society of industrial and office realtors® 1 sior new mexico chapter industrial & office update
TRANSCRIPT
Society of Industrial and Office REALTORS®
Society of Industrial and Office REALTORS®1
SIOR New Mexico ChapterIndustrial & Office Update
Society of Industrial and Office REALTORS®
SIOR Market Update
SIOR is the leading industrial and office real estate brokerage association.
SIOR confers the SIOR designation to only the most knowledgeable, experienced, ethical, and successful commercial real estate brokerage specialists.
Society of Industrial and Office REALTORS®
AGENDA
• Overall local Industrial and Office Statistics
• Comparison to Regional Markets
• Jim Smith – Discuss Industrial Sector
• Tom Jenkins – Discuss Office Sector
• Questions
Society of Industrial and Office REALTORS®
LOCAL STATISTICS
Recession
Low Point - 5%Low Point - 5%
Current- 9%Current- 9%Peak - 11%Peak - 11%
Society of Industrial and Office REALTORS®
LOCAL STATISTICS
Recession
Low Point - 11%Low Point - 11%
Peak/Current – 20%Peak/Current – 20%
WHY??
Society of Industrial and Office REALTORS®
LOCAL STATISTICS
• Annual Absorption & Construction for past 10 years
• In peak years, the Industrial market absorbs 750K-1 million SF per year
• In 2006, there was more product built than the next 7 years combined!
Society of Industrial and Office REALTORS®
LOCAL STATISTICS
• Annual Absorption & Construction for past 10 years
• In peak years, the Office market absorbs 300K-400K SF per year
• If market absorbed 200K/yr it would take 6 years to stabilize to 12% Vacancy
Society of Industrial and Office REALTORS®
Regional Comparison(Industrial)
• ABQ’s industrial vacancy stacks up well to competing regional markets
• ABQ has less SF per capita than many competing cities.
• Denver and Salt Lake City are larger distribution hubs
Society of Industrial and Office REALTORS®
Regional Comparison(Office)
•Although ABQ’s vacancy is high, it is comparable to PHX and Las Vegas.
•PHX currently has 26 million SF of vacant space
•ABQ has let SF per capita than competing markets likely due to high govt influence.
Society of Industrial and Office REALTORS®
Society of Industrial and Office REALTORS®16
Industrial Overview
Jim Smith, SIORCBRE
Society of Industrial and Office REALTORS®
Albuquerque Industrial Market
• National versus local trends• Largest industrial transactions over the last 8
quarters• Market activity by industry and decision
drivers• Forecast
Society of Industrial and Office REALTORS®
National versus Local Trends (Tenant perspective)
National Trends Albuquerque Trends
Concessions tighten Ditto
Less available space Varies by submarket, development type and age
Multiple offers on same space Sometimes, but infrequent
e-commerce activity up Not here
Spec development returns, but limited to top 5 markets
Ha!
Port volume up – retail sales remain strong
Albuquerque has seen some consumer goods warehousing activity
Society of Industrial and Office REALTORS®
National versus Local Trends(Landlord perspective)
National Trends Albuquerque Trends
Leasing volume to prerecession levels in most major markets
Not yet
Beginning to see rent growth Maybe in some cases
Capital available for spec construction Not yet
Competition for space increasing Infrequently
Landlords closely tracking housing market
Yes
Developers contemplate additional high cube space 36’+
Not here
Society of Industrial and Office REALTORS®
Largest Industrial TransactionsQ4 2011 – Q3 2013
SF Occupier Address Date occupied
219,000 Admiral Beverage 3980 Prince St SE Q3 2013
133,000 US Foods 3700 Prince St SE Q4 2011
114,000 Fidelitone Logistics 801 Comanche Rd NE Q1 2012
109,000 Vitality Works 8500 Bluewater Rd NW Q1 2012
87,000 Friedman Recycling 5049 Edith Blvd. NE Q2 2013
45,901 Bruckner Truck Sales 8101 Daytona NW Q4 2013
41,000 SAMS Academy 4100 Aerospace Pkwy Q3 2012
40,800 Durham School 2401 Menaul Blvd NE Q1 2013
40,000 Fed Ex Ground 4525 Paseo del Norte NE Q4 2011
39,000 Air Gas 2929 Vassar Dr. NE Q4 2011
Society of Industrial and Office REALTORS®
Locations of largest industrial transactions
SOUTH I-25
2
NORTH I-25
5WEST MESA
3
Society of Industrial and Office REALTORS®
What sort of activity is driving Albuquerque industrial market?
