january 2019 albuquerque/santa fe ......n anuary 2019 albuquerque/santa fe multifamily market survey...

© 2019 CBRE, Inc. January 2019 Albuquerque/Santa Fe Multifamily Market Survey

JANUARY 2019

ALBUQUERQUE/SANTA FE MULTIFAMILY MARKET SURVEY

CBRE | 6100 Uptown Blvd NE, Suite 300 | Albuquerque, NM | +1 505 837 4999 | www.cbre.com/abq


ALBUQUERQUE MARKET SURVEY SYNOPSISThe CBRE January 2019 apartment market survey shows continued strong Albuquerque occupancy with similar year-over-year rent growth. January year-over-year rent (combined market-rate and affordable properties) increased from $818 to $837, a 2.32% increase with all unit types showing rent gains. Studios and one-bedroom/one-bath units led with gains of 4.83% and 2.84% respectively. Three-bedroom/two-bath units and two-bedroom/two-bath units followed with gains of 2.35% and 2.01%, while two-bedroom/one-bath showed an increase of 1.70%.

January’s total market occupancy of 94.51% showed no change from the previous year. Albuquerque seasonal occupancy trends throughout the year have been consistent since CBRE began tracking them eleven years ago. January is the seasonal low point, with an increase in May and a high point in September.

The CBRE January survey includes 152 market-rate and 46 affordable properties. Market-rate properties average 221 units and affordable properties average 166 units. By unit count, Albuquerque market-rate properties comprise 81% of the surveyed units.

January market-rate property occupancy decreased slightly to 94.56% from 94.58% the prior year. Average market-rate community rent increased from $836 to $856, a 2.39% increase.

January year-over-year affordable property occupancy increased from 94.21% to 94.28%. Year-over-year affordable rent increased from $739 to $754, a 2.03% increase. The relatively slow affordable community rent growth is due to affordable property maximum rent increases being tied to increases in MSA area median income.

Albuquerque has continued delivering new Class A and affordable units, and more developments are on the way. An estimated 700 market-rate units are expected to be delivered between 2019 and late 2020, and about 400 affordable units will be delivered in the next twelve months. Market-rate deliveries will be scattered throughout

the NE Heights, Nob Hill, Downtown, and Uptown, and affordable deliveries will happen in all four quadrants of the Albuquerque MSA.

Since our last report in September 2018, Netflix completed the acquisition of ABQ Studios, bringing $1B in production to New Mexico over the next decade and up to 1,000 new jobs per year. They have already started filming numerous self-produced television shows and movies throughout Albuquerque and Santa Fe. Intel is continuing their expansion, and many other notable companies have put Albuquerque on the map in regards to scouting new satellite office locations.

Albuquerque Occupancy

1% 6%

33%

60%

0 - 79.9%

80-84.9%

85 - 89.0%

90 - 94.9%

95 - 100%

CBRE JANUARY 2019 ALBUQUERQUE/SANTA FE MULTIFAMILY MARKET SURVEY

STABLE OCCUPANCY & RENT GROWTH WITH MORE NEW CLASS A DEVELOPMENTS PLANNED

Billy EagleFirst Vice President

ALBUQUERQUE OCCUPANCY

Source: CBRE

Erik OlsonFirst Vice President

A discussion on trends by CBRE’s Albuquerque Multifamily Investment Professionals

The percentage of surveyed properties with occupancy of 95% or better in January 2019 was 62%, an increase from 57% in January 2018. Properties reporting occupancy between 90% and 94.9% was 26% compared to 30% in January 2019. Communities reporting 90% or greater occupancy in September 2018 was 88% compared to 87% a year ago.

Chris SotoClient Services Specialist

62%

26%

11%

1% 0%

OCCUPANCY TRENDS HAVE REMAINED CONSISTENT, JANUARY’S TOTAL MARKET OCCUPANCY OF 94.51% SHOWED NO CHANGE FROM THE PREVIOUS YEAR.


