If most Desert southwest markets in the downturn were like the super-quick bunny in the Tortoise and the Hare fable, speeding ahead during the exuberant housing boom only to collapse during the recession, then Albuquerque is the slow, steady tortoise.
Some owners eschewed Albuquerque for markets with higher returns during the boom, when Albuquerque’s rental market was seeing only 1 percent to 3 percent growth, says Kelle Senyé, Executive Director of the Apartment Association of New Mexico.
But for the owners who chose to stay, Albuquerque’s slow growth turned out to be a blessing after other overheated markets collapsed in the downturn. Whereas markets such as Las Vegas and Phoenix struggled under the burden of excess and shadow market housing, Albuquerque’s supply seemed just right.
“Albuquerque did not have the single-family home issues; it did not have the run-up in value or overbuilding,” says John Rials, Managing Director for Real Estate at Greystar, in charge of the company’s Desert Southwest portfolio, which includes 14,500 apartments. “The market stayed much more stable from an employment standpoint because it had no single-family home issues.”
As a result, apartment managers were able to keep pricing more consistent than in many markets around the country, Rials says. “We didn’t have the panic, or the necessity to combat vacancy losses with concessions,” he says. “We would get what the markets would give us with rent growth and manage expenses as best we could. It’s more of a slow, stable environment than some markets.”
Effective rents in Albuquerque have grown 8.9 percent from an average of $621 in January 2009 to $676 in January 2011, according to a report from David Eagle, Senior Vice President, CBRE Capital Markets, Multi-Housing Group, in Albuquerque.
Eagle expects the market to remain stable in the year ahead despite stagnant employment growth, due in large part to a lack of new construction. The east end of the city has been built out for years, he says, and there are only a handful of near-in parcels on the west side.
With little new supply coming online and no shadow market of vacant single-family homes to compete with, Albuquerque is outperforming its Southwest competition, Rials says. Greystar’s Q1 total income in Albuquerque is up 4.5 percent year-over-year. “Not many markets can say that,” Rials says.
But in a slow and steady market without much population growth, it’s going to be critical for companies to invest in the education of their team members, Senyé says. “If we do start to see new building, companies are going to want to put themselves in the strongest position.” –NAA’s Jeffrey Lee