— By Robert Gallegos, Senior Vice President, The Mogharebi Group —
New Mexico is rapidly becoming an important multifamily market for both investors and developers as the state experiences explosive job and population growth, which is expected to continue on an upward trajectory over the next five to 10 years. While Albuquerque remains the most targeted multifamily market in the state, it is worth noting that the tertiary market of Santa Teresa — near El Paso and the Mexico border — is becoming a hotbed for multifamily investment.
Santa Teresa is a key inland port serving as a strategic focal point for intermodal shipments in the Southwestern U.S., with more than 6 million square feet of industrial space in use and nearly 1 million square feet under construction. As more jobs flood into New Mexico, the demand for quality rental housing will continue to far outstrip supply.
With a population of more than half a million people and counting, it is no wonder Albuquerque is seeing the bulk of investment activity. The city has drawn an influx of new residents thanks to its diverse economy, relatively affordable cost of living and quality of life. According to Numbeo, one of the largest cost-of-living databases, Albuquerque’s cost of living is lower than the national average, making the city a desirable option for renters.
Research shows Albuquerque’s multifamily sector has remained strong despite the challenges posed by volatile market conditions over the past few years. The vacancy rate for A-rated multifamily properties stood at only 2.1 percent at the end of 2022, significantly lower than the national average of 5.2 percent. Meanwhile, rent growth has been steady with a 5.6 percent increase in 2022 and a 6 percent increase projected for 2023 to 2024. The combination of limited inventory and heightened demand has continued to push up rents, resulting in a landlord’s market where concessions and incentives need not be offered.
The region is also benefiting from considerable job growth as employers are increasingly drawn to its business-friendly environment and low operational costs. Tech giants Intel, Amazon, Netflix and Meta have all increased their footprint in New Mexico. They are bringing with them high-wage jobs paying more than $100,000 a year.
Albuquerque’s robust multifamily fundamentals have not been lost on investors. It is projected that in the next 24 months, New Mexico will need 15,000 to 16,000 units to meet demand, yet permits have been approved for only 3,500 units. This limited supply is driving up the value of existing properties and fueling demand for new development in the area. One such project is the 322-unit Via Verde master-planned community scheduled for completion within the next year. This project represents more than 10 percent of new inventory, given that only 2,800 units will be coming online.
These factors have positioned New Mexico as one of the most stable and attractive multifamily investment markets in the Western U.S.