The percentage of surveyed Albuquerque properties offering some form of concessions was 30% in January 2019, compared to 39% from January 2018. Albuquerque concessions are typically modest and temporary, and usually involve “look-and-lease” specials or are related to temporary exposures on selected unit types.

Unit Type Total # Units Percent Mix

# Vacant Units

Weighted Occupancy Total SQFT

Weighted Average

SQ FT

Weighted Average

Rent

Rent Per SQFT

Studio 3,087 7.48% 213 93.10% 1,308,871 424 $586 $1.29

1 Bed / 1 Bath 17,131 41.50% 862 94.97% 11,513,516 672 $761 $1.10

2 Bed / 1 Bath 5,382 13.04% 362 93.27% 4,557,392 847 $779 $0.92

2 Bed / 1.5 Bath 658 1.59% 38 94.22% 581,676 884 $838 $0.87

2 Bed / 1.75 Bath 57 0.14% 0 100.00% 50,487 886 $820 $0.74

2 Bed / 2 Bath 11,022 26.70% 535 95.15% 11,135,751 1,010 $964 $0.93

2 Bed / 2.5 Bath 382 0.93% 12 96.86% 458,039 1,199 $1,194 $0.95

3 Bed / 1 Bath 53 0.13% 2 96.23% 58,042 1,095 $980 $0.87

3 Bed / 1.5 Bath 294 0.71% 14 95.24% 314,080 1,068 $956 $0.85

3 Bed / 2 Bath 2,920 7.07% 198 93.22% 3,474,179 1,190 $1,089 $0.86

3 Bed / 2.5 Bath 159 0.39% 26 83.65% 214,463 1,349 $1,214 $0.87

3 Bed / 3 Bath 40 0.10% 2 95.00% 52,688 1,317 $1,262 $0.88

4 Bed / 1.5 Bath 14 0.03% 0 100.00% 17,528 1,252 $874 $0.70

4 Bed / 2 Bath 76 0.18% 4 94.74% 86,610 1,140 $963 $0.84

41,275 100.00% 2,272 94.51% 33,823,322 819 $837 $1.02

ALBUQUERQUE MARKET SURVEY - SUMMARY

ALBUQUERQUE CONCESSIONS

Source: CBRE*Any variances in totals are minor and are a result of weighting, rounding or non-representative units such as retail spaces.

30%of properties surveyed

do provide “Rent Concessions”

Source: CBRE


do not provide “Rent Concessions”


