Steady commercial improvements for one New Mexico city

Commercial real estate in Albuquerque, N.M., is slowly on the rise.

It's been a slow pace for improvement in the Albuquerque, N.M., commercial real estate sector, but a gradual recovery is better than none at all.

According the the Urban Land Institute, which recently completed a survey of Albuquerque commercial industry insiders, a declining trend in cap rates signals a positive shift for the market.

Cap trends are a measure of market fundamentals and have maintained a three-year decline in all commercial property types: office, industrial, apartments and retail. Clarke noted that when cap rates go down, values go up.

"Cap rates in general for Albuquerque have descended down to where we were when the downturn started (8 percent in 2008)," said Todd Clarke, CEO of Cantera Consultants & Advisors. Clarke carried out the study for the Urban Land Institute, which surveyed approximately 100 owners, investors and brokers in the area.

While cap rates are often quoted, John Ransom, managing director of Colliers International's Albuquerque office, said that cap rates are just one tool to gauge commercial real estate.

"It's one benchmark we look at, a snapshot," Ransom told the Albuquerque Journal. "We look at so many other things as well."

By the numbers
Thirty-two percent of respondents from the Urban Land Institute poll said that property values have increased in 2013. That's a 20 percent upswing compared to the 12 percent of industry professionals who said the same thing in 2010. Meanwhile, 74 percent of respondents said that property values had decreased in 2010, but that number is now at just 27 percent in 2013.

Vacancy rates are also way down in 2013 compared to three years ago. In 2010, 78 percent of respondents said that vacancies had risen. In 2013, that figure was 24 percent. In contrast, 37 percent of those polled in 2013 said that vacancies had dropped, while just 9 percent had the same sentiment in 2010.

Surprising the survey conductor
Clarke said that the biggest shocker of the survey was the lack of optimism in the business sector and little interest in building green, energy efficient buildings.

"I expected more people to be talking about building green," Clarke said. "I think the lack of optimism about the New Mexico economy was a surprise. It's not real tangible. Collectively, it feels like a hopelessness about encouraging the government to get out and do something to encourage job growth."

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