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Office Trends Report—Second Quarter 2012 Albuquerque, NM

Office Graphs Template

Stagnation

Vacancy Rate 22%

For the last eight quarters, vacancy has lingered around eighteen percent. This quarter’s

20% 18%

30-basis point increase marked the highest level seen over the last 20 years. It has been very

16%

difficult to put together two consecutive quarters of positive results. The number of new Office Graphs Template and expanding companies making positive moves was again more than offset by those

14% 12% 22% 10% 2Q 10 20% 18%

downsizing. During the quarter for every five buildings with positive absorption, six were 4Q 10 CBD

2Q 11

4Q 11

2Q 12

Combined

Suburban

negative. Additionally, for every 2.5 square feet of space that was occupied, another 3.07 square feet of space was vacated. All combined the net result was an increase in vacancy.

16% 14% 300 12% 200 10% 22% 100 2Q 10 20% 0

The record level of inventory on the market has actually become a hindrance to making deals. Many tenants searching for new spaces have very particular requirements. When the 4Q 10

2Q 11

4Q 11

2Q 12

few choices often remain. In other words the chance of finding spaces that meet the selection

Completions vs. Absorption

18% -100 (in Thousands of SF) 16% -200 300 14% -300 4Q 10 2Q 11 200 2Q 10 12% 100 10% 02Q 10

4Q 10

criteria and are move-in ready can often be very low. Another concession that some tenants are asking for is early termination rights. Landlords are usually not fond of granting this option 4Q 11

2Q 11

4Q 11

2Q 12 2Q 12

-100 $22

200

and often tie it to a particular measureable event such as the loss of a major contract if at all. One of the most worrisome trends facing the office market is the year-over-year negative employment levels. Employment in the Professional and Business Services sector fell by 900

-200 -300 $20 300

parameters of location, cost, configuration, and tenant improvement costs are factored in, very

jobs compared to May 2011. The May 2012 employment levels have not been this low since 2Q 10

4Q 10

Absorbed 100 $18 0 $22 -100 $16 -200 2Q 10 4Q 10 $20 -300

2Q 10

2Q 11

4Q 11

2Q 12

the year and by over 400 jobs since April. These gains will likely not translate to a reduction in

Completed

2Q 11

4Q 10

vacancy as tenants re-utilize their existing spaces. 4Q 11

2Q 11

4Q 11

2Q 12 2Q 12

4Q 10

2Q 11

FORECAST n The amount of overall available space increases. n Vacancy in Class A buildings climbs.

$18Asking Rental Rates ($/SF/Yr. Full Service) $22 $16 2Q 10

1999. Employment for this sector has actually increased by 900 jobs since the beginning of

Page 1 KEY TRANSACTIONS 4Q 11

2Q 12

*New Mexico Health Connections $18 $16 2Q 10

4Q 10

Class A

2Q 11 Class B

4Q 11

2Q 12

leased 8,198 SF at Page2440 1 Louisiana Blvd NE Albuquerque, NM from *AFC-5, LLC

*Cardiac Care Consultants

Lovelace Health Plan

leased 5,470 SF at 500 Unser Blvd Albuquerque, NM from *Act Now, LLC

leased 20,000 SF at 7850 Jefferson St NE Albuquerque, NM from Ashcraft Real Estate & Development

* Indicates Transaction Represented by Grubb & Ellis|New Mexico Grubb & Ellis|New Mexico 2424 Louisiana Blvd. NE Suite 300 Albuquerque, NM 87110 www.genewmexico.com Independently owned and operated

by: PagePrepared 1

Ken Schaefer Director of Brokerage Services 505.880.7012 • ken.schaefer@grubb-ellis.com Janna Corro Assistant Research Analyst 505.880.7026 • janna.corro@grubb-ellis.com

©2012 Grubb & Ellis|New Mexico

$20


Office Trends Report—Second Quarter 2012 Albuquerque, NM By Submarket

Total SF

Vacant SF

Vacant %

Available %

Year To Date

NET ABSORPTION (28,334) (23,308)

Construction SF

Class A

Under -

2,773,722

608,709

By Submarket CBD Total

Total SF 2,773,722

Vacant SF 608,709

Vacant % 21.9%

Available % 23.7%

Current Qtr (28,334)

Year(23,308) To Date

Construction SF-

Downtown Airport CBD Total Far Northeast Heights

2,773,722 1,271,905 2,773,722 967,769

608,709 174,182 608,709 107,060

21.9% 13.7% 21.9% 11.1%

23.7% 25.4% 23.7% 13.4%

(28,334) (13,678) (28,334) 36,248

(23,308) (16,737) (23,308) 35,971

-

-

Far Northeast Heights North I-25 Mesa del Heights Sol Northeast North I-25 Rio Rancho

23.7%

Current Qtr

ASKING RENT

Under

Downtown

Airport Mesa del Sol

21.9%

NET ABSORPTION

-

-

Class B

ASKING RENT $20.06 $15.12 Class A $20.06

Class B $15.12

$20.06 $20.06 -

$15.12 $12.51 $15.12 $15.95

1,271,905 271,052

174,182 41,778

13.7% 15.4%

25.4% 15.4%

(13,678) -

(16,737) -

--

--

$12.51 $23.00

967,769 3,324,297

107,060 600,369

11.1% 18.1%

13.4% 17.4%

36,248 38,684

35,971 90,335

--

$22.50

$15.95 $17.90

271,052 855,071

41,778 174,908

15.4% 20.5%

15.4% 19.9%

(41,385)-

(36,946)-

--

--

$23.00 $16.96

3,324,297 616,578

600,369 70,790

18.1% 11.5%

17.4% 11.5%

38,684 (6,238)

