A Strong 1st Quarter Despite Uncertain Future
Near the end of the first quarter of 2020, uncertainty gripped the world with the declaration of the novel coronavirus COVID-19 as a worldwide pandemic. Stay at home orders were issued throughout the world in March, with New Mexico’s coming on March 23rd. Governor Michelle Lujan-Grisham closed all non-essential businesses, workers were furloughed, and others began to work from home.
Despite all of this, the first quarter of the year was remarkably strong for the Albuquerque office market. The global impact of COVID-19 didn’t start ramping up until February, and the momentum from the end of 2019 carried many large deals through to completion. Average rental rates increased in Q1 to $18.99 full service, increasing by $0.23, becoming the highest asking rate Colliers has recorded. The market experienced 25,718 square feet of absorption, and the vacancy rate came down another 18 basis points to 16.24 percent.
Due to that momentum, the long-term effects of COVID-19 on the Albuquerque office market may not be widely felt until the end of 2020, in the third or fourth quarter. It’s likely Q2 will also see a positive absorption and low vacancy rates as office-based businesses decide how to move forward. Across the world, Colliers professionals are continuing to work with clients, many of whom are extending timelines of deals instead of canceling them outright. The current ratio is being estimated at 20%/20%/60%; 20% of clients are moving forward with deals without delay, 20% of clients are choosing not to move forward, and the remaining 60% are in a holding pattern as clients wait to see what the future holds.
Key Factors in this Quarter
The first quarter finished strong with an absorption of 25,718 thanks to momentum from 2019.
The impact of COVID-19 is still yet to be seen however, preliminary survey data indicates that offices are likely to trend away from colaborative, high density layouts as well as increased remote work in the long term.
Uptown Tower saw the largest positive absoprtion of the quarter with two tenants occupying 22,000 square feet.