MARKET SNAPSHOT: Albuquerque, N.M. Market Remains Slow but Steady

Albuquerque, N.M.—Despite increasing unemployment, the Albuquerque apartment market has not suffered much.

“We saw unemployment hit 9 percent in January, and back in mid-2008 it was 3.5 percent, so you’d expect to see our apartment market, and the overall housing market, in a really severe slump. In contrast, the multifamily market continues to do quite well,” reports David Eagle, a senior vice president in CBRE Capital Markets’ Multi-Housing Group in Albuquerque.

He credits Kirtland Air Force Base and Sandia National Labs with providing the metro area with a relatively steady workforce.

Despite the unemployment figures, average market occupancy as of January 2011 was 94.96 percent, a 2.03 percent increase year-over-year, according to CB Richard Ellis Multi-Housing Group’s Albuquerque & Santa Fe January 2011 Apartment Market Report.

At the same time, year-over-year average rent improved 3.34 percent. According to the report, market-rate average rent was $719, with affordable rent averaging $681.

Meanwhile, 36 percent of properties surveyed were offering some form of concessions in January, compared to 27 percent of properties in September. However, year-over-year concessions declined from 60 percent of surveyed properties in 2010. Concessions reported were usually a week or two on a nine- or 12-month lease.

While the investment market has slowed considerably, it is beginning to pick up somewhat, Eagle tells MHN. In 2007, he says, the market had 23 sales of 100-unit and larger properties, for a total of $540 million; in 2008, four deals traded for a total of $60 million. In 2009,there was only one sale for just over $11 million, and 2010 saw three deals trade for a combined total of $63.3 million.

“The reason for the drop-off,” says Eagle, “is we have a good solid market, and if you talk to those selling they are saying we are doing better than other [markets] and [they]’ll hold off selling.”

And while the market hasn’t had a single foreclosure yet, Eagle reports that it is beginning to see some hitting the market now. “If you’re trying to sell and you have existing debt right now with maturities of one to four years, you’re in big trouble because of the inverted yield curve. … If  you look at the rates of one-, two-, three-, four-year Treasury bills, they are very, very low; you can see a $5 million loan with a year-and-a-half to go with a $1 million prepayment, so the low short-term Treasuries have had a profound impact on the cost of prepaying debt early, which has resulted in owners holding on a little bit longer.”

Those that are looking to buy in the market are mostly national private capital firms.

“Cap rates are higher than what you see in most other markets because [Albuquerque] is a relatively low-growth market,” Eagle adds. “We tend to get a higher cap for equal product [in other markets] because we’re viewed as being very safe, but you’re not going to see a 15 percent return in a year.”