Santa Fe COMMERCIAL REAL ESTATE
2014
VOL. XX
#1 Shopping City in USA —USA Today 2013
• RETAIL on fire • OFFICE recovering • HOTELS happier
#2 Destination City in USA —Conde Nast Traveler 2013
1979 - 2014
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however, have ironically come down. Downtown’s vacancy rate dropped below 5% for the first time since 2009, which stands today at 4.93%. With the addition of Talon Market and the Luna Development, Downtown added 28,192 square feet of new, net leasing (more space leased than vacated). The Southside District has doubled its square footprint since 1990 and has an even lower vacancy rate than Downtown. The 2014 vacancy rate is listed at 4.13% with the average square foot triple net rate at $15.50 per square foot. The Medical District, which includes the Plaza Entrada Shopping Center at Zia Rd and St. Francis, continues to struggle with leasing. The area has over 26,000 square feet available or a 15.31% vacancy rate. The Westside, which includes lower Airport Road is benefitting from limited supply and a growing household population. The 2014 vacancy rate is less than 1% DOWNTOWN with a respectable average rate of $13.05 Downtown Santa Fe of course, is the heart per square foot. of the retail market. Rates have come sub- Santa Fe’s newest sector and the stantially down since their peak in 2007. fastest growing is the area surrounding Average square foot rates have dropped the new Super Walmart. With new gas just over 18%, which is off its average high stations, coffee shops, and fast food restauof $29.29 per square foot in 2007, to $23.89 rants, the area will continue to benefit today (triple net). from a growing population moving in its Downtown retail vacancy rates, direction.
RETAIL
anta Fe’s retail market is one of the hottest in the country, according to USA Today readers. With a few exceptions, both residential and retail real estate will continue to sizzle in 2014 and produce as much pop as it did in 2013. Due to a confidence not seen since 2006, investors and tenants are once again willing to buy and lease. In fact, a flurry of commercial acitivity has taken over the City Different despite headwinds of a lagging overall job market. Santa Fe’s commercial real estate is at a critical point where sustained job loss in its core economic base, which includes government and services, poses the biggest risk to retail sales in general. Concerns about the economy remain, so shoppers are not quite ready to buy with abandon. However, with a stable tourist market and limited new retail supply, Santa Fe’s overall vacancy rate dropped to below 5% for the first time since the Great Recession.
Santa Fe 2014 Retail Market Statistics Net Space
Space Available 2014 Vacancy
Sq Ft Rate
2013-2014
Net Absorption
Downtown South Capitol District Cerrillos Corridor Medical District Southside Westside Southwest Sector
1,595,858 175,266 880,953 173,450 2,327,676 501,145 185,000
77,149 18,081 44,299 26,551 96,188 4,493 6,525
4.83% 10.32% 5.03% 15.31% 4.13% 0.90% 3.53%
$23.89 $10.25 $19.50 $10.75 $15.50 $13.05 $13.86
(28,192) 3,010 (14,799) 1,009 (28,494) (2,735) (7,675)
TOTALS
5,839,348
273,286
4.68%
$15.26
(77,876) 1
2013 Retail Market
Rank
Santa Fe’s 2013 retail market posted its first positive absorption of leased space since 2008. The 2013 overall vacancy rate decreased slightly to 5.27%. Nearly 30,000 square feet was positively absorbed but overall the retail leasing activity is relatively flat. The positive gains in one sector were generally offset by a net loss of tenants in the Cerrillos Road Corridor. Part of the issue may have been road construction that recently completed however, the commercial corridor suffers from high turnover and shifting traffic patterns.
Place
Likes 10,732 1. Ten Thousand Waves 2. Museum of Indian Arts & Culture 9,655 7,187 3. Inst of American Indian Arts 8,893 4. Georgia O’Keefe Museum 4,154 5. NM Museum of Art 3,727 6. Lensic Theater 7. Back at the Ranch Cowboy Boots 3,681 3,237 8. Museum of Intl Folk Art 2,822 9. NM History Museum 2,381 10. The Pantry Restaurant
Source: Facebook, March 6, 2012
Cerrillos Road historically was known for slow traffic and dangerous driving conditions. After a $10 million in road improvements and new landscaping, the street is no longer a parking lot and today moves traffic much more efficiently. However, with some left hand turns now gone, some C-2 properties are feeling the reprocussions.