MLS Area Total # Units # Vacant Units


Weighted Average

SQFT

Weighted Average

Rent

Rent Per SQFT

21 216 21 90.28% 232,400 1,076 $1,269 $1.18

30 5,587 226 95.95% 4,919,946 881 $973 $1.10

31 430 10 97.67% 441,388 1,026 $1,313 $1.28

32 5,784 446 92.29% 4,756,008 822 $824 $1.00

40 965 88 90.88% 711,867 738 $820 $1.11

41 4,556 374 91.79% 3,284,276 721 $746 $1.03

42 1,164 29 97.51% 893,519 768 $884 $1.15

50 5,445 253 95.35% 4,282,866 787 $760 $0.97

51 378 48 87.30% 302,500 800 $708 $0.89

70 251 11 95.62% 199,415 794 $769 $0.97

71 3,316 196 94.09% 2,309,614 697 $668 $0.96

80 1,142 47 95.88% 670,100 587 $756 $1.29

92 658 50 92.40% 671,550 1,021 $1,012 $0.99

100 495 8 98.38% 361,292 730 $733 $1.00

101 300 7 97.67% 241,032 803 $717 $0.89

102 224 20 91.07% 158,256 707 $718 $1.02

103 334 11 96.71% 313,054 937 $1,000 $1.07

110 1,333 60 95.50% 1,305,460 979 $998 $1.02

111 2,423 117 95.17% 2,040,670 842 $756 $0.90

120 548 19 96.53% 511,408 933 $1,027 $1.10

121 3,734 111 97.03% 3,458,371 926 $912 $0.98

130 748 62 91.71% 603,330 807 $886 $1.10

150 768 33 95.70% 718,667 936 $891 $0.95

160 348 21 93.97% 297,620 855 $801 $0.94

161 128 4 96.88% 138,712 1,084 $1,092 $1.01

*TOTALS 41,275 2,272 94.51% 33,823,322 819 $837 $1.02

ALBUQUERQUE MULTIPLE LISTING SERVICE - SUMMARY

Source: CBRE* Any variances in totals are minor and are a result of weighting, rounding or non-representative units such as retail spaces.


ALBUQUERQUE MARKET OVERVIEW

Albuquerque is a unique combination of the traditional and the highly contemporary. It is a spectacular blend of diverse cultures, cuisines, people, and landscapes. It is a city with a rich history with evidence of inhabitation dating as far back as 25,000 years. Albuquerque has been called the most culturally diverse city in America with its balance of a prehistoric past and a high-tech present.

The city of Albuquerque, covering roughly 181 square miles, is located on a high, semi-arid plateau at an altitude of 5,311 feet. The Rio Grande River divides the city into east and west sides. Two major interstate freeways, the I-25 (north/south) and the I-40 (east/west), bisect the city. Historic Route 66, now Central Boulevard, also runs through Albuquerque.

Located at the approximate geographic center of New Mexico, Albuquerque serves as the state’s major commercial center. As the state’s largest urban metropolitan area, Albuquerque plays a central role in New Mexico’s economy, serving as a business, trade, finance, industry, and government center. Albuquerque’s moderate climates, breathtaking scenery, well-developed transportation network, and overall quality of life have all contributed to the city’s continued growth and prosperity.

The east side of Albuquerque is essentially built out, thus much of MSA growth has been on the west side, including the far Westside bedroom community of Rio Rancho. According to estimates by On Numbers, a national research firm, the Albuquerque MSA is the nation’s 59th-most populous MSA with 918,876 residents, up from 887,077 from the April 2010 Federal Census. The Albuquerque MSA accounts for nearly half of New Mexico economic activity.

ALBUQUERQUE MLS MAP

Source: Albuquerque MLS

Number of Properties Reporting 198

Total Units Reporting 41,275

Average Property Size 208 Units

Average Occupancy Rate 94.51%

Smallest Property 47 Units

Largest Property 572 Units

Earliest Year Built 1953

Latest Year Built 2016

Average Year Built 1983

ALBUQUERQUE PROPERTY STATISTICS - SUMMARY

The Department of Workforce Solutions December Labor Report showed continued favorable job growth throughout New Mexico. The December 2018 unemployment rate for New Mexico was 4.7%, down from 6.0% the previous December. Total New Mexico nonfarm payroll employment increased by 20,400 jobs, or 2.4 percent from the previous year. For the Albuquerque MSA, the unemployment rate was 4.7%, down from 5.6% a year prior. Most notably, total nonfarm payroll employment increased by 10,300 jobs or 2.6%. Gains in Albuquerque occurred by an increase of 7,900 jobs in the private sector, and 2,400 jobs in the public sector.

ALBUQUERQUE ECONOMIC INDICATORS

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Total Nonfarm Jobs and Unemployment Rate

Source: Bureau of Labor Statistics, January 2019. Not Seasonally Adjusted. Based on the data as of November 2018

410

400

390

380

370

360

350

340

330

320

9

8

7

6

5

4

3

2

1

0

Total Nonfarm Jobs Unemployment Rate Unemployment Rate-Preced 12-mo Avg

Total Nonfarm Jobs (000’s) Unemployment Rate (%)

0

1

2

3

4

5

6

7

8

9

320

330

340

350

360

370

380

390

400

410

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Total Nonfarm Jobs Unemployment Rate Unemploymenbt Rate-Preced 12mo Avg

Total Nonfarm Jobs (000's) Unemployment Rate (%)

Source: Bureau of Labor Statistics, January 2019. Not Seasonally Adjusted. Based on the data as of November 2018.


