New Mexico is ready for industrial growth

The development of Facebook’s new data center in nearby Los Lunas has seen a surge in apartment buildings in Albuquerque.

By Riley McKee, Consultant, NAI Maestas & Ward

In summary, the industrial real estate market in New Mexico can best be described as underserved. Constant increases in demand combined with a shortage of new buildings have resulted in record-low vacancy rates in Albuquerque, Las Cruces and Santa Fe – the state’s most important metropolitan areas.

A number of notable projects are ongoing in Albuquerque. Food supplier Ben E. Keith Foods is building a 260,000 square foot regional headquarters and distribution center to serve markets across the region. FedEx Freight recently opened a 95,000 square foot distribution center strategically located on 50 acres to accelerate planned expansions. Brunacini Development, the city’s largest industrial landlord, has just completed a 140,000-square-foot multi-tenant distribution center that will be anchored by Bunzl, a London-based food packaging distributor. Finally, and perhaps most notably, nuclear power company Kairos Power acquired a 110,000-square-foot research and development facility following a nationwide site selection process. It is planned to expand the facility, which is located on 35 hectares, as part of an incentive package with the state.

Las Cruces is also seeing strong development activity, particularly in Santa Teresa, an international port of entry that is 21 miles south of the city. W. Silver Recycling, which processes non-ferrous metals, recently announced plans for a 120,000 square foot facility to announce the advantage of proximity to markets in Mexico. Electric cable manufacturer Admiral Cable is expected to complete a 195,000 square meter facility this year in a location that is well suited for intermodal transportation. A few miles south in Sunland Park, Stampede Meat is renovating and expanding a processing facility that was previously owned by Tyson Foods.

This activity is certainly to be welcomed, but it represents a decline compared to the national demand for the development of industrial space. Albuquerque’s vacancy rate is currently at an all-time low and has been between 2.5 and 3 percent since 2018. Most of the available storage space is functionally out of date, which some nimble developers have cleverly upgraded for users with urgent needs. The Santa Fe market is even tighter with just 40,000 square feet of available space (at the time of this writing).

While the primary markets in the United States saw a steady influx of new home, New Mexico’s industrial real estate portfolio has not kept pace. This is partly a consequence of the state’s tertiary market character, but is also explained by its position vis-à-vis other states during business cycles. The effects of the last recession were felt locally only a few years later, while only recently began to show signs of recovery. This is a compelling opportunity for investors and developers who are active in markets during their peak periods. New Mexico’s growth trajectory is only just beginning.

Although COVID-19 has blind-sided markets worldwide, commercial real estate users unlike their retail and office counterparts are expected to escape the most devastating effects. The demand for robust and efficient supply chains remains high.

– This article originally appeared in the May 2020 issue of Western Real Estate Business.

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