Although sale activity has begun to slow in the Albuquerque metropolitan area, there are still buyers and tenants in the market. Here at NAI SunVista, we have closed approximately 360 transactions, yet the number of our active listings remains steady. Cash is King and tends to speed a transaction to closing; however, seller financing in the form of Real Estate Contracts are on the rise the 2nd half of the year. There is still inventory available, however, it may take a bit longer to locate the best asset for you and your business.
Office
Labor Crisis
Although the hot pandemic job market is cooling, it is set to remain tight for years. The US economy has been experiencing an unemployment rate under 4% for nearly two years.
It isn’t just a holdover from pandemic bottlenecks when employers let millions of people go and then struggled to find workers when demand roared back, economists and business leaders say. It is a storm that has been brewing for decades. Labor shortages are turning into long-term labor crises that could push wages and turnover higher.
Work experts have warned for years the combination of baby boomer retirements, low birthrates, shifting immigration policies, and changing worker preferences is leaving US employers with too few workers to fill job openings.
“It is a talent supply chain and talent has a choice,” said Teresa Carroll, chief executive of Magnit, a firm that manages temp, contract, and freelance workers for companies. Workers are choosing arrangements such as part-time, flexible, or remote work, prompting employers to adapt to fill roles.
As a general rule, an economy is able to grow about as quickly as its workforce expands, plus any gains in how productive the workforce is. Productivity is difficult to measure. Overall, productivity growth has been mostly lackluster, rising about 1.4% a year over the past decade.
After considering AI tools such as Chat GPT whose technology is still too new, and offshoring US manufacturing, it leaves us with immigration. Immigration has come back strong after falling during the pandemic because of Covid-related policies. However, it remains a divisive issue. Business leaders indicate the lack of a coherent, stable policy is contributing to the labor problem. “If we don’t solve this with a thoughtful immigration program, we’re going to drive wage rates through the roof in the next two to three years because of the systemic shortfall of labor at the end of the day.” John Fish, chairman and CEO of construction contractor Suffolk said.
Federal Reserve Pauses Rate Hike as Inflation Slows
The Federal Reserve left the U.S. interest rate unchanged in late September, leaving the main policy rate range of 5.25% to 5.5%, citing an easing of economic conditions while also acknowledging inflation is still higher than its 2% target. The Fed is waiting to see if its historic series of rate hikes over the last 18 months continues to get inflation under control. The Fed cited, “The economy is in solid shape, with job gains slowing and tighter credit conditions likely to slow economic activity and stem inflation.”
In August, the Bureau of Labor Statistics said prices for consumers were up 3.7% from the same period last year. That’s above the 2% annual level the Fed Says it wants to see, however, is a big change from last year’s peak of 9.1%. The future of the Commercial Real Estate Market is intricately linked to developments in interest rates and the market’s corresponding adjustments.
The full repercussions of these changes are anticipated to become apparent in early 2024, shaped by the continual modifications in both interest and cap rates, along with the overall cost of capital.
Growth in Office Leasing
Contrary to earlier predictions, office leasing activity improved in the second quarter with the fastest growth rate since Q2 of 2021 according to a Jones Lang LaSalle (JLL) chart. Although we are not yet back to pre-pandemic leasing absorption, out of the 53 markets tracked, 66% saw quarter-over-quarter growth. According to Jacob Rowden, manager of JLL Research, the growth is primarily being contributed to large-scale transactions consisting of over 100,000 square feet bouncing back with 38 transactions in Q1 and 46 transactions in Q2. Additionally, sublease vacancy has begun to slow.
Flight to quality is still the dominant trend for tenants to upgrade to higher-end space as their leases expire. Class A office space has been healthy in the Albuquerque market for several quarters causing some Tenants to begin to explore premium enhancements within Class B and Class C buildings according to a recent CBRE report. Amenities such as enhanced security systems and upgraded HVAC facilities are among the top choice amenities today.
