Unraveling the Dynamics: A Examination of the U.S. Industrial Market Slowdown and Albuquerque’s Resilience

As we approach 2024, the U.S. industrial market shows signs of slowing down, with a national vacancy rate of 5.5%, which is still below the 20-year average of 7.3%. This shift is partly due to increased industrial developments since mid-2022, raising the rate from its previous low of 3.9%.

However, the story is different for Albuquerque’s industrial market, which stands out with a significantly lower vacancy rate of 3.5%. This is attributed to consistent demand outpacing the limited supply over the past decade, maintaining a robust market despite the national slowdown.

2023 saw higher interest rates, which significantly reduced new industrial projects, potentially leading to fewer completions by 2024. Despite these challenges, Albuquerque’s rent growth has been strong at 4.6%, though slightly below the national average of 6.6%.

The industrial investment market also experienced fluctuations. Despite a 50% drop from late 2021 peaks, the transaction volumes in Q1 2023 exceeded the pre-Covid five-year average by 12%. However, Q2 2023 marked a slowdown, the slowest since Q2 2017. Property valuations in Albuquerque have seen a rise in cap rates by 100 to 150 basis points, indicating a changing landscape in property investment values. Despite this, the Albuquerque industrial market has remained relatively illiquid, with less than 5% of inventory trading annually.

Key Statistics:

  • Vacancy Rate: 3.5% in Albuquerque vs. 5.5% nationally
  • Rent Growth: 4.6% in Albuquerque vs. 6.6% nationally
  • Average Cap Rate: 8.4%
  • Market Sale Price per SF: $106

Albuquerque’s industrial market has focused on rent growth in a tight market and owner-occupant purchases to stabilize long-term occupancy costs amidst rising rental rates.

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