Category Archives: Market Reports

Albuquerque CRE Report 12.17.12

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Bob - Walt, what do you have for us today?

Walt - Good morning Bob, SIOR and CCIM are the acronyms for today. Both are designations that I have achieved during my career in commercial real estate. SIOR which stands for society of industrial and office realtors is the leading professional commercial and industrial real estate Association with only 3000 members worldwide in 630 cities in 33 countries.

The SIOR membership is a designation with the highest level of knowledge, production and ethics in the real estate industry.

The SIOR designation is really unchallenged for excellence and performance of real estate services. So Bob, if you’re looking for the best in commercial real estate, hire an SIOR for any of your commercial real estate requirements. You’ve made an excellent choice.

Bob - you also mention CCIM, tell us a little bit about that designation that you also have earned.

Walt - Thanks Bob a CCIM or certified commercial investment member is a recognized expert, having successfully completed a process that ensures that I am not only proficient in the theory of real estate but also in practice. Some of that skill set includes financial analysis, market analysis and investment analysis of commercial real estate.

Hiring a CCIM is an excellent choice for any commercial real estate needs.

Bob, I have put both of those organizations, SIOR and CCIM, to work for me and my clients to ensure that I offer my clients and customers the highest level of services in commercial real estate

Bob - Walt, how can people get a hold of you today to talk about commercial real estate?

Walt - Thanks Bob, give me a call, Walt Arnold with Sperry Van Ness, my direct line is 256-1255, and our website is waltarnold.com. Sperry Van Ness is a full-service commercial real estate company with expertise in all areas of commercial real estate. Sperry Van Ness is an 165 markets across the country with the thousand advisors.

Some of our skill set includes landlord or tenant representation, sales, leasing, property management, auction services and distressed assets. If you’re considering commercial real estate, let’s talk.

Bob thanks for the time today and I look forward to talking to you.

Albuquerque CRE Report 12.10.12

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Bob - Last week we talked about the improving commercial retail market. Are more shopping center owners looking at selling their properties as the retail market shows continued signs of improvement?

Walt - Bob, good morning, as more owners are considering the question “is now a good time to sell”, what is really needed is more buyers or investors asking the question “are we ready to take on an acquisition or purchase a property?” And how do we purchase the property in order to get favorable financing?

Bob - So what you’re saying is, wanting to sell a property is one thing, but the most important part is having buyers wanting to invest?

Walt - It really is and here are some points for buyers to consider.

Think about worst-case scenarios, for example, what if a tenant leaves or to keep and retain tenants, rates have to be reduced?

The next point is “cash is still king” and one strategy is to purchase the property with cash and work out the financing details after the purchase. It provides more leverage on the purchase and more time to find the best financing without having to meet financing contingency dates in a purchase contract.

If you are seeking financing, be proactive and define what terms you want from the lender and get all information as soon as possible. Over communicate, get all lease details, read the leases and be able to respond quickly to the lender’s request for documents and information.

Lastly, be intuitive and follow your instincts. If something creates an uneasy feeling, act on it, dig into what the issue is and decide if the property is worth pursuing.

You can control the process when purchasing commercial real estate. Develop the plan and stick to it.

It’s a great time to consider investing in commercial real estate and at Sperry Van Ness we have the knowledge and experience that leads to a successful transaction.

Bob - Walt, how can people get a hold of you to talk about commercial real estate?

Walt - Thanks Bob, give me a call, Walt Arnold at Sperry Van Ness my direct line is 256-1255 our website is waltarnold.com. Sperry Van Ness is a full-service commercial real estate company with experience in working with buyers, sellers, landlords and tenants in commercial real estate sales, leasing, investments and management. Bob thanks for the time today, have a great week and we’ll talk next Monday.

Albuquerque CRE Report 12.3.12

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Bob - Walt, the apartment market appears to be the strongest sector of commercial real estate, can you give us an update on what’s happening in the apartment market?

Walt - Good morning Bob. One of the things that stand out in the apartment market is the move away from the major markets. Secondary markets posted a 38% year over year increase in transaction volume and tertiary markets, like Albuquerque, had a 23% year over year increase. So the money is starting to flow from the major markets into smaller markets for one primary reason and that is investors are able to achieve a better yield on the properties in the smaller markets.