Here in Albuquerque, quality move-in ready space is scarce. Tenants in the market seeking alternative offices should allow time to tour several properties, select the best fitting space, negotiation the terms and understand construction timelines for Landlords and Contractors to perform the Tenant Improvement work. Although construction costs are coming down, labor expenses have risen causing Tenant Improvement packages to remain high.
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.
Interest Rates Rise Again
The Federal Reserve announced an interest rate hike by another 25 basis points increasing interest rates from 5.0 to a range between 5.25 and 5.50%, the highest point since 2001. Chairman Powell says the Fed is concerned about global food security and constrains on the housing supply in part due to homeowners reluctant to move because they have low-interest rate mortgages.
This expected increase, following last month’s pause, is taking place as the economy continuously cools, with inflation slowing to 3.1% and core inflation (excluding food and energy costs) dropping to 4.8%, the lowest they been since June and September of 2022, respectively.
Powell’s mission going into the meeting was likely to keep market expectations of another rate rise later this year “priced as a coin flip,” said Daleep Singh, a former executive at the New York Red who is now chief global economist at PGIM Fixed Income. “Pricing the next set of decisions as a coin flip maximizes flexibility for the Fed to react to incoming data.”
In my conversations with lenders, their relationships with borrowers and being creative with their financing outweigh watching a loan go bad. Additional collateral, higher down payments, and creditworthiness of the tenant(s) all play a role in approving loans. “Lenders will continue to focus on cash flow and debt serviceability, and will remain highly selective, but can be highly competitive for deals they like,” says Henry Vuong, PGIM’s head of Real Estate Investment Research.
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 DJ Brigman – SunVista’s Newest Partner
Have you ever watched the face of a person determined to win? Have you seen the strength of mind, the willpower and the resolve to rise above and grab the prize? Well, if you haven’t, perhaps you have not been watching DJ Brigman in his quest to make Partner. He set his sights, marked his goal and made it happen.
We teed up a conversation with DJ to discuss his promotion to Partner.
Q. What did you do before your career in Commercial Real Estate began? I played 17 years of professional golf. Played on the PGA Tour, traveled the world and have a total of 13 tournament wins.
What made you take that leap and transition into commercial real estate? When I decided that traveling 25-30 weeks a year was no longer in the cards, I didn’t know what I wanted to do. Honestly, I thought I would transition into medical device sales. That door did not open and on a chance conversation with an acquaintance the commercial real estate seed was planted. I didn’t know a thing about commercial real estate, but I started researching the industry and liked what I saw. I interviewed with multiple firms in Albuquerque but landed at NAI SunVista because of a podcast interview I listened to that Dave Hill did back in 2015. As a result of that podcast, I reached out to Dave and an amazing journey started.
Q. What changes have you seen arise in Commercial Real Estate since you began?
Technology has been the biggest change in CRE. It is ever evolving and amazing the type of research one can do at the touch of a few buttons.
Q. What trends are you noticing in the office/industrial markets that you are either excited for?
The work place is evolving which is good for CRE. This means they will need to renew their leases, right size, or even look at owning instead or leasing. All mean they will need an expert to help make pivotal decisions for the future of their businesses.
Q. What is the most fulfilling aspect of being a Commercial Real Estate Advisor?
The most fulfilling part of CRE is helping business owners realize their dreams and being a small part of that success. Finding that perfect location, helping that business owner expand, or being a resource for questions relating to the market all bring satisfaction to me.
Q. What would you say has led you to success in Commercial Real Estate?
The quote that resonates with me is “I am pleased but not satisfied.” To be successful in professional golf you need to be self-motivated, driven, mentally tough, and refocus quickly. All of those ingredients applied to CRE with the ability to converse with people have led to my success.
Q. What would you say has been the highlight of your career to date?
The highlight of my career have been making top 5 as producer in my first year in the business, becoming a owner in the company, and a achieving Partner.
Q. What parts of the job do you find most challenging?
Time management. This profession requires one to juggle many “balls in the air”. Managing expectations and responding in a timely manner can be a challenge.
Q. Commercial Real Estate can involve risk, how do you approach it?
Being a professional golfer required risk. You had to evaluate each shot, weigh the risk/reward, commit to your decision and execute. For me risk equals reward and I have always been willing to “take the shot” when needed.