Downtown Westside Cerrillos Southwest (to be added)
Corridor
The Southside continues to house the bulk of the retail space and sales in Santa Fe county. Strong leasing activity at the Target Center along with new store openings at Santa Fe Outlet mall helped propel Santa Fe to overall positive leasing activity—albeit at a small fractional gains compared to pre-2008.
LaLas
South Capital
Medical District South Side
The overall vacancy rate decreased slightly from 5.97% in 2012 to 5.27% today.
Santa Fe 2013 Retail Market Statistics Net Space
Space Available
2013 Vacancy Planned Space
Net Absorption
Downtown South Capitol District Cerrillos Corridor Medical District Southside Westside Southwest Sector
1,563,858 175,266 880,953 173,450 2,316,176 501,145 178,200
73,341 15,071 59,098 25,542 124,682 7,228 0
4.69% 8.60% 6.71% 14.73% 5.38% 1.44% 0.00%
80,000 0 128,000 0 272,000 220,000 125,000
(3,445) 5,145 (23,176) 6,640 26,702 18,002 n.a.
TOTALS
5,789,048
304,962
5.27%
825,000
29,868 2
WINNER: BEST U.S. CITY FOR SHOPPING Chosen by readers of USA TODAY
NEW YORK
1st
2
Santa Fe, NM
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CHICAGO
istory and commerce collide in Santa Fe, a mix of western wear, wester decor, fine art and chic fashion jostling for retail space. The city has also embraced the ‘shopping local’ mantra and a weal of local artists and artisans are well-represented. Resorts and hotels all have amazing boutiques and gift shops, while the city’s famed historic downtown area and Canyon Road are must-dos for any avid shopper. Savvy shoppers head to the Tesuque Flea Market northwest of the city for art, decor, rugs, jewelry and vintage western wear.
D.C.
SEATTLE
10
ORLANDO
9
3 MEMPHIS
4 LAS VEGAS
5
DALLAS
8
ATLANTA
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Santa Fe, New Mexico QI • 2014
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Santa Fe Office Market Softening rents and limited construction has helped turn around the Santa Fe office market. The overall vacancy rate dropped below 10% for the first time since 2009. The 2014 overall estimated vacancy rate for January is 9.28% versus a 15.51% vacancy rate in late 2010. Santa Fe’s office occupancy numbers relate directly to Santa Fe’s labor force. According to the U.S. Bureau of Labor Statistics, the civilian labor force in Santa Fe County bottomed in 2011 and shares a positive correlation with the uptick in labor and the decreasing office vacancy rate. MARKET INDICATORS 2013 VACANCY RATE NET ABSORPTION
Santa Fe 2011 CONSTRUCTION Retail Market Statistics RENTAL RATES Net Space
The labor market is still off its peak in 2008 where the labor force swelled to over 78,000 and vacancies dipped to near 5%. Downtown The several large, contiguous blocks that were available downtown have been slowly broken up and being absorbed. Downtown’s 2014 vacancy rate plummeted to 8.48% as rental rates dropped across the city. The “First Interstate Building” as originally known, is making a turnaround as the financial industry in Santa Fe makes 2008-2010 its slow comeback. Overall, the Downtown sub-market has absorbed Space Available 2010 Vacancy Planned Space Net Absorption over 120,000 square feet since 2011. The City of Santa Fe took over 23,000 of vacant office space 72,826square feet4.69% 80,000 at the Railyards (10,602) in order17,428 to move the Land-use and Parking divisions while Wells 9.94% (9,794) 31,759 3.60% (19,481) Fargo Advisors took over 12,000 square 112,000 feet at the Montgomery 0% private as well as- government leases (0) and Andrews0Building. Many 179,428 were restructed in order7.75% to reflect the new272,000 market realities.(80,503)
Forecast 2014 Downtown 1,553,758 South Capitol District 175,266 VACANCY RATE Cerrillos Corridor 880,953 Medical District 173,450 NET ABSORPTION Southside 2,316,176 Westside 446,809 8,750 1.96% CONSTRUCTION South Capital District TOTALS 5,546,415 310,191 5.60% The area surrounding the section RATES Source:RENTAL Allen Branch, Branch Realty Commercial Advisors, Commercial Association of Realtors New Mexico
Santa Fe 2014 Office Market Statistics Net Space
TOTALS
2,280
614,000 of St. Francis Drive and (118,097) Cordova Road is again showing the most favorable vacancy rate in the city at 2.87%. The area has historically been the most responsive to market conditions and prices its rents accordingly. Nevertheless, the area’s vacancy rate decreased to 2.87% with low lease turnover and no new construction.
