Second quarter holds steady amidst change
Since the publication of Colliers last quarterly office report, the worldwide pandemic known as COVID-19 has continued to spread, and the efforts to contain it have meant that many parts of normal life have come to a halt. In New Mexico, shutdown efforts and social distancing may have largely kept the virus at bay, but the question of when to reopen the state’s economy and what the long-term effects of the pandemic will be on employment and the commercial office market remain unanswered.
Asking rental rates increased in Q2 to $19.43 per square foot, full service, an increase of $0.44 from Q1. The market experienced positive absorption of 89,679 square feet, and the vacancy rate decreased by 63 basis points to 15.40 percent. Upward pressure on rents continued through the second quarter and carried over from leasing momentum in 2019 and Q1 2020.
The Albuquerque office market is considered by many to lag overall in economic trends, with the effects of unexpected economic shocks taking longer to manifest. Unpaid rents, vacancies and downward pricing trends may still come in time, but the second quarter data shows that efforts by tenants, landlords, and state and federal governments to mitigate the effects of the shutdowns are holding things steady for the time being.
Key Factors in this Quarter
Rental rates have continued to increase and are now up to $19.43 full service. This is a 2% increase over last quarter.
The office market overall has continued to hold steady with strong rental rates and vacancy has decreased by 63 basis points. This is primarily due to Sandia National Labs occupying 2301 Buena Vista Dr. SE.
Offices are likely to see a movement away from collaborative high-density layouts in favor of layouts that support social distancing and sanitization.