Q. Who has influenced you the most? I have been lucky to have many influences in my life.
When it comes to CRE, Dave Hill, CCIM, SIOR has been a great mentor, friend, and partner. He took a chance with me, saw the potential, set the foundation, and let me do my thing!
Q. What part of each transaction tends to be over looked?
What I enjoy about each transaction is that they are all fluid. Different parts of the deal pose challenges. Seeing the process from start to finish requires multiple steps, problem solving and what I do well.
Q. Where can we find DJ on the weekends? On the weekends you can find me hanging out with my wife, working out, playing some golf, and lighting up the grill.
To see what others are saying about DJ click here.
The Return to Office and to Retail
In early June, Jones Lang LaSalle’s CEO Christian Ulbrich reported the Return to Work “Worst is Behind Us.” Headquartered in Chicago, Illinois, Ulbrich went on to say he is seeing 65% of its employees return to the office full time. According to a CNBC report, Dallas, Houston and Charleston, SC are markets where office occupancy is more substantial because those cities didn’t have as strict lockdown policies in the past few years. However, workers in other markets, especially on the coasts, are still reluctant to return. As a measure of tracking employee attendance at the office, some employers are “tracking office badge attendance” and confronting workers who are not complying with company policy. Albuquerque has been “back to the office” for well over a year now. That said, the pandemic did cause attrition of due to Covid health risks, early retirements, and care duties, including working moms who found staying at home with their children beneficial to both themselves and their families.
In addition to returning to the office, consumers are returning to dining out and brick-and-motor shopping. Although recent macroeconomic changes and wider societal and technological innovations have led to shifts in shopping behavior, brick-and-mortar locations remain the primary channel for consumer purchases in the United States. This is true for both retail and office locations. Foot traffic analytics, which reveal how consumers behave in brick-and-mortar retail outlets, can provide critical insights into current consumer preferences. Landlords can use this information to their benefit to best understand who is visiting their retail and office buildings. Are the visitors the Tenant employees who come and go daily, or are they customers and clients of the Tenants? Here at NAI SunVista we have the ability to help Owners, Landlords and Tenants track such traffic. If this is of interest to you, simply reach out to me and I will be happy to run the numbers for you!
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.
10 Myth Busters for Downtown Albuquerque: Perception Versus Reality of Albuquerque’s Central Business District
1. Myth: Downtown Albuquerque is dead
Fact: Downtown Albuquerque is in the midst of a major multimillion-dollar revitalization. You will find bustling nightlife along Central Avenue (Route 66), including many nightclubs, theaters and restaurants. Additionally, the migration into and out of Downtown Albuquerque from 2019 -2022 was -0.6 businesses for every 1,000 city residents.
2. Myth: Downtown Albuquerque is unsafe
Fact: The City of Albuquerque has placed significant emphasis on safety and the mental health of the homeless in Downtown Albuquerque. In a recent personal experience, I felt safer walking on the streets of Downtown than I did in Uptown. Did you know there is an APD substation on 4th Street between Gold and Central Avenue? Have you noticed how clean the streets and sidewalks are in Downtown Albuquerque?
3. Myth: There’s nowhere to eat downtown
Fact: The newly developed 505 Food Hall located at the corner of 5th and Central contains 9 local venders offering everything from Chicken, street tacos, burgers, fries, beer/wine and more. Additionally, Slate Street Café, Cocina Azul, Monroes’, Baca Boys Café, Asian Noodle Bar, Rumor Pizza and many other bars with tapas are located in downtown Albuquerque.