© 2011 Allen Branch
Downtown South Capitol District Cerrillos Corridor Medical District Southside Westside*
150,000
Space Available
1,000,013 227,737 98,500 540,894 929,358 477,953 3,274,455
84,771 6,540 10,100 21,847 173,263 7,350 303,871
2014 Vacancy
Average Sq Ft Rate
2011-2014 Net Absorption
8.48% 2.87% 10.25% 4.04% 18.64% 9.28%
$20.29 $15.09 $11.95 $16.95 $15.61 $14.95
(120,409) (1,510) 21 (16,366) (17,542) (43,500)
9.28%
$15.80
(199,306)
*Includes Office/Warehouse. Does not include government owned buildings. Average rates are asking rates per year (modified gross). Source: Allen Branch, Branch Realty Commercial Advisors © 2014 Allen Branch
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Medical District The healthcare and social service employment in Santa Fe metro is projected to grow 25.5% by the year 2021 according to New Mexico Workforce Connection. These numbers reflect the Medical District’s office occupancy numbers and as shown by its continued strong leasing activity. The area positvely absored (net leased) 16,366 square feet since 2011 and posts a 4.04% office vacancy rate. Southside Several large contiguous blocks of office space have been temporarily leased by the State of New Mexico and have helped bring down the area’s swollen vacancy rate. The Southside sub-market, which is the area defined as south and west of St. Michael’s and St. Francis Drive, however, still suffers from an 18.64% vacancy rate. While the amount of office space available remains virtually unchanged since 2009, the area is still plagued by former large government buildings. Plans to consolidate all state agencies located in private buildings located in Santa Fe has been stalled, but is still in the moving forward at the General Services Division. Governor Richardson and his finance board pushed through a last minute deal to end all private leases in the Capitol City in 2008h before turning the reigns over to his successor. Governor Martinez has yet to determine the fate of Las Soleras and its future impact on the Santa Fe office market. Summary Approximately 304,000 square feet of office space remains available in the City Different on 3.24 million square feet of total inventory. Leasing activity is turning positive but the recent federal job losses and still uncertain state government consolidation looms as we move towards a new cycle. We expect the market cycle to yield further positive leasing absorption in both the outlying and CBD office markets over the next 18 to 24 months. Rates are expected to remain flat until vacancies drop below 7%.
78,000 76,000
Santa Fe County Labor Force
Santa Fe County Gross Receipts
(Billions)
$1.450
$1.400
$1.350
$1.300
$1.250
$1.200 2005
2006
2007
2008
2009
Branch Realty Commercial Advisors is a consulting firm offering professional expertise in urban planning, real estate analysis, market studies, and commercial real estate development services. This broad range of services enables the firm to bring a project from the initial feasibility stage, through planning and approvals, to specific design and construction. Branch Realty Commercial Advisors provides in-depth local market knowledge for public, private, and nonprofit clients since 1979. 228 S. St. Francis Dr. Bldg. E Santa Fe, NM 87501 T: 505.984.8100 F: 505.984.8801 www.branchrealty.com Form information contact: Allen Branch 505.920.9900 Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof.
Office Vacancy Rate
74,000 72,000 70,000 68,000 66,000 64,000
Sources: University of New Mexico, Bureau of Business and Economic Statistics, U.S. Dept. of Labor Statistics (june data), Branch Realty Commercial Advisors
2010
Source: University of New Mexico, Bureau of Business and Economic Statistics
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YEARS OF 6 REAT RESULTS
TARGET
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Qr branch COMMERCIAL ADVISORS
Albuqueraue
9651 Merion Cir"'NE Albuquerque,NM 87111 505.984.8100
Santa Fe
228 S. St. Francis Dr. Santa Fe, NM 87501 505 .984.8100 505 .920.9900
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