Society of Industrial and Office REALTORS®
Market Activity
Warehousing of retail and consumer goods•Retail third party logistics providers, Pepsi
Bottling, Admiral Beverage, US Food
•What drives location decisions?– 24’+ ceiling height– ESFR (Early Suppression, Fast Response) fire sprinklers– trailer parking– Two of three user built new facilities
Society of Industrial and Office REALTORS®
Market Activity
Oil and gas• Transportation – pipeline
• Pipeline companies have generated construction work.
• Some engineering company activity related to oil and gas industry
• Opportunity is related new technologies (fracking) which have made extraction of resources viable.
• What drives location decision? – Storage requirement and term
Society of Industrial and Office REALTORS®
Market Activity
Cell tower construction: •Activity driven by new technologies and required hardware/infrastructure upgrade.
•Construction work of limited duration.
•What drives location decisions? – Storage requirement and term
Society of Industrial and Office REALTORS®
Forecast
• Owner user activity has been positively affected by low interest rates, but as interest rates uncertainty continues will users become less optimistic about purchasing?
• There is limited and shrinking availability of class A inventory (constructed post-2000, 24’+ clear height with ESFR fire sprinkler systems).– Cost of new class A facilities will likely see asking lease rates 20% above
current market asking rates?
• Construction activity to remain below 10-year average for the next 18 months
• Annual rent growth 3-4% - above inflation
Society of Industrial and Office REALTORS®
What might disrupt the path forward?
• Availability of adequate wet utilities in south I-25 corridor and far west side may limit options for quick development.
• Will there be downward pressure on land prices to make development affordable?
• Lack of rail service in Albuquerque.
Society of Industrial and Office REALTORS®
Society of Industrial and Office REALTORS®31
Office Market Overview
Tom Jenkins, SIORReal Estate Advisors
Society of Industrial and Office REALTORS®
Quality Pre-1985
• Multi-Story Atrium Lobbies• Granite Flooring and Counters in Common
Areas• Water Features• Substantial Window Lines and Views• Large Offices
Society of Industrial and Office REALTORS®
Quality Today
• Function• Efficient use of space• Infrastructure• Lower operating costs• Higher density
Society of Industrial and Office REALTORS®
Total Office Inventory14.1 Million Square Feet
Quality Office InventoryGreater Density & After 1985
3.6 Million Square Feet
Society of Industrial and Office REALTORS®
Largest Office TransactionsQ4 2011 – Q3 2013
Square Footage
Occupier Address Date of Transaction
133,090 Presbyterian (sale) 9521 San Mateo Q4 2011
84,724 Blue Cross Blue Shield 4411 The 25 Way Q3 2013
63,000 Lowes 6301 Jefferson Q4 2011
47,000 Molina Health Care 7401 Snaproll Q2 2013
37,478 State of NM HSD 1474 Rodeo Road Q2 2013
33,682 Canon 4041 Jefferson Place Q3 2013
30,898 Lowes Expansion 6401 Jefferson Q2 2012
28,726 Molina Health Care 8801 Horizon Way Q1 2013
21,856 Lovelace Healthcare 7850 Jefferson Q1 2012
18,762 Moss Adams 6565 Americas Parkway Q2 2013
Society of Industrial and Office REALTORS®
CANON’S SEARCH FOR “QUALITY” OFFICE BUILDINGS
7401 Snaproll
4400 Masthead
5700 W University
4411 The 25 Way
4041 Jefferson Plz
4500 Alexander Blvd
Society of Industrial and Office REALTORS®
CANONGAP
MOLINA HEALTHCARE
UNIVERSITY OF NM
AVAILABLE
BLUE CROSS BLUE SHIELD
Society of Industrial and Office REALTORS®
What Could Be?
“The new office will offer improved infrastructure to better accommodate the
needs of our employees and business,” Gap spokeswoman Avery Vaught.
Society of Industrial and Office REALTORS®
Summary of Flight to Quality
• Office users will continue to migrate to “quality” office buildings
• Vacancy rates will continue to decrease in “quality” buildings
• Rental Rate Gap will increase between “quality” office buildings and Class C buildings.
• Redevelopment and repurposing of existing buildings
• There will be new substantial office buildings breaking ground