4. Myth: There’s nowhere to live downtown
Fact: Currently downtown Albuquerque enjoys 1,590 households in Downtown Albuquerque. Additionally, there is a $50 million public-private project slated for Downtown that will bring more than 200 housing units to the area. This project cleared Albuquerque City Council on March 7, 2023, approving an agreement that includes a timeline and performance benchmarks for the Downtowner, a mixed use project at First Street and Silver Avenue that has been years in the works. The Downtowner, a multistory development expected to span 131,700 square feet, is one of a handful of supported project by the Metropolitan Redevelopment Agency (MRA) which includes the Palladium Townhomes, the Villa Agave redevelopment project and the Imperial Inn
5. Myth: All the high rise buildings in Downtown Albuquerque are vacant
Fact: Downtown Albuquerque is currently experiencing an approximate 18% office vacancy rate. In comparison, overall the City of Albuquerque is experiencing an approximate 14% office vacancy rate.
6. Myth: There’s no entertainment in Downtown Albuquerque
Fact: I recently attended a concert at the Albuquerque Convention Center. Parking was easy to find, streets and sidewalks were clean and I felt safe. Every day, I see advertisements for theater experiences, food trucks, movie nights, growers markets and other forms of family entertainment.
7. Myth: There’s no lodging in Downtown Albuquerque
Fact: Downtown Albuquerque enjoys over a dozen hotel experiences from locally owned boutique hotels to national name branded chains. Downtown Albuquerque has something for everyone when it comes to overnight stays.
8. Myth: There’s no plan to make Downtown Albuquerque more vibrant.
Fact: The Metropolitan Redevelopment Agency (MRA) has created seven strategies as the most essential steps to creating a healthy, safe, and vibrant downtown district plan. These seven strategies include making downtown safe, extending compassion to those in need, giving people something to do, building more housing, strategizing strategic investments, investing in sustainability and creating tools for redevelopment.
9. Myth: There’s no outdoor culture in Downtown Albuquerque
Fact: A 7 mile loop will link Albuquerque’s vibrant downtown area to nearby neighborhoods, mass transportation options, and the Rail Yards, creating a world class urban amenity that will catalyze redevelopment. The Albuquerque Rail Tail will transform Downtown’s rail corridor into a safe, vibrant and artistic urban trail that creates opportunities for economic development, healthy recreation, and cultural expression. The Trial will connect the diverse communities it travels through and build bridges across those that have been disconnected. The Rail Trail is the next expression of this essential trade route, embracing a resilient future for Downtown Albuquerque. Read more about it here. https://www.abqjournal.com/2526771/abq-trail-project-gets-injection-of-federal-money.html
10. Myth: Downtown Albuquerque is not walkable
Fact: According to Walk Score, Downtown Albuquerque has a Walk Score of 96, Transit Score of 54, Bike Score of 91. Comparatively, Phoenix has a Walk Score of 41, Transit Score of 36 and Bike Score of 56 while Denver has a Walk Score of 61, Transit Score of 45 and Bike Score of 72. Check out your favorite City’s walk score here. https://www.walkscore.com/score/loc/lat=35.0844/lng=-106.6504/?utm_source=liquidspace.com&utm_medium=ts_api&utm_campaign=ts_api
Downtown Albuquerque has made great strides in their safety, vibrancy and livelihood in recent years and is a place to live, work and play. I invite you to visit Downtown Albuquerque and witness for yourself the change that has and is taking place. Additionally, I challenge you to revisit Downtown Albuquerque and join forces with the organizations, businesses and governments that continue to make a change in yours and mine Downtown Albuquerque!
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.
Ten 2023 Commercial Real Estate Myth Busters for Albuquerque, New Mexico
1.
Myth: Interest rates will continue to rise causing buyers to sit on the sidelines.
Bust: We are finding because the economy is coming back and unemployment continues to decrease, buyers are still in the market looking for buildings to own.
2.
Myth: It is harder than ever to get approved for a loan.
Bust: Bankers I am talking to tell me their loan approval process is easier now than it was before COVID.
3.
Myth: Lease rates will come down.
Bust: No, as a matter of fact, due to flight to quality, and the cost of Tenant Improvements and the increase in operating expenses, lease rates are on the rise.
4.
Myth: Landlords are desperate for Tenants.
Bust: Those Landlords who worked with their Tenants throughout COVID and those Landlords who have enhanced their common areas are experiencing very high Tenancy rates.
5.
Myth: Sellers are desperate.
