The Land of Enchantment—a Market Primed for Industrial Development

By Riley Mckee, NAI Maestas & Ward Industrial Real Estate Advisor. An article featured in the May 2020 Western Real Estate Business Magazine by NREI.com. 

If summarized in one word, New Mexico’s industrial real estate market can best be described as undersupplied. Steady increases in demand combined with a dearth of new construction have resulted in record low vacancy rates in Albuquerque, Las Cruces, and Santa Fe—the state’s primary metropolitan areas.

In Albuquerque, a string of noteworthy projects are underway. Ben E. Keith Foods, a Fort Worth based supplier of food products, is building a 260,000 square foot regional headquarters and distribution center to service markets throughout the region. FedEx Freight recently opened a 95,000 square foot distribution center strategically positioned on a 50-acre site to expedite planned expansions. Brunacini Development, the city’s largest industrial landlord, just completed a 140,000 square foot multi-tenant distribution center anchored by Bunzl, a London based food packaging distributor. Finally, and perhaps most notably, Kairos Power, a nuclear energy firm, acquired a 110,000 square foot research and development facility after a nationwide site selection process. It plans to expand the facility (which sits on 35 acres) as part of an incentive package agreed to with the state.

Las Cruces is seeing strong development activity as well, specifically in Santa Teresa, an international Port of Entry 21 miles south of the city. W. Silver Recycling, which processes nonferrous metals, recently announced plans for a 120,000 square foot facility touting the advantage of being located near markets in Mexico. Electrical wiring manufacturer Admiral Cable is expected to complete a 195,000 square foot facility this year on a site that is well suited for intermodal transport. A few miles south in Sunland Park, NM, Stampede Meat is in the process of renovating and expanding a processing facility previously owned by Tyson Foods.

This activity is certainly welcome, but it represents a drop in the bucket when compared to statewide demand for development of industrial space. Albuquerque’s vacancy rate is currently at a historic low, hovering between 2.5 and 3 percent since 2018. Most remaining available space is functionally obsolete, which some nimble developers have astutely retrofitted for users with urgent needs. Santa Fe’s market is even tighter—as of this writing, only 40,000 square feet of space is available.

While primary markets throughout the United States have enjoyed a consistent influx of new construction, New Mexico’s industrial real estate portfolio has not kept pace. This is partially a consequence of the state’s tertiary market nature but is also explained by its position relative to other states during economic cycles. Impacts of the last recession were not felt locally until several years after the fact while evidence of recovery has only recently become apparent. To investors and developers active in markets at their peak, this presents a compelling opportunity. New Mexico’s growth trajectory is only beginning.

Though COVID-19 has blindsided markets worldwide, industrial real estate users are expected to escape its most devastating impacts, unlike their retail and office counterparts. Demand for robust and efficient supply chains is as strong as ever.

To read the entire article from Western Real Estate Business Magazine (Pg. 29), click here

Riley McKee is an NAI Maestas & Ward commercial real estate specialist that advises industrial and logistics real estate owners and occupiers on leasing, acquisitions, and dispositions.  Learn more about Riley, his properties and his insights to market shifts in commercial real estate here.