New Construction Around the Corner
Albuquerque’s industrial market finished 2019 with a negative absorption of 4,868 square feet. The overall vacancy is 3.29 percent, up two basis points from third quarter’s vacancy of 3.27 percent. Average asking rates rose to $8.61 per square foot.
Rates increased each quarter in 2019, due mostly to the lack of availability of quality industrial inventory. Competition for quality space has been tight, with increasing activity allowing landlords to be more aggressive with their asking rates, driving rates up across the city. While the cost of new construction is still higher than justifiable in the current market, the market is getting close to the tipping point, despite the expectation that the cost of building will increase in 2020.
The quarter’s largest positive absorption was at 4500 Alexander Blvd. NE, where Paychex, a payroll and HR solutions company, occupied roughly 35,000 square feet.
Presbyterian Medical Services occupied 25,315 square feet at 5501 Wilshire Ave. NE. They leased the 19,000 square feet previously occupied by US Bank, as well as an additional 6,315 square feet in a separate suite, leading to an overall positive absorption.
Kairos Power, LLC announced plans to purchase the former Schott Solar building at 5201 Hawking Dr. SE out in Mesa Del Sol. The building and its 32 acres of land will be a home for their research and development center, which supports advanced nuclear reactor technologies, but will have no nuclear material or waste at the site. They plan to invest $135 million into the facility, creating 65 jobs over the next several years. Fathom NM has also taken up residence at 5201 Hawking Dr. SE, quietly occupying 50,000 square feet in August. The venture, which is headed by former New Mexico gubernatorial candidate, Jeff Apodaca, offers agricultural services to regional hemp farmers, including harvesting, shucking, drying, milling, prepping and sealing crops. In addition to the 50,000 square foot lease, the company is looking to expand and possibly construct another building in the area.
Ben E. Keith broke ground on a 261,000 square foot warehouse and office facility located at 601 Gallatin Pl. NW. The City Council has voted to change the name of Gallatin Place NW to Ben E. Keith Way between Fortuna and Los Volcanes roads, where the facility will be located. Construction is anticipated to complete between December 2020 and February 2021.
Broken Arrow Communications, Inc. leased just over 8,000 square feet at 4455 Anaheim Ave. NE, which was built early in 2019 by Mechenbier Construction. Bunzl Distribution USA’s newly constructed 80,000 square foot facility at 7601 Los Volcanes Rd. NW is completed, and they’re expected to occupy it in the first quarter of 2020. Over on Prince St. and Rio Bravo, a newly constructed 50,600 square foot warehouse has been completed, and the tenant, Rio Grande Service Center, will occupy some time in 2020. They are vacating their current space at 3005 Broadway Blvd. SE, which will be completely absorbed by the expansion of National Tire Wholesale, who will now occupy the whole building. These projects are significant as they represent the only newly constructed 32’ ceilings on the market.
The largest negative absorption of the quarter happened at 8436 Washington Pl NE, where Sierra Peaks vacated their 13,000 square foot space. The specialty manufacturer of electromechanical components is consolidating operations with Marpac in a newly refurbished 40,000 square foot building at 4801 Lincoln Rd. NE.
Firebellz, a Russian kettlebell training gym, permanently closed and vacated 8,280 square feet at 7447 Pan American Freeway. An unknown tenant vacated 12,280 square feet at 1450 Candelaria Rd. NE.
The highest driver of activity in the industrial market in 2020 will likely be related to the film industry, with major production companies NBCUniversal and Netflix opening large studios in Albuquerque. Albuquerque’s already busy and thriving film industry might also see another significant uptick in activity, as controversy in Georgia over a new abortion bill has led Netflix, NBCUniversal, Disney, WarnerMedia and others to say they will stop production in the state if the law is enacted. If the companies do pull their operations out of Georgia, where the film industry currently adds over $9.5 billion to the economy, Albuquerque presents an appealing opportunity as another well-established film and production community with room to grow.
Key factors this quarter
- Average asking lease rates have continued increase, bringing Albuquerque closer to the tipping point for kicking off new construction.
- Ben E. Keith broke ground on a 261,000 square foot warehouse facility in the West Mesa submarket and is expected to be complete by the first quarter of 2021.
- The largest positive absorption of the quarter was approximately 35,000 square feet occupied by Paychex in the I-25 submarket.