Another sign of the strength in the apartment market is developers purchasing apartment sites. Nationally, multifamily construction increased 45% year-over-year and developers have acquired more than $2 billion in multifamily development sites, that’s double the volume for all of 2011.

Bob - How are those national numbers translating to the Albuquerque market, are we seeing any development here in the apartment sector?

Walt - Titan development recently broke ground on the first phase of multifamily development project totaling more than 460 units in Albuquerque just north of San Antonio East of I 25.

And Titan has six more development projects in the queue so we are seeing some strength in the Albuquerque market on the development side.

Bob - Walt, with all these new projects being developed what are some of the changes being made in new apartment projects? What the younger generation looking for in an apartment?

Walt - Generation Y is basically looking for smaller, connected spaces in urban locations. They travel light and don’t collect a lot of stuff. And they’re also looking for smaller personal space and larger communal space.

And apartment owners are listening because are adding more outlets with built-in USB charger ports in kitchens and bedrooms, creating more open spaces, using cool color patterns to attract more tenants, and tenants are using their smart phones to find out what amenities are located in the area.

So generation Y is having an impact on construction of new apartments, both from the fact that younger people like the apartment life because it provides them the flexibility that they require and generation Y is also having an impact on the way developers are constructing new apartment units.

Bob - How can people get a hold of you to talk about commercial real estate?

Walt - Thanks Bob, give me a call, Walt Arnold, Sperry Van Ness, 256-1255, our website is walt.arnold.com. If you have any questions regarding commercial real estate, let’s talk. Bob thanks for the time today and I’ll talk to next week.

Listen to recorded show here

Albuquerque CRE Report 11.26.12

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Bob - Walt, what impact does the looming fiscal cliff have on the commercial real estate market?

Walt - Bob, whatever happens with the expiring tax cuts and the scheduled new legislation, any reference to a “cliff” does not sound good.

The main impact for commercial real estate will be the long term capital gain rate, increasing from 15% to 20%.

This affects more than real estate investments, but it will lower capital (money) moving into commercial real estate

Although many pundits are saying that commercial real estate will come out of this is as a favorable investment.

Bob - Walt, that’s a little bit of talking out of both sides of your mouth. How can you say the fiscal cliff will create less money into real estate but commercial real estate is still a good investment?

Walt - Because I’m an optimist Bob!

Seriously if you look at the commercial real estate market, first there is lower volatility in commercial real estate, it’s an excellent way to diversify investments, while you’re invested in commercial real estate you will receive a yield on the investment and it’s also a hedge against inflation and don’t forget about the appreciation of the commercial real estate asset. This makes for a stable long term investment.

CRE values are depressed and the best time to invest, or the best time to buy is when there are great opportunities for upside. Bob, buy low is still a great strategy.

Bob - are there any other tax implications we need to be aware of with the fiscal cliff for commercial real estate?

Walt - Yes, estate taxes are currently taxed at 35% with an exemption of $5 million in assets. It goes to 55% tax and a $1 million exemption after January 1st. Bob, you work hard your whole life and want to leave your kids or heirs something when you go, I don’t think any of us want another heir, the federal government that is going to take 55% of your blood sweat and tears, it’s just wrong!

We will also see federal, state and local governments continue to shrink their lease space requirements. This will show up primarily in the office lease market as governmental agencies continue to evaluate their space requirements to meet their budget demands.

So the fiscal cliff will have some impact on the commercial real estate market, but there is a silver lining as investors will continue to look to commercial real estate as a favorable investment.

Bob - Walt, how can people get a hold of you today to talk about commercial real estate?

Walt - Thanks Bob, give me a call, Walt Arnold, my direct line is 256-1255, website waltarnold.com. Thanks for the time today, have a great week.

Listen to recorded show here

Albuquerque CRE Report 11.19.12

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Pat - Walt, it starts this week, the Christmas shopping season, what are the predictions for this year’s shopping season?

Walt - Yes, good morning Pat, here we go! Online sales are predicted to increase by 12% which is also reflected in Fed Ex’s projected 13% increase in its number of shipments for the Christmas season.

The majority of retailers are predicting an increase in Christmas season sales for 2012. Most retailers are starting earlier than ever and many have already started Christmas advertisements.

