Land/Industrial – 2023 Q2 Market Review
Industry News | Land & Industrial | Quarterly Reports
The vacancy rate is increasing, but it’s still well below the historical average.
Research and Analytics provided by Riley McKee
Since the end of Q3 2022, the vacancy rate has steadily increased from a record low of just under 1% to its current level, roughly 1.6%.
- About 625,000 square feet of space is currently available, up from 550,000 at the end of the first quarter. The North I-25 corridor continues to have the highest amount of vacant space (roughly 280,000 square feet) while submarkets west of the river remain very short on space. The largest existing vacancy (a manufacturing facility in the North I-25 corridor) is just under 45,000 square feet. The smallest existing vacancy (1,075 SF) is an office/warehouse building in the South Valley.
- The median triple-net (NNN) asking lease rate has decreased from the previous quarter’s record high ($12.17/SF) to $11.52/SF. This is likely in response to the vacancy rate increase, though 80% of all spaces currently being marketed still have a price tag at or higher than $10.00/SF.
- New construction of industrial space continues but is slowing. A ±60,000 square foot building in the North I-25 corridor was completed in the second quarter. As of this writing it is about 70% leased. Two other buildings are well underway and should be delivered to the market in the third quarter: a ±150,000 square foot distribution center located in the West Mesa submarket that is about 30% preleased and a ±150,000 square foot distribution center in the South Valley. While several other new construction projects are being marketed, none have yet broken ground.
- In late June, a ribbon cutting ceremony was hosted to celebrate the opening of the Sunport Blvd. interchange which now links the intersection of Broadway Blvd. and Woodward Rd. to I-25. This project has been in the works for decades and dramatically improves accessibility to and from the area. While industrial property owners along the Broadway corridor north of Rio Bravo and south of Gibson stand to benefit the most, this is another benchmark improvement for the South Valley submarket which has seen several hundred million dollars in new investments (public and private) in the last five years.
Macroeconomic trends remain a challenge. The interest rate environment is unlikely to improve this year, but it also may not get worse. Inflation is tapering but not yet at the 2% target rate. Construction costs are still high. These and other factors may cause the industrial real estate market in Albuquerque to stabilize further but overall, the local market remains strong.
The Land and Industrial Q2 market research and data is compiled by NAI SunVista commercial real estate land and industrial specialist, Riley McKee. Riley advises industrial and logistics real estate owners and occupiers on leasing, acquisitions, and dispositions.