s nemesis, social media and digital marketing allows you to send a message, a reminder or start a connection during people’s busy lifestyles.

I love the New Year because it means new beginnings, new challenges and opportunities. A blank canvas to create whatever you want. I look forward to my second year in CRE and I can’t wait to share my experience with you.

 

Lisa Mercer is an Advisor with NAI SunVista.  To view Lisa’s properties, click here.

To Occupy or Not to Occupy: Data Results for Q3 2021 Office Space

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by Shelly Branscom, CCIM 

As we wind down 2021, I am feeling every grateful for the business opportunities and transactions I have consummated this year.  Let’s take a look some statistics from 3rd Quarter.

According to Colliers International, the office vacancy has declined for the second straight quarter to 14.02% from 15.88% at the end of last year.  This is the lowest vacancy Albuquerque has experienced since 2009.  A handful of moderate office leases in primarily suburban office buildings caused this reduction.  Tenants are seeking shorter terms (3-4 years) and early termination options creating the highest amount of flexibility for themselves.  The average office asking lease rate stabilized during Q3 mirroring the year over year averages seen in 2019 & 2020.  As we continue in this uncertain market, Tenants are also taking into consideration employee safety and functionality of their office space.  

The unemployment rate continue to trend downward landing at 6% in Albuquerque up from 4.6% in February, 2020.  Oil and gas revenues as well as increased consumer spending are likely causing New Mexico’s GDP to increase 4.14% in 2020 to 19.27% which is expected to trend through 2023. 

Moody’s Analytics predicts office vacancy nationwide has hit its lowest point and is inching upward as analysists begin to see light at the end of the tunnel.  The good news is Moody’s is also reporting there is historical evidence that office values have held relatively steady over the last 40 years, despite major ups and downs. 

Kastle Systems Data reports office occupancy reached its highest level nationwide (36.2%) since the pandemic began proving we are slowing going back to the office and increasing productivity.  Vaccine mandates have aided in a continue uptick in the workforce returning to the office.  Office foot traffic jumped another 19% now at 25% – the highest since the pandemic started.  Media and Telcom lead the Industry in office returns while Government took the lead in how often employees come to the office. 

As organizations grapple with accommodating new regulations and guidelines, it has become evident that flexibility is a central ingredient to building a productive and engaged workforce.  It is more important than ever for leaders to have insight into how their employees are using the office and it resources to enhance the workplace experience for today’s workforce.

4th Quarter projections – With the Federal Reserve expected to hold interest rates through 2023, analysists expect consumer spending to be strong this holiday season.  Office vacancies rates are expected to continue to decline while construction costs continue to rise due to lack of availability of product and of laborers.  Asking rental rates will likely inch in the upward direction as vacancy levels continue to decline.  SIOR reports despite reportedly high development costs, this is the most profitable time to build investment real estate.

 

Shelly Branscom, CCIM is an NAI SunVista commercial real estate specialist who provides substantial long-term strategies and business planning services to her clients.  She prides herself on thinking outside the box, enabling her to contribute unique solutions and outcomes specific to each of her clients.  Learn more about Shelly and her listings.   

NAI SunVista is a full-service commercial real estate company serving New Mexico since 1996. The company is a dynamic commercial real estate firm offering best-in-class real estate services in brokerage, property management, asset management, business brokerage and development services.

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