Considering the weakness of the local economy, Albuquerque’s sparse residential development and its declining rates of population growth, the local retail real estate market fares relatively well—in some respects, if not others. In a ranking of national markets cited by the Albuquerque Journal in May, Albuquerque scored “68,” slightly above the “64” national score. For all retail combined, the local vacancy rate was reported at 10% at the time, lower than the 13.2% national rate. Moreover, noted an executive with local firm NAI Maestas & Ward Commercial Real Estate Service as related by the Journal, “The retail vacancy rate is artificially high because it includes a big chunk of empty space at Winrock Center.” (Winrock Town Center, a major mall on Albuquerque’s east side, is in early stages of a redevelopment that will include a cinema complex, a set of restaurants and a hotel, reports New Mexico Business Weekly). Reis reports 107,600 square feet of new construction planned for the mall. At a neighboring site, a 155,500-square-foot Target broke ground in May at the ABQ Uptown lifestyle center. The $20 million store is scheduled to open in March, as reported by the Journal.
Reis expects no community or neighborhood center projects to complete construction this year; only 44,350 square feet of such space delivered throughout 2011—in August, in the Shops 8 development in Rio Rancho. Also in Rio Rancho, the 75,000-square-foot first phase of the Plaza at Enchanter Hills neighborhood center broke ground in Rio Rancho in March 2011; and in south Albuquerque the 28,000-square-foot University Plaza neighborhood center started the previous September. Completion dates were not specified for either project per the date of this report. Groundbreaking is scheduled for this November for the 16,000-square-foot Unser Pavilion neighborhood center, also in Rio Rancho. Development of the Unser Crossing power center appears to have been delayed as a result of Lowe’s failure to build-out the site, which it acquired earlier, New Mexico Business Weekly has reported. The 238,000-square-foot first phase broke ground in June 2009. A January 2013 start is scheduled for the 69,300-square-foot Plaza at San Mateo neighborhood center in northeast Albuquerque. Reis expects completion in January 2014. Meanwhile, the metro area’s third Walmart Neighborhood Market, at 35,000 square feet, opened in September 2012 at 11001 Menaul Boulevard NE, the Weekly reported at the time.
Occupancy and rental data and trends vary by product category. The 11.2% second quarter vacancy rate reported by Reis for 10.2 million square feet of community-neighborhood shopping center space was down 50 basis points year-to-date in the wake of 49,000 square feet of positive net absorption. Rent growth, however, remains weak: at $14.42 psf and $12.47 psf, asking and effective averages for the quarter were down 1.2% and 1.1% since year-end following minimal gains overall in 2011. The 1,000 square feet of positive absorption that followed over the next two months left the vacancy rate unchanged while mean rents each suffered a 0.2% additional loss. At 11.6%, albeit down 120 basis points year-over-year, second quarter vacancy in the local power center remained particularly elevated (the second quarter national power center rate was 6.3%). Local rents are reflective: the $20.46 psf second quarter asking average was down fully 2.4% since the second quarter of 2011.
Modest positive absorption over the remainder of 2012 should drop the community-neighborhood shopping center vacancy rate below 11.0% by year-end. Rental loss in the sector, however, should continue: declines of 2.1% and 1.8% currently are anticipated for the mean asking and effective rates for the year. Development should remain prudent and subdued.