FEATURE ARTICLE, MARCH 2006
Albuquerque's Retail Sector Stands On Its Own
Albuquerque metro area retail activity in 2005 could be called the freestanding frenzy. The majority of new construction delivered and space absorbed was dominated by freestanding centers. The more than 800,000 square feet of new buildings included two Wal-Mart Supercenters, a Target, three Walgreens and a Sam's Club.
The 2006 Albuquerque market should see similar results in terms of total retail square feet delivered this year, but with less freestanding buildings and more power and lifestyle centers in the mix. With all this new construction coming on line this year, retail tenants will continue to see a separation of classes. Lease rates for new retail construction are expected to exceed $24 per square foot for smaller suites while similar spaces in older centers will cost as much as 50 percent less.
Albuquerque's Uptown submarket will be very active in 2006. El Paso, Texas-based Hunt Development has broken ground on the retail phase of the long-awaited ABQ Uptown project, a 170,000-square-foot lifestyle center. Scheduled to open in fall 2006, ABQ Uptown will bring several new national retailers and restaurants to the city. With lease rates almost 50 percent less than those in ABQ Uptown, nearby centers should be well positioned for positive absorption.
Across the street, Winrock Center finally received approval for its redevelopment from an enclosed regional mall to an outdoor lifestyle center called Winrock Market Center. This major renovation, which gets underway later this year, is a joint venture between Cousins Properties and Prudential Real Estate Investors. The development will have about 1 million square feet of various freestanding and inline retail sites. No major tenants have been announced yet.
Across the Rio Grande River to the northwest of Albuquerque lies the fastest growing city in New Mexico, Rio Rancho. Since 2000, the city of Rio Rancho has added more than 17,000 residents, a 33 percent increase. Rio Rancho is the home of one of Intel's most productive plants, which employs more than 5,200 workers. Rio Rancho's economic development department is eager to shore up the city's retail leakage into the Albuquerque market and has various incentive programs available to retailers to fund some building costs with collected gross tax receipts.
A new Wal-Mart Supercenter is scheduled to open in Rio Rancho this spring. The move has already spurred additional retail projects in the surrounding area. As the neighboring Cottonwood Mall area becomes completely developed, Rio Rancho will appear on the radar screens of more national retailers. Opening in late 2006, a new Rio Rancho events center is currently under construction next to what will be a new 60,000-square-foot city hall. Called the Rio Rancho City Centre, the entire project will be a big driver for additional retail, office and industrial growth.
Albuquerque's South Valley submarket should begin to attract additional retail projects this year as well. In particular, the area south of Central Avenue and west of Coors Road has seen tremendous residential growth. This submarket is expected to grow by 23 percent from 2004 to 2009. One of the biggest projects planned for the area is Silver Tree Shopping Commons, a 240,000-square-foot shopping center scheduled to begin construction in fall 2006.
Ken Schaefer is director of brokerage operations for Grubb & Ellis|New Mexico in Albuquerque.
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