Bust: Most sellers are not desperate. In fact, many properties are still receiving multiple offers causing values to continue to increase.
6.
Myth: Employees will win the work from home battle.
Bust: Although employees may have an opportunity to continue to work from home, most employers are requiring employees work from the office one to three days per week. Prior to the pandemic, employers were already allowing employees to work from home on a flex schedule.
7.
Myth: Office Landlord defaults escalate.
Bust: Although this is true in larger metropolitan areas, we are not seeing Office Landlords default on their loans in Albuquerque.
8.
Myth: Shopping Malls are drying up.
Bust: Although consumers are ordering more and more on line causing shopping malls to experience vacancy, shopping mall owners are getting creative and signing leases with manufacturing and educational related tenants. Additionally retail owners are utilizing a portion of the space they previously occupied for in person shopping for next day delivery operations.
9.
Myth: Site Selectors skim over Albuquerque.
Bust: Albuquerque Regional Economic Alliance (AREA) reports, Albuquerque and New Mexico are being looked at more and more by Site Selectors naming our climate and lack of natural disasters the main reasons companies want to be located here.
10.
Myth: Activity in the market is slow.
Bust: We are so grateful commercial real estate professionals are needed both when the market is hot and when the market cools. Thankfully our market has not yet cooled.
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.
The 5 Steps to Acquiring Your Next Space – by Shelly Branscom
Often in my business clients ask me to explain the process of acquiring their space. The process consists of understanding the time it will take to search the market, negotiate the business points, performing the tenant improvements, the act of occupying the space and proper representation. Let’s break each of these steps down one by one.
1. Timing. In today’s picked over market, the amount of time it takes to find the space that fits the need of your business can seem daunting. It is important to start with the end date in mind to create a realistic timeline of events. If you are currently in a lease, I highly recommend beginning your search a year in advance of the date you need to occupy your leased space. This timeline could grow if you desire to own your building as the selection of properties available to purchase in the market has dwindled greatly due to the atmosphere of low interest rates we recently experienced. There are not many speculative buildings planned in the near future in Albuquerque. You may decide to purchase land and construct a building. If this is your desired outcome, you will need to plan on it taking between eighteen months to two years.
2. Negotiate. Understanding your budget will greatly enhance your ability to move quickly into negotiating the business points of the transaction, especially if the owner is experiencing multiple offers. It is beneficial to have a conversation with your business banker, attorney and/or CPA to best understand the loan amount for which you are able to qualify while continuing to successfully operate your business. The negotiation process takes into consideration rate, operating expenses, owner contributions, timing, and other deal point concessions. Both sides of the transaction will want to consider all elements of the deal structure in order to ascertain if the outcome is one they desire.
3. Tenant Improvements. Once a space has been selected, it is also important to understand the amount of Tenant Improvement work that will need to be performed and who will pay for it. Post pandemic, we are still experiencing delays in supply chains. The amount of time it may take to permit, order supply and perform the work can vary greatly depending upon the selections made. This can impact the timing of occupancy significantly.
4. Occupy. It takes a tremendous amount of planning to pack and move into your new space. Everything from internet to furniture to the interruption of your business needs to be taken into consideration. I highly recommend hiring a moving company to assist with the heavy lifting. Additionally, the coordination between the moving company and the members of your team may require one or more staff members working through the logistics, coordination and timing. Once the move is behind you, I can assure you, the moral in your work place will be lifted as the staff members enjoy the newness of the space.
5. Representation. As you begin the process of acquiring your next space, do yourself a favor and work with a licensed Realtor. The person representing the owner will always have the owner’s best interest in mind. By utilizing a licensed Realtor to solely represent you, you will be sure an expert has your best interest in mind. This service is generally at no cost to you, rather the owner pays the buyer/tenant broker commission. So, pick up the phone can reach out to an experienced Realtor who will share their market knowledge with you to help you through every step of the transaction. If you do not currently have a relationship with a licensed Realtor, feel free to contact me. I would be delighted to share my market knowledge with you and assist you to full fruition of the transaction.
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.