SANTA FE MARKET SURVEY SYNOPSISThe Santa Fe January 2019 apartment market survey is composed of 11 market-rate and 12 affordable communities totaling 3,685 units. By unit count, the survey consists of 48% market-rate and 52% affordable units. The large affordable percentage reflects a local government preference for affordable housing because of high home prices and a large population segment with moderate incomes.

Combined market-rate and affordable occupancy for January 2019 is 97.69%, an increase from 96.69% the prior year. Market-rate occupancy was 96.96% compared to 96.69% a year earlier. Affordable occupancy was 98.6% compared to 97.63% the prior year.

Combined market-rate and affordable year-over-year rent growth was 11.49%. Market-rate property rent growth was 13.66% compared to -1.00% the prior January. The unusually strong rent growth is due to a combination of strong market-rate demand coupled with the addition of a new 58-unit Class A market rate property in Santa Fe. Affordable community year-over-year rent increased by 7.58% compared to 3.00% the prior January. Affordable rent increases are normally constrained by limits on area median income (AMI).

Santa Fe’s supply/demand imbalance is continuing to resolve itself as the City of Santa Fe relaxes building requirements to ease the housing shortage. However, only a handful of projects are expected to actually break ground and deliver units in the next three years.

SANTA FE SURVEY DISCLAIMER

• The Santa Fe apartment market is relatively small, and the survey captures most large communities, at 3,685 units.

• The market-rate property population includes several large communities, and the results of an individual CBRE market report can be skewed by temporary or unusually aggressive short-term pricing programs.

• Santa Fe’s affordable communities operate under a number of different programs that can result in a wide range of asking rents for a particular unit type. We average these individual unit type rents without regard to the number at each price point.

• Anyone analyzing a single property is advised to conduct their own detailed survey of direct competitors.

ALL INDICATORS CONTINUE TO SHOW THAT SANTA FE IS STILL ONE OF THE TIGHTEST

RENTAL MARKETS IN THE COUNTRY

Source: CBRE

SANTA FE CONCESSIONS


do not provide “Rent Concessions”

Source: CBRE

SANTA FE CONCESSIONS

Santa Fe Occupancy

0-79.9%

80-84.9%

85-89.9%

90-94.9%

95-100%

1% 6%

33%

60%

0 - 79.9%

80-84.9%

85 - 89.0%

90 - 94.9%

95 - 100%

91%

9%


Unit Type Total # Units Percent Mix

# Vacant Units


Weighted Average

SQ FT

Weighted Average

Rent

Rent Per SQFT

Studio 399 10.83% 6 98.50% 203,823 511 $752 $1.48

1 Bed / 1 Bath 1,004 27.25% 23 97.71% 654,123 652 $952 $1.48

2 Bed / 1 Bath 831 22.55% 16 98.07% 674,479 812 $989 $1.19

2 Bed / 2 Bath 933 25.32% 24 97.43% 871,706 934 $1,152 $1.21

3 Bed / 1 Bath 42 1.14% 1 97.62% 36,912 879 $942 $1.05

3 Bed / 2 Bath 431 11.70% 15 96.52% 475,628 1,104 $1,337 $1.19

4 Bed / 2 Bath 45 1.22% 0 100.00% 56,161 1,248 $1,228 $0.97

TOTALS 3,685 100.00% 85 97.69% 2,972,832 807 $1,038 $1.29

SANTA FE MARKET SURVEY - SUMMARY

Source: CBRE* Any variances in totals are minor and are a result of weighting or rounding

