Nov 7 – Remember last year when articles about the “death of the office” in the midst of a homework revolution cost a dime a dozen? It turns out that a lot can really change in a year.
Colliers International released its third quarter report on the Albuquerque office market last week, which showed rental rates in our beautiful city are on par with where they were before the pandemic hit New York. -Mexico. And the city-wide vacancy rate has fallen to its lowest level since 2009.
“I have a level of optimism that I never imagined a year ago and would have now,” said Scott Whitefield, partner and general manager of Colliers’ Albuquerque office.
The office market isn’t all sunny and rosy, but Whitefield said it was a slow and steady recovery fueled by old buildings coming back to life, new businesses coming to town and the appreciation of returning to an office environment.
“It has been an absolute marathon to bring the vacancy rate back to where it is today,” Whitefield said.
Nationwide outlets ranging from NPR to the New Yorker have produced articles predicting, in various forms, that the traditional office will not return to normal even after the COVID-19 pandemic has slowed, and these articles largely correspond to the situation of many markets. Heck, the Journal has published a few of them as well.
Restrictions related to the pandemic have caused tens of millions of workers across the country to work remotely for long periods of time, and some companies have reduced their office footprint to accommodate them. In coastal markets as dense as New York and San Francisco, vacancy rates remain well above what they were before 2020.
In little old Albuquerque, however, Whitefield said the effects on the office market were less severe. He acknowledged that many large companies have switched to remote working in the past year and that foot traffic in large downtown office buildings has dropped significantly.
“But it didn’t last very long,” Whitefield said. “People wanted to come back to the office.”
The third quarter report showed that 13,306 square feet of office space was taken off the market between July and September, largely due to small and mid-size deals.
In an office building, located at 8500 Menaul NE, 11,466 square feet were leased during the period, covering four individual office suites, according to the release.
However, not everything is as before March 2020. Whitefield said the pandemic has prompted a number of companies to rethink how big or small their office footprint should be. Some companies have responded by finding smaller spaces as employees continue to work from home full or part time, but others have moved into larger offices where employees can feel more comfortable. Whitefield said.
Whitefield added that rental structures have also changed since the pandemic. With uncertainty always the norm, many tenants are looking for shorter lease terms or opt-out options that allow them to terminate leases in certain circumstances.
“At this point, I think people just want the ability to act a little bit faster,” he said.
In addition, a number of buildings have found new life as offices. He noted that some users, especially large healthcare providers, are taking old industrial and commercial spaces and turning them into offices.
“We see little pockets of it,” he said.
Despite the optimism, there are still areas of concern. The report showed that the vacancy rate in the West Mesa submarket was 47.5% in the third quarter, compared to 14% in the metropolitan area as a whole.
Whitefield said the market has less space overall, and many Albuquerque business owners and managers may require a psychological shift to seek office west of the Rio Grande.
Additionally, Whitefield said there was virtually no new office construction in Albuquerque, which he attributed to the high cost of building materials and labor.
“There’s a gap there, and it’s just getting further away,” he said.
Stephen Hamway covers economic development, health care and tourism for the Journal. He can be reached at [email protected]