For more than two decades, NAIOP New Mexico’s 232 members and 144 member companies have been led by the husband-and-wife team of Lynne Andersen and John Gallegos (Lynne has served as chapter president for 26 years; John has been vice president for 21 years). They are retiring at the end of 2021.
“My husband joined me five years into my 26-year journey with NAIOP,” Lynne Andersen recently told Development magazine. “He had just sold his business and was looking for something to do. Since he is better than I am at math, I convinced him that this partnership was going to be fun. Thanks to the incredible people we work with, it has been.”
Lynne’s background was teaching, marketing and publishing, and John was a small-business owner.
“Together we have learned about the multi-faceted world of development from the ground up,” she said. “I actually understand, and can discuss intelligently, issues such as impact fees, acre feet of water, cap rates, supply chains and other fascinating real estate topics.”
Andersen says her most meaningful memory during her time leading the chapter demonstrated the kindness of the local real estate community.
“Our 28-year-old son was diagnosed with Stage 3 cancer and with multiple tumors throughout his body,” she said. “The chapter rallied around us, working with our need to be out of state for months for special operations, jumping in to handle chapter needs and even setting up a GoFundMe account for our son. I don’t want to sound maudlin, but the members were a warm blanket around all three of us. The happy ending is that our son is cancer-free.”
Andersen asked members of NAIOP New Mexico to share their thoughts on what's going on in the state's commercial real estate markets.
Development: How are the market conditions for member companies in New Mexico?
According to Debbie Harms, CEO of NAI Sun Vista Commercial Real Estate and 2019 past president of NAIOP New Mexico, the state’s member companies, from developers to contractors and brokerage houses, are seeing activity that is rapidly advancing to full capacity. However, they are also experiencing labor and material shortages caused by the pandemic.
Harms said Albuquerque’s office market, which had lagged other property types, was finally recovering from the Great Recession when the pandemic hit.
“It’s been a long, slow slog for our member companies,” said James Chynoweth, managing director for CBRE’s Albuquerque office and a past president of the New Mexico chapter. “Finally, in 2019 activity picked up, projects started, users were looking and everyone was busy. 2020 was going to be a great year, dare we say a breakthrough year. At least that was the plan.”
Chynoweth said New Mexico’s recovery will likely be a little slower than other states, but several factors should help it in the coming years.
“Quality of life is more important than ever in attracting talent,” he said. “Big, dense cities are not as appealing as they once were. The lower cost of living here creates added lifestyle opportunities.”
During the past year, Albuquerque has enjoyed new growth in several sectors of office occupants (medical, government, labs, education, IT, etc.), and the growth/influx of these businesses is driving down the vacancy rate of office product. Chynoweth said vacancies in all product types across the state are very low. For example, multifamily occupancy is at 97%; office vacancy rates are at 15.1% marketwide but only 8.1% for Class A space.
Development: What are the challenges you’re facing in either the business or regulatory climate in New Mexico?
“The Albuquerque/Santa Fe metro area is challenging and unpredictable regarding their entitlements and approval processes, even with Albuquerque’s recent Integrated Development Ordinance (a 2017 streamlining of city zoning regulations),” said Kurt Browning, a partner with Titan Development and a 2015 past chapter president who also serves on the national NAIOP Board of Directors. “Neighborhood associations and multiple agencies have significant input into developments, creating unpredictability and delays.”
Browning said New Mexico’s tax policy is outdated and does not encourage growth. For example, it has a gross receipts tax that immediately adds almost 8% to the cost of any development. There are state programs to assist relocating or expanding businesses, but they are difficult to navigate.
Development: What are the big opportunities in commercial real estate in New Mexico right now?
“New Mexico is ideally positioned for commercial investment and development in several sectors,” said Benjamin Gardner, president of Dekker | Perich | Sabatini and a NAIOP New Mexico board member. “With a burgeoning film industry and the expansion of Netflix, NBC Studios and others, opportunities abound for service providers to become part of the supply chain for these industries. Most of these film companies are incentivized with state and local tax credits that are somewhat based on jobs created here and money spent on local services and materials.”
Because of New Mexico’s climate, 300-plus days of sunshine and unique topography, Gardner said solar and wind energy production and development are booming. They are gaining ground on New Mexico’s No. 1 revenue generator, oil and gas. (New Mexico recently surpassed North Dakota to become No. 2 in oil and natural gas production nationwide, according to the U.S. Energy Information Administration.)
Beyond film, renewables, and oil and gas, Gardner said aerospace activity is strong and diverse, with a multitude of commercial, industrial and defense contractors settling in or looking seriously at New Mexico for manufacturing and research and development facilities.
“We have also seen an increase in inquiries from firms looking at reshoring their manufacturing to New Mexico’s inland port at Santa Teresa in the southern part of the state,” he said.
According to Gardner, opportunities for commercial and industrial development are vast and so is New Mexico’s landscape of available undeveloped land (it is the fifth-largest state by area in the U.S.). But available infrastructure, entitlement processes, tax structure, and a limited skilled workforce are challenges.
“The business community, the local NAIOP chapter, and New Mexico’s universities and community colleges are all are working hard to help make New Mexico more business friendly and competitive by focusing on overcoming these challenges,” he said.
Development: Have there been educational sessions specific to New Mexico or your chapter recently?
“Education has always been a core benefit for chapter members,” Andersen said. “We have 11 luncheons a year with major speakers on important industry topics. In the first part of 2021, COVID-19 turned many of those into Zoom meetings, but we moved to in-person gatherings in June. Our Zoom meetings averaged 150 attendees. Our in-person meetings are averaging about 250 attendees at this point.”
Topics covered included the impact of drought on real estate in New Mexico, an Albuquerque City Council candidate forum with nine candidates and the senior editor of Albuquerque Journal newspaper serving as moderator, and a “state of the state” session with New Mexico Gov. Michelle Lujan Grisham.
Trey Barrineau is the managing editor of publications for NAIOP.