Is 2021 up or down from 2020?
by Shelly Branscom, CCIM
As we climb out of the pandemic, you are likely wondering if 2021 Commercial Real Estate is up or down from where we were this time last year just before the COVID-19 shutdown.
Here’s what we know.
Technology is reshaping industrial space while robotics are playing a role in improving the supply chain, creating an increased demand for Class A industrial space across the U.S. and in Albuquerque. There is still no speculative industrial construction happening in the Albuquerque metro area. However, the growth of food and beverage e-commerce has increased demand for cold storage. Have you been purchasing your groceries online?
The Life Sciences industry momentum has continued to increase the demand for specialized real estate for research, development and production, creating stronger yields for portfolio diversification. We are seeing more and more multifamily and office developments becoming increasingly intertwined.
Medical service providers have been expanding into retail spaces including malls, shopping centers and urban storefronts as patients continue to seek the convenience of a medical visit close to home. How many new urgent care and ERs have you noticed in the Albuquerque metro area? I’ve seen several while traveling around the city.
Although co-working and flexible office space leases were on the rise prior to the pandemic, they slowed greatly at the beginning of 2nd Quarter, 2020 as more workers were productive working from home while remaining COVID-free. This became a challenge for traditional asset owners as their buildings began to show signs of office vacancy. Although this is more prevalent in larger metro areas, most Albuquerque tenants have continued their stead in making their lease payments
Faster deliveries blur the lines of industrial and retail facilities. As consumer demand for swift product delivery continues to increase, warehouse users are learning how to redevelop existing retail product while looking for infill development opportunities at urban core sites. Have you noticed a change in tenancy at our local area malls? Are the new tenants traditional mall occupants, or have they begun to ebb into industrial and retail facilities?
Multifamily investors are gravitating toward secondary markets, creating lower-than-expected capitalization rates on smaller (50 units or fewer) multifamily investments. The higher cost of living in supply-constrained primary markets has driven renters into less expensive, secondary markets. This is appealing to transient renters and baby boomers who look for quality employment opportunities across the country. As a result, multifamily has continue to trade—many complexes multiple times—in the Albuquerque metro area.
The technology sector is driving creativity in office design with the addition of touchless access points and elevator controls as well as enhanced air quality. Schools and office buildings are investing in their heating and cooling systems by upgrading their filtrations systems including HEPA filters, ionization, ultraviolet lights and active carbon. These enhancements have increased the quality of recirculated air, without having to increase the amount of fresh air in the building.
Whether your business occupies office, industrial or retail space, there is no question that rising construction costs continue to correlate with increased tenant improvement allowances across the country. We can expect rents to increase and/or terms of the leases to lengthen to offset these industry-wide costs. As with residential real estate, the commercial real estate market is HOT. We continue to experience all-time low interest rates creating multiple offers on most commercial real estate properties. If you are thinking of buying, selling or leasing, now is the time because commercial real estate is UP!
Shelly Branscom, CCIM is an NAI Maestas & Ward 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 Maestas & Ward 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.