By Tim With, Senior Vice President, Colliers
The amount of empty space in New Mexico’s industrial market has shrunk to unforeseen levels. Albuquerque, the state’s largest MSA, reported a total of 41.5 million square feet of industrial space and only a 2.4 percent vacancy rate at the end of 2020. Absorption levels have increased through the first quarter of 2021, and available inventory is becoming difficult to find as the vacancy is down to 1.9 percent.
Albuquerque has been on the brink of new construction for some time, with the need for new Class A space far outweighing the current availability. The nationwide industrial supply posted record deliveries in 2020 that totaled more than 300 million square feet. This represents about a 2 percent year-over-year increase in total
Tim With, Senior Vice President, Colliers
inventory. In comparison, Albuquerque’s inventory grew by less than 1 percent over the past five years, while vacancy rates decreased by almost 550 basis points. Most new construction has been build-to-suit activity. Tenants, meanwhile, are challenged with a lack of choice as a considerable amount of the existing vacant space is functionally obsolete.
The average overall asking lease rates for existing warehouse/distribution space was $6.58 per square foot, triple net, at the end of 2020. New projects will be offered from $8.50 to $9.50 per square foot due to escalating construction costs.
In response to the tightening market conditions, Brunacini Development has just commenced construction on a 150,000-square-foot, high-bay facility within Meridian Business Park in Albuquerque’s West Mesa submarket. This will be the area’s first completely speculative, large-scale project in more than a decade.
Another experienced local developer has also begun planning efforts in the South Valley submarket. This project includes a 65,000-square-foot building with the ability to accommodate another 250,000 square feet on an adjacent parcel.
Despite a small amount of industrial product in the pipeline, several development sites are well-positioned to capitalize on future growth demands for distribution, manufacturing, and research and development space.
The following master-planned developments can accommodate 30,000- to 1-million-square-foot industrial uses, generally within a 12- to 18-month timeframe:
• Sunport South: a 165-acre planned business park development near the Albuquerque International Sunport
• Westpointe 40: 112 acres of development-ready land along Interstate 40 in the West Mesa submarket
• Cordero Mesa Business Park: 132 acres of developable land remaining for industrial uses. The park is home to TempurPedic and Shamrock Foods
• Los Morros Business Park: 200 acres of fully improved land in Los Lunas that is suitable for industrial and other uses. Located just south of Albuquerque, this area is home to Facebook’s new data center and a Wal-Mart Distribution center
Activity in the southern part of the state has been very strong, specifically around the border town of Santa Teresa. About 500,000 square feet of space was recently added, providing one of the largest blocks of spec space in the Borderplex region. In addition, Prent Thermoforming and W Silver Recycling have each committed to build 120,000-square-foot buildings. The Santa Teresa region accounts for 60 percent of New Mexico’s total exports to the world, according to recent reports.
Though the pandemic isn’t over yet, many New Mexico regions are experiencing — and anticipating — further industrial growth.