Predictions for increase in sales are just over 4% overall and a 3% increase in sales at brick and mortar retail stores. Hurricane Sandy is having an impact on retail sales and predictions have been lower slightly due to Hurricane Sandy.

Just a quick recap on the Albuquerque regional market.

The Albuquerque retail market continues to show improvement with 263,000 ft.² of net absorption year over year. Filling the vacant space is good news and that leads to a decrease in the vacancy rate which is currently 11.2% and continues the pattern of improvement for the fifth consecutive quarter.

The Metro market has experienced 35,000 ft.² of construction completion and overall asking rates for all retail properties is $13 per square foot per year NNN, with rates ranging from seven dollars per square foot per year for neighborhood shopping centers to $36 per square foot per year for high traffic centers.

Pat - Walt how can people get a hold of you today to talk about commercial real estate?

Walt - Thanks Pat, give me a call, Walt Arnold, with Sperry Van Ness, my direct line is 256-1255, our website is waltarnold.com. Sperry Van Ness is a full-service commercial real estate company able to assist our clients and customers in all aspects of commercial real estate.

Pat, I want to wish everyone a great Thanksgiving holiday, we all have things to be thankful about, try to concentrate on those things this Thanksgiving holiday. Thanks for the time today, and Pat, I look forward to talking to you soon.

Albuquerque CRE Report 11.12.12

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Bob - Walt, you wanted to talk about tenant representation today, why does a company need tenant representation when looking for lease space?

Walt - Bob, good morning, landlords and their representatives negotiate leases on a daily basis, while the typical tenant does so once every 3 to 5 years. Given those odds who you think will come out ahead at the bargaining table? Engaging a tenant representative ensures that a company’s interest is protected and that they find the best location at the best terms. A tenant rep broker will not only level the playing field, but can create competition among landlords to strike the best deal.

Bob - What about the cost, how is a tenant rep broker compensated?

Walt -The tenant rep commission is typically paid by the landlord. Just as the seller pays the realtor commission in residential real estate, the landlord pays the commission in commercial real estate. If you work exclusively with your landlord’s representative, that individual earns the entire commission. However, if you engage a tenant rep broker the commission is split with the landlord’s representative when the lease is signed.

When working with a tenant rep broker as your representative it means that your best interest are driving every step, from the facility search to lease negotiation. It also means you and your staff can focus on running and growing the business while your tenant representative handles the relocation research and leg work.

Bob - Walt, how does a tenant rep broker discover the best properties and how can a company be sure they’re not overpaying for office space?

Walt - Bob, a good tenant rep broker will scour the market to turn up any and all properties that meet the requirements, regardless of who has the property listed. In contrast the landlord’s broker is obligated to promote his client’s building. The tenant rep broker will also know about unadvertised opportunities and creative alternatives that would not occur with someone unfamiliar with the market.

Working with a tenant rep broker is the best way to make sure you’re getting the most competitive lease terms available in your market. For example, part of the tenant rep strategy will be to create a bidding war between two or more landlords by sending out well-crafted requests for proposals (RFP) to each one. Even if you’re only interested in one property, a good tenant rep broker will choose one or two similar properties to negotiate against, thus encouraging landlords to compete for the tenant.

Bob, tenant rep brokers also negotiated renewals on their client’s behalf. In addition to analyzing the renewal terms, a tenant rep broker will also show what else is available on the market to ensure that a tenant is getting the best available terms.

Bob - Walt, how can people get a hold of you today to discuss tenant representation?

Walt - Thanks Bob, call me, Walt Arnold, with Sperry Van Ness, my direct line is 256-1255, website waltarnold.com. I want to say a big thank you, to all of our veterans for their service. Bob have a great week.

Listen to Recorded Show Here

Albuquerque CRE Report 11.5.12

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Bob - Walt, our weekly talks focused mostly on the Albuquerque metro market, are there other commercial real estate developments going on in the rest of the state, that might be of interest or noteworthy?

Walt - Bob, good morning, the big story in development is happening in Santa Teresa on the southern border of New Mexico.

Union Pacific has a $400 million intermodal facility and they have already spent about $150 million in the project with a scheduled completion date in 2015 and 600 employees will be working at facility when it’s at full capacity.

