WESTERN SNAPSHOT, SEPTEMBER 2004

Albuquerque Multifamily Market

The Albuquerque multifamily sales market is on quite a roll, according to Steve Monroe, managing director of CB Richard Ellis. “Consisting of approximately 70,000 units, the sector has shown good stability in recent years, and is certainly healthier than most of its peers in the southwestern United States,” he says. “Unlike many cities in Arizona, Utah, Colorado and Texas, Albuquerque has shown remarkable discipline in terms of new construction of larger multifamily properties. In fact, the number of new market-rate properties built in the area in the past 5 years can be counted on one hand.”

Additionally, there have been a handful of tax credit and/or senior-living projects built. Long-term average construction in the metro area the past 30 years has been about 1,700 units per year. By contrast, in recent years the average has decreased to around 600 units per year. “While it is tempting to credit local developers for their restraint, the fact is that there are very few remaining parcels in the metro area that are zoned for multifamily and have infrastructure and access in place,” adds Monroe.

Vacancy in Albuquerque’s multifamily market is approximately 5.5 percent with Class A product performing better than average, says Bill Fox, senior investment advisor for Hendricks & Partners in Albuquerque. Occupancy for Class B and C locations ranges between 88 and 95 percent. Multifamily rents range from $0.57 per square foot for large older properties to $1.10 per square foot for new upscale studio units.

Investors have been drawn to the combination of low vacancy rates, low construction levels, steady employment growth and the availability of assets in most cases below replacement cost. During the last 15 years, there have typically been three or four sales per year of multifamily properties of 100 units or more. In the past couple of years, that level of activity has shot up to 10 or 12 properties per year.

Apartment ownership in Albuquerque has changed as well. In the late 1980s and throughout the ‘90s, institutional owners had a large presence, but, since 2000, these large players have chosen to concentrate on a smaller number of large metro areas. The multifamily void in New Mexico’s biggest — but still mid-size — market has been filled by private capital buyers like family partnerships, tenant-in-common buyers and limited partnerships. Every major apartment acquisition in Albuquerque in the past 5 years has been made by a private entity of some kind.

In addition to the increase in transactional volume, multifamily values have risen dramatically as well. Part of this boost in values is attributable to improvements in the marketplace, especially increases in revenue due to higher lease rates and the implementation of tenant utility billings, including water. A bigger factor in the increased values is the reduction in cap rates experienced throughout the country, with Albuquerque being no exception. In some cases, cap rates on closed transactions have been less than 7 percent, a level unheard of just 2 years ago. Values per unit have risen commensurately, such that during the past year, sales per unit have exceeded $100,000 for the first time ever.

©2004 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.