Good news, bad news, and the latest office vacancy numbers

Good news, bad news, and the latest office vacancy numbers

From Downtown Albuquerque News

Despite everything the pandemic has done to diminish the popularity of congregating in offices to work, the vacancy rate for commercial space in greater Downtown has actually gone down recently, in what could be a tentative sign of optimism for the collection of restaurants and coffee shops that depend on the commuter class for survival – particularly in the Downtown core.

The Downtown area – defined here as the area contained by I-25, I-40, the river, and Avenida Dolores Huerta – has a little more than three million total square feet of commercial space. Some 18.3 percent of it was vacant in the second quarter of this year, according to a report published by Colliers, a commercial real estate services firm. During the same quarter in 2019, that rate stood at 22.9 percent.

While that’s an improvement – during a tough economic time no less – a similar report from CBRE, another commercial real estate services firm, found that Downtown still had some of the highest vacancy rates in the city during the first half of 2021. Downtown vacancies were particularly high with “Class B” space – buildings that are generally older – at 41.4 percent.

CBRE’s data shows a broadly stable commercial real estate market across the city, with an overall vacancy rate of 15.1 percent, down from 16 percent in the second half of 2020. CBRE attributes the stability in part to expansions by both local and federal government agencies, and because businesses began returning to offices during the first half of the year.

Marguerite Haverly, a senior associate with CBRE, told DAN that while the pandemic has definitely kept some people from working in offices, CBRE hasn’t seen many companies completely abandon their spaces.

“Office space is still going to be in demand moving forward. That’s not going to change. I think what companies will be trying to figure out is: Will the office itself look different?” Haverly said. “Will we have more private offices rather than open space?”

But the report also contains a reason for pessimism for anyone hoping to lure office workers away from their desks for lunch or a cup of coffee: Many companies are evaluating work-from-home and hybrid options and some are considering moving to smaller spaces.

Another key factor: Prices in Albuquerque are cheap enough that companies could potentially lease more space than they really need.

“In larger markets, where it costs so much more per square foot than it does in Albuquerque, companies are certainly downsizing their office space,” Haverly said. “But in Albuquerque, office space is still very affordable … and companies have avoided making significant changes to their office footprints.”

Depending on how exactly those factors shake out, it could mean that lower vacancy rates still translate into fewer commuters on Downtown area streets at any given time.

The report found some of the strongest demand for office space in the city was in the area near the Sunport, along the north I-25 corridor, and in Uptown.

Haverly said that while demand remains high for space along north I-25 and in Uptown, that doesn’t mean companies are avoiding greater Downtown, where she said demand remains strong. But while leasing space here is not necessarily more expensive than other parts of the city, she notes that in some cases, associated costs such as parking can cause some businesses to look elsewhere.

“Companies add up all of those costs, and consider things like access to amenities and walkability, and all of those factors dictate where a tenant may want to locate their business,” she said.

While location always matters in real estate, Haverly said many companies are also seeking quality office space with good property management and high-end amenities.

“Quality office space is quality office space. If we have quality office space Downtown, and if we have quality office space along I-25 or in Uptown, all of those sites are going to be on a target tenant’s property list tour,” she said. “But we’re bullish on Downtown, and that’s a function of landlords investing in their buildings and providing quality office space.”