90,335 2,596

--

$22.50 -

$17.90 $20.77

Northeast Heights Heights Southeast

855,071 595,167

174,908 137,009

20.5% 23.0%

19.9% 25.8%

(41,385) 7,620

(36,946) 3,071

--

--

$16.96 $11.41

Rio Rancho University

616,578 915,514

70,790 120,622

11.5% 13.2%

11.5% 19.5%

(6,238) 12,747

2,596 19,347

--

--

$20.77 $17.15

595,167 1,814,645

137,009 428,721

23.0% 23.6%

25.8% 24.2%

7,620 (48,797)

3,071 (79,853)

--

$20.64

$11.41 $18.50

Southeast Heights Uptown University West Mesa

915,514 326,130

120,622 113,927

13.2% 34.9%

19.5% 34.9%

12,747 (7,467)

19,347 (16,141)

--

--

$17.15 $18.02

Uptown Total Suburban

1,814,645 10,958,128

428,721 1,969,366

23.6% 18.0%

24.2% 20.1%

(48,797) (22,266)

(79,853) 1,643

--

$20.64 $21.64

$18.50 $17.61

West Mesa Totals Suburban Total

326,130 13,731,850 10,958,128

113,927 2,578,075 1,969,366

34.9% 18.8% 18.0%

34.9% 20.8% 20.1%

(7,467) (50,600) (22,266)

(16,141) (21,665) 1,643

-

$20.76 $21.64

$18.02 $17.10 $17.61

13,731,850

2,578,075

18.8%

20.8%

(50,600)

(21,665)

-

$20.76

$17.10

Totals

-

AVAILABLE FOR SUBLEASE By Class Class A

CBD

Suburban

AVAILABLE FOR SUBLEASE

1,386,055

257,088

18.5%

21.4%

(39,818)

(63,599)

-

18,721

14,436

Class B

9,287,962

1,677,376

18.1%

19.6%

21,071

82,340

-

CBD-

Suburban 136,503

ClassCA Class

1,386,055 3,057,833

257,088 643,611

18.5% 21.0%

21.4% 24.3%

(39,818) (31,853)

(63,599) (40,406)

--

18,721 -

14,436 79,676

Class B Totals Class C

9,287,962 13,731,850 3,057,833

1,677,376 2,578,075 643,611

18.1% 18.8% 21.0%

19.6% 20.8% 24.3%

21,071 (50,600) (31,853)

82,340 (21,665) (40,406)

-

-

136,503 230,615 79,676

Totals

13,731,850

2,578,075

18.8%

20.8%

(50,600)

(21,665)

18,721

230,615

By Class

Grubb & Ellis|New Mexico Real Estate Advisors

-

-

18,721

Anne Apicella Senior Associate 505.880.7059 aapicella@nmrea.com

Marguerite Haverly Associate 505.880.7098 mhaverly@nmrea.com

John Ransom, CCIM, SIOR Senior Vice President/Principal 505.880.7011 jransom@nmrea.com

Ed Anlian Senior Associate 505.880.7069 eanlian@nmrea.com

Ben Perich Associate 505.880.7054 bperich@nmrea.com

Brent Tiano, CCIM Vice President 505.880.7027 btiano@nmrea.com

Keith Bandoni, CCIM Senior Vice President 505.880.7015 kbandoni@nmrea.com

Jane Pilger, CCIM Senior Associate 505.880.7067 jpilger@nmrea.com

Tim With, CCIM, SIOR Senior Vice President/Principal 505.880.7092 twith@nmrea.com

OFFICE TERMS AND DEFINITIONS

Office Building Classifications: Grubb & Ellis adheres to the BOMA guidelines. Class A properties are the most prestigious buildings competing for premier office users with rents above average for the area. Class B properties compete for a wide range of users with rents in the average range for the area. Class C buildings compete for tenants requiring functional space at rents below the area average.

Vacancy and Availability: The vacancy rate is the amount of physically vacant space divided by the inventory and includes direct and sublease vacant. The availability rate is the amount of space available for lease divided by the inventory. Net Absorption: The net change in physically occupied space over a period of time. Asking Rent: The dollar amount asked by landlords for available space expressed in dollars per square foot per year in most parts of the country and dollars per square foot per month in areas of California and selected other markets. Office rents are reported full service where all costs of operation are paid for by the landlord up to

a base year or expense stop. The asking rent for each building in the market is weighted by the amount of available space in the building. * Grubb & Ellis statistics are audited annually and may result in revisions to previously reported quarterly and final year-end figures. Reproduction in whole or part is permitted only with the written consent of Grubb & Ellis Company. Some of the data in this report has been gathered from third party sources and has not been independently verified by Grubb & Ellis. Grubb & Ellis makes no warranties or representations as to the completeness or accuracy thereof.

Š2012 Grubb & Ellis|New Mexico

Total SF: Office inventory includes all multi-tenant and single tenant buildings at least 10,000 square feet. Owner-occupied, government and medical buildings are not included.


Albuquerque Office Market Trends Report