The facility will be a refueling, crew change and intermodal facility with trucks, rail and air delivering products throughout the country.

This is a big investment in New Mexico by Union Pacific Railroad and it will spur growth in Santa Teresa and surrounding communities.

The project will also allow customers in the region to use Union Pacific’s intermodal ramp to load and unload cargo. This will be a big benefit to many companies throughout the region that need rail access.

Bob - I would imagine that there has been some development of commercial warehousing along with retail and residential projects around Union Pacific’s facility, is that taking place?

Walt - It is, there was strong development at Santa Teresa in the early 2000, but very little has been built since that time and this is causing for a shortage and industrial space.

So the space crunch along with products pouring out of Mexico’s maquiladoras increasing demand for industrial space. Several companies are building or beginning to start the process to build more warehouse space.

Bob your question is right on about residential housing. With new jobs being created, this creates demand for housing. Several developments are starting to come out of the ground and permits are being issued for new housing and the projections are over the next five years 1500 homes are planned in the Santa Teresa area.

So Union Pacific’s intermodal facility, along with strong demand to move product through Santa Teresa from Mexico is making a big impact in southern New Mexico. This project over time will provide thousands of jobs and homes, along with millions of square feet of commercial and industrial space.

Bob - Walt, how can people get a hold of you today to talk about commercial real estate?

Walt - Thanks Bob, give me a call, Walt Arnold with Sperry Van Ness, my direct line is 256-1255, and our website is waltarnold.com. If you’ve got questions regarding commercial real estate for a commercial real estate requirement, let’s talk.

Bob, have a great week and we’ll talk next Monday.

Albuquerque CRE Report 10.29.12

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Bob - Walt, if I’m an office tenant looking for space in this current real estate market, what are some things I need to be thinking about when considering renewing my current lease or looking for a new location?

Walt - Bob, good morning, there are opportunities for tenants in this market, when considering renewing or relocating. The office market continues to experience high vacancy and rates are around $18 sf/yr to $21/sf/yr for class A space, $15/sf/yr to $17.75/sf/yr for class B space, and $10/sf/yr to $13/sf/yr for class C space.

Current vacancy rate in Albuquerque is just below 19%, with little prospects of getting better anytime soon.

At Sperry Van Ness a good portion of our daily activity is focused on representing tenants in this market.

Our four step approach is to first, develop a strategy that outlines the objectives and expectations in the current market, next, we go through an extensive needs analysis to determine the space plan, growth, budget and location requirements. We then develop a market survey, organize property tours, and develop a short list of potential properties. Finally, we perform financial analysis, handle lease negotiations, and stay involved in the tenant improvement construction, move in, lease commencement and beyond.

Bob - I would imagine that the landlord has the upper hand in the tenant negotiation process. Landlords are dealing with tenants every day, and as a tenant, that seems like an event that happens for most tenants only once every several years.

Walt - That’s a great point. And as a tenant you have several options when the lease is approaching the expiration date.

The tenant can also do nothing and let the landlord dictate the rate and terms of the new lease, which is probably not a good scenario.

Another choice is the tenant can try to negotiate the renewal or relocation on its own, but as you said, the landlord is ahead of the tenant in that arena tenants might be unaware of current market rates, incentives being offered in the market, vacancy rates and general market conditions.

The better choice is to call the commercial real estate broker that specializes in commercial leasing, like Sperry Van Ness, and have them implement and develop a strategy to help make a tenant make wise business decisions.

We help companies spend time on what’s important to them, which is their business, and let us spend time and effort on finding the best potential location and pricing for lease space in this current market.

Bob - Walt, how can people get a hold of you today to talk about leasing in this commercial real estate market.

Walt - Thanks Bob, give me a call, Walt Arnold, 256-1255, our website is waltarnold.com. Bob thanks for the time today, have a great week and save some of the candy for the kids. Happy Halloween, talk to you next week.

Albuquerque CRE Report 10.22.12

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Bob - Walt, what do you have for us today?

Walt - Bob, good morning, we have talked about the building vacancy in this market and I want to talk about vacancy today, but how it affects building insurance.

Bob - This sounds like one of those issues that is not exciting talk about, but probably very important.

