The New Mexico retail market is continuing to change in a positive manner, which bodes well for property owners and businesses. There are new national, regional and local tenants looking at this market, moving in and around the shopping centers of New Mexico. New shopping centers are being built, while existing shopping centers are being redeveloped and traded.
Some of the most significant transactions include Columbus Pacific acquiring Sierra Vista Shopping Center in Albuquerque and moving Stein Mart and Hobby Lobby into a former K-Mart space. Pete Daskalos Properties has also purchased Four Hills Village Shopping Center on Central and Tramway in the Southeast Heights submarket. The center now has a new movie cinema, among other changes to its anchors and tenant roster. A K-Mart building at Rio Rancho at Hilltop Plaza Shopping Center was also sold after the store vacated. The new landlord is looking to re-anchor that space as well.
These big box vacancies have created redevelopment opportunities for existing shopping centers located in established trade centers while rents are increasing as the larger spaces are subdivided and leased to other tenants. This has created momentum in the market and upward pressure on asking lease rates.
Other retailers expanding or moving into New Mexico recently include Jersey Mikes and Del Taco, which is growing its presence in the area. Metro PCS has also opened several new stores in the state. Local players are also hard at work. Vernon’s Steak house opened its Wise Pies brand, in addition to Prime Gourmet Sandwiches. The RadioShack bankruptcy will also bring about several closures in the Albuquerque area.
All of this activity has resulted in some strong vacancy rates in certain submarkets. The total vacancy rates varied from 5.4 percent mid-year of 2014 to 5.8 percent at the end of last year, according to CoStar. The most significant submarket changes were in the Airport submarket, showing a drop from a 4 percent down to a 2.8 percent vacancy rate, as well as the Far Northeast Heights submarket, dropping from 8.8 percent down to 5.5 percent. The University submarket, on the other hand, went from 6.7 percent up to 7.3 percent. The other submarkets, while active, showed less significant changes in their vacancy rates. The average lease rates over the same period for retail began at $13.14 per square foot, per year and ended at $13.42 per square foot, per year. Some of the most significant changes were the Cottonwood submarket going from $17.27 per square foot on average all the way down to an average of $16.16 per square foot. The Far Northeast Heights submarket went the other direction. It started at an average of $13.31 per square foot and ended at $16.26 per square foot for an increase of almost $3 per square foot. This was mostly due to the growth on the Paseo del Norte corridor.
New Mexico is an active market with many changes and challenges. It’s the strongest and most active retail market since 2008, and we expect to see a continuing growth pattern in the foreseeable future.
By Glenn Wright, Retail Specialist and Advisor, SVN / Walt Arnold Commercial Brokerage Inc. This article originally appeared in the May 2015 edition of Western Real Estate Business magazine.