MLS Area Total # Units # Vacant Units


Weighted Average

SQFT

Weighted Average

Rent

Rent Per SQFT

2 162 0 100.00% 158,554 979 $1,671 $1.71

3 770 23 97.01% 613,492 797 $1,153 $1.45

4N 403 5 98.76% 335,043 831 $926 $1.11

4S 895 13 98.55% 655,304 732 $932 $1.27

13 1,455 44 96.98% 1,210,439 832 $1,001 $1.20

*TOTALS 3,685 85 97.69% 2,972,832 807 $1,038 $1.29

SANTA FE MULTIPLE LISTING SERVICE - SUMMARY

Source: CBRE* Any variances in totals are minor and are a result of weighting or rounding


SANTA FE MARKET OVERVIEW

Santa Fe, founded in 1610, is located 50 miles north of Albuquerque and is a world-renowned tourist destination that attracts 1.5 million visitors annually. Santa Fe also serves as the New Mexico state capital, is the oldest capital city in America and the fourth largest city in New Mexico with a population of about 80,000. Santa Fe continues as an attractive apartment market due to relatively high single-family residential prices coupled with slow supply growth due to a combination of affordability requirements on all new residential development and high land and construction costs in relation to rents. According to Zillow.com, Santa Fe’s median single-family home value in September 2018 is $387,400, while the median price of homes currently listed is $525,000. Expensive single-family home prices coupled with a large cohort of hourly or relatively low wage workers continue to favor renting for many.

The seasonally adjusted unemployment rate for the Santa Fe MSA was 4.3% in December 2018, up from 4.0% a year earlier. Total nonfarm employment was up 400 jobs with the private sector gaining 600 jobs and the public sector losing 200 jobs. Most private sector gains came from the private service providing industries which were up 500 jobs.

Santa Fe employment tends to expand most during the prime summer tourist season, although tourism friendly activities and events continue year-round. Among Santa Fe’s world-famous attractions are the Santa Fe Opera, the Santa Fe Indian Market, the Spanish Market, more than 300 art galleries, 50 Indian jewelry shops, hundreds of restaurants with many nationally ranked, and some of the finest museums in the country.

SANTA FE MLS MAP

Source: CBRE

Number of Properties Reporting 23

Total Units Reporting 3,685

Average Property Size 160 Units

Average Occupancy Rate 97.69%

Smallest Property 58 Units

Largest Property 416 Units

Earliest Year Built 1973

Latest Year Built 2018

Average Year Built 1995

SANTA FE MULTIFAMILY PROPERTY STATISTICS - SUMMARY


PURPOSEThe purpose of the Albuquerque/Santa Fe Apartment Market Survey is to satisfy demand from property managers, investors, lenders, appraisers, and other real estate professionals for comprehensive information about Albuquerque and Santa Fe rents and occupancy. We are committed to making this data as widely available as possible.METHODOLOGY

CBRE originally included all Albuquerque properties totaling 90 or more units and has been gradually adding representative smaller properties. This survey sample includes substantially all of Albuquerque’s larger properties but omits certain non-representative properties as well as new properties in lease-up and those undergoing heavy renovation programs resulting in non-representative vacancy.

The January 2019 Albuquerque market survey population includes 198 properties totaling 41,275 units. Of these, 152 properties totaling 33,618 units are market rate and 46 properties totaling 7,657 units are affordable (income restricted).

The January 2019 Santa Fe market survey encompasses 23 Santa Fe properties totaling 3,685 units. This represents most apartment complexes of more than 80 units and some smaller properties. The Santa Fe population is composed of 11 market-rate properties totaling 2,038 units and 12 affordable properties totaling 1,647 units.

The objective of the survey is to determine weighted average occupancy and rent for individual unit types and for the overall market. The survey also reports data by Greater Albuquerque Association of Realtors MLS areas, which are generally homogeneous residential neighborhoods. This facilitates comparison of multifamily data with single family residential data.

