Albuquerque’s Industrial Market Sees Strong Absorption From Warehouse, Manufacturing Users
The metro Albuquerque industrial market reported more than 39 million square feet of total industrial space as of year-end 2017.
The two largest categories of occupied space were warehouse/distribution (12.5 million square feet with 5.5 percent vacancy) and manufacturing (12.55 million square feet with 3.5 percent vacancy). The overall market vacancy rate at the end of 2017 was 5.7 percent for all industrial uses in buildings with more than 10,000 square feet.
New Mexico added about 11,000 non-agricultural jobs from February 2017 through February 2018. The Albuquerque MSA added 5,800 jobs — a 1.5 percent increase — over this period, or more than half of the new jobs added in New Mexico.
Albuquerque’s unemployment rate was 5 percent as of February, which is a notable improvement over the 6.2 percent unemployment rate in February 2017. During this period, the private service-providing industries grew by 3,100 jobs, or 1.2 percent, while the goods-producing industries (warehouse and manufacturing users) added 2,300 jobs, representing a gain of 6.2 percent.
Albuquerque’s industrial market experienced positive net absorption of more than 261,000 square feet during the fourth quarter of 2017. This was the highest net absorption since the fourth quarter of 2015, and the second-highest net absorption level since the end of the economic downturn of 2007/2008.
The largest single industrial lease for the fourth quarter was Flagship Foods, which occupied 75,000 square feet in the West Mesa submarket. Another large expansion included a new 72,000-square-foot lease by Raytheon in the Southeast Heights submarket.
The largest vacated space for the quarter was MSR-FSR, which left the Albuquerque market and vacated more than 55,000 square feet in the Mesa del Sol submarket, south of the Albuquerque International Sunport airport.
The North I-25 Corridor submarket continues to attract the most industrial demand in the metro area. This submarket absorbed more than 148,000 square feet of space during the last quarter of 2017.
The West Mesa submarket also experienced notable positive absorption of nearly 132,000 square feet by the end of 2017. The amount of vacant space among distribution/warehouse properties with more than 10,000 square feet declined to its lowest level in at least the past 20 years.
Expectations for 2018 are modest. The increased activity in 2017 will likely lead to a general slowdown in development activity for the next year or so; and there are no large expansions or new industries expected to enter the market over the next few quarters.
However, there have been reports from Albuquerque Economic Development of companies inquiring about the availability of large industrial spaces to enter the market or expand within it. The gradual tightening of the distribution/warehouse segment should also lead to new development pressure by 2019.
— By Joel White, senior advisor, Walt Arnold Commercial Brokerage/SVN. This article first appeared in the May 2018 issue of Western Real Estate Business magazine.