Walt - Absolutely, commercial property owners must understand the vacancy provisions in their insurance policy in order to properly insure the building.

In the insurance language a building is considered vacant unless at least 31% of its total square footage is rented to a tenant to conduct its customary operations and or used by property owners to conduct customary operations.

So the building does not have to be totally vacant, Bob think about this, if you own a 12 tenant strip mall with a grocery store, if they grocery vacates the building, even though all the other tenants are still occupying the property, and less than 31% is occupied by the remaining tenants, it can still cause a problem with the vacancy clause in the insurance policy. It is important for property owners not to assume that they are covered if they have vacancy.

Bob - Copper theft has become a serious issue, is copper theft or vandalism covered is the building is vacant?

Walt - This is another area where it is important for property owners not to assume that they have coverage.

If a building is vacant for more than 60 consecutive days before the loss occurs, there is no coverage for loss caused by the following: vandalism, glass breakage, theft and water damage.

If the property has for example a fire, the amount that would otherwise have been paid for loss or damage is reduced by at least 15%. The insurance policy is a complicated document and should be understood by the policyholder. It is crucial not to assume that you are covered unless the policy says you are.

Bob - Walt, what are some solutions for property owners to make sure that they are covered and have the proper insurance?

Walt - Bob it is essential to take the following steps: first of all notify your insurance company about the vacancy so proper coverage can continue under the policy. Next, review the policy terms and conditions regarding vacancy. Check with your carrier to determine whether that vacancy position applies in your policy. Finally, consider a property insurance endorsement that will help with vacant building coverage. Although this will carry an additional premium, it could be well worth it.

Copper theft is currently the greatest concern in a vacant building. The crucial aspect is to not assume if a building is vacant or partially vacant that the copper theft will be covered. Pull out the policy, read the vacancy clause and understand what is and is not covered, and then call your insurance agent to get the coverage you need.

Bob - Walt how can people contact you today to talk about commercial real estate?

Walt - Thanks Bob, Walt Arnold with Sperry Van Ness, 256-1255, website waltarnold.com.

Listen to Recorded Show Here

Albuquerque CRE Report 10.15.12

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Bob - Walt, we have talked before about declining real estate values over the past several years, are there investment opportunities in commercial real estate today?

Walt - Good morning Bob, there are opportunities in this market. And investors are again moving to real estate. Private investor’s purchases of commercial real estate increased 21% this year over last year. This is good news.

In commercial real estate capitalization rate or cap rate is a common measure of return on an investment. Bob, if you look at what you can get from a 10 year treasury bill, around 2%, the average return on real estate investments is 500 basis points or at least 5% higher than what you can achieve in a 10 year treasury bill. So yes real estate is a great place to invest and achieve excellent returns.

Bob - There is risk in real estate, how can investors handle or evaluate the risk?

Walt - Yes, that’s an excellent point and all investments deal with risk. But with real estate as with all investments, when you buy is much more important than when you sell. And this is a great time to look at purchasing commercial real estate. Values are down and capital for real estate is starting to loosen, banks are starting to ramp up lending, so this is a opportunist time to look at commercial real estate for long-term returns.

Opportunities are starting to develop in both the industrial and office sectors of commercial real estate and another interesting note is that the sales of development sites that have sold, double last year. But these are all good signs to look at commercial real estate. At Sperry Van Ness we can help in analyzing the risk.

Bob - Walt, anything else today and how can people contact you to talk about commercial real estate?

Walt - Thanks Bob, give me a call, Walt Arnold with Sperry Van Ness my direct line is 256-1255, and the website is waltarnold.com. I do want to mention again the auction they were having October 24. There are three properties in the Albuquerque area. Bryan Ranch in Stanley, New Mexico is an income producing alfalfa farm. We also have the Ness pumpkin farm in Estancia and the Saddle Ridge subdivision in Edgewood. The Saddle Ridge subdivision is 62 developed lots for just over $15,000 per lot. The opening bid in the auction is $945,000. This is an excellent opportunity due to the fact that even to put in the infrastructure for these lots would be close to 15,000 per lot.

Bob - thanks for the time today, have a great week and will talk next Monday.

Listen To Recorded Show Here