The CBRE market report is comprised of Class A, B and C market-rate and income-restricted properties as well as properties with varying degrees of utilities paid by either the tenant or the property. Properties that include utilities in the rent generally have lower rent than those that do not, which is counterintuitive, but reflects their catering to a lower-income clientele that needs certainty of their monthly housing expenses. Because of the diversity of properties surveyed, we believe that the CBRE report accurately reflects Albuquerque and Santa Fe market averages and trends.

We consider concessions as only those “specials” that affect first month or ongoing monthly rent. Concessions that result in reduced rent for the entire term of the lease are treated as rent reductions and are also counted as concessions. Concessions continue to be moderate in Albuquerque and rare in Santa Fe, and tend to relate to short-term exposure with a particular unit type or other special circumstances.

We ask properties on a “yes” or “no” basis if they offer rent concessions and report the response as a percentage of all responders. Concessions come and go and are difficult to accurately quantify, but we believe that significant trends over time in the percentage of properties offering some form of concession give an indication of the market’s health.

MARKET OCCUPANCY AND RENT ARE REPORTED BY WEIGHTED AVERAGES:

Weighted average figures for occupancy and rent more accurately reflect market performance than do arithmetic averages. Total market and individual unit occupancy and rent are reported as weighted averages.

Please note that reported rents are “asking rents” and should be adjusted to take into account loss-to-lease and concessions. Vacant units are physically vacant or empty units and would include a vacant but pre-leased unit.

SURVEY TIMING

CBRE produces the survey three times annually: In January to correspond to the winter occupancy low point, in May to correspond to the usual spring rise in occupancy, and in September to correspond to the end-of-summer occupancy peak

CUSTOM REPORTS

The CBRE market survey summary contains basic information on the overall Albuquerque and Santa Fe apartment markets and on the MLS districts making up the markets. CBRE also has the ability to prepare more detailed custom reports containing in-depth information on specific market segments or areas and will consider doing so upon request.

SPECIAL ACKNOWLEDGMENTS

We would like to offer a very special congratulations to Mr. David Eagle on his recent retirement from CBRE. Mr. Eagle ended a 13 year-long tenure with CBRE’s Albuquerque office and was instrumental in first implementing the Albuquerque-Santa Fe apartment market survey in May of 2008, nearly 11 years ago. His efforts have brought valuable information to owners, investors, and lenders of the Albuquerque and Santa Fe markets. We wish him the absolute best in his future endeavors and thank him for his dedicated leadership and guidance.

We also wish to thank the property owners, property management firms and their senior management, regional managers, and on-site staff who have made this survey possible by providing rental rates and vacancy data. We will continue to seek recommendations from them for adjustments or additions to future surveys that will make it an even more useful management tool.

CBRE MULTIFAMILY PROFILE

The CBRE national multifamily platform features market-leading professionals in most major markets across the country. The national team’s constant exchange of market intelligence provides a foundation for the highest level of service to our local and national clients.

The CBRE New Mexico Multifamily Group is committed to providing the most accurate and comprehensive information possible about our local apartment markets. The team consists of the following individuals:

PURPOSE, METHODOLOGY & ACKNOWLEDGMENT

BILLY EAGLEFirst Vice President+1 505 837 [email protected]

ERIK OLSONFirst Vice President+1 505 837 [email protected]

© Copyright 2019 All rights reserved. Information contained herein, including projections, has been obtained from sources believed to be reliable, but has not been verified for accuracy or completeness. CBRE, Inc. makes no guarantee, warranty or representation about it. Any reliance on such information is solely at your own risk. This information is exclusively for use by CBRE clients and professionals and may not be reproduced without the prior written permission of CBRE’s Global Chief Economist.

CHRIS SOTOClient Services Specialist+1 505 837 [email protected]

january 2019 albuquerque/santa fe ......n anuary 2019 albuquerque/santa fe multifamily market survey...

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