I think it is safe to say we are all fatigued with the continuing pandemic dialogue.
While this is still very relevant and serious, let’s put that to the side for a moment and discuss the things we have learned about ourselves and our industries and what that looks like moving forward.
We have learned that the concept of “working smarter and not harder” are not necessarily mutually exclusive terms. We, as an industry, have had to continually reinvent how business is done. While at the same time maintain, or in many cases, re-establish our corporate cultures, overcome the “Great Resignation,” and explore new ways to retain and recruit talent.
However, New Mexico’s strength of our character, the community we have created within our industry, and the resiliency of the human spirit will guide us through this difficult time. We are very privileged to work in this village we call “commercial real estate.”
2021 has been a year of surprising volume and activity. We have seen the commercial office market, the one entity within commercial real estate that had been projected to be doomed forever, not just survive but, indeed, thrive. Although the pace of leasing had slowed for a while, office sales never stopped for a minute across the entire state of New Mexico. Buyers and occupiers found a way to make the best of favorable financial terms and found their permanent business homes allowing for their growth or simply long-term security.
In the second half of 2021, leasing activity began to increase, and now we are seeing vacancy rates shrinking to levels nearing those of 2007, which is starting to influence lease rates. Tenants seem to be searching for the “right-size” accommodating for the new hybrid work dynamic or social distancing. All signs at this point indicate this will likely continue through 2022. In a nutshell, office remains!
Throughout the pandemic, the retail market had a projected future that rivaled the office market.
Again, this couldn’t be more wrong. We are seeing many retail developments traded for the sole purpose of slightly changing the use by incorporating multi-family components in concert with repurposing retail to suit the nearby neighborhoods better.
Many centers that experienced loss during the past 18 months have generally found ways to recuperate, and occupancy shows signs of strengthening. Again, retail remains!
The 800-pound gorilla in the room remains to be the industrial market. Incredibly low vacancy and little new speculative development are beginning to nudge lease rates up. Much of the new construction completed or even started in 2021 were build-to-suits or were 95% leased while construction was still underway.
Provided supply chain issues do not interfere, new construction is anticipated to increase.
Regional and national developers are really starting to notice Albuquerque and the surrounding areas. We are no longer the best-kept secret in the Southwest!
Speaking to general contractors, vendors, sub-trades, architects and developers has become a rarity as they seem so busy that they have no time for chit-chat. There are several large projects on the go and in the works that I would say statewide development marches on.
I guess we could say that 2021 gave us the opportunity to really take a look at ourselves as a community, firmly plant our feet on the ground, and push back against the temptation to allow the pandemic to define us. We know what we have done, what we can do, and what we are going to do, so let’s do it!
Scott Whitefield, SIOR, is president and principal of Colliers and has more than 30 years of years of experience in the commercial real estate industry. He served as chair of NAIOP NM in 2021.