New Mexico Commercial Real Estate Market Trends Analysis

Industrial properties are a class of commercial real estate that is used by companies that do business with other businesses (B2B tenants). Industrial tenants may be manufacturers and intermediaries such as supply houses.

Recently an additional group of industrial renters has been developed by fulfillment centers that disburse online purchases to retail purchasers.

The holders of industrial assets are also long-term investor-landlords. Their investment projections rely on income from both lease and the eventual sale of the asset. Industrial leases can be structured on either gross or net rent conditions.

Annual and 10 Year Population Growth

Population statistics are important for industrial investment plans for reasons that are different from investing in housing. Sluggish or declining populations mean a shrinking tax base. If the local municipality can’t gather adequate taxes, it can’t maintain its obligations to sufficiently administer the infrastructure that industrial tenants need.

A shrinking population is an accurate signal that business property values are presumably to shrink as well. A big consideration for industrial tenants is the availability of suitable workers. Significant industrial tenants will avoid markets that are losing citizens.

Property Tax Rates

Industrial investors use property tax trends as an indicator of the strength of a community, akin to multifamily investors. Consistent tax rates are the sign of a foreseeable environment for your investments.

Investors may need to read more about commercial property taxation and commercial real estate tax reduction from our guides.

Accessibility

Industrial building renters typically haul large amounts of goods or unwieldy products. Big tractor-trailer trucks are utilized to ship these items. Industrial properties need to be close to major roads so that large vehicles can reach them without complications.

There are industrial businesses that utilize trains or airplanes to ship their goods. This makes being near an interstate, which typically runs near airports and railway hubs, a big advantage for industrial assets.

Utilities

Manufacturing companies usually use significant levels of electricity and water. A property missing the capability to supply suitable utilities won’t draw those tenants.

Businesses that are housed in retail spaces sell directly to the people in the area. This includes single-tenant and multi-tenant assets. Desirable companies for single-tenant locations are drug stores, automobile parts stores, banks, and restaurants.

A property that houses a couple or more renters is multi-tenant property, as are “neighborhood” shopping centers, “strip” malls, grocery anchored centers, or malls with large nationally known tenants called “big box” shopping centers. A big center with a mix of types including office, retail, and residential are called “lifestyle” shopping centers.

Retail landlords utilize “net” lease agreements that require the tenants to separately take responsibility for the taxes, property insurance, and maintaining the common areas including the parking lot. Tenants are responsible for the maintenance of the building as well.

Retail renters have specific site requirements that retail investors follow when analyzing demographic data.

Population Growth

The overall information for the region being considered isn’t enough for retail investors. The important information will correspond to the immediate area around the marketed investment property. Retailers need to locate where their shoppers live, commute past, or are employed.

A trade area that doesn’t already contain enough “rooftops” will not work for retailers no matter if it is expanding. Retail property investors need to analyze the current population growth, average yearly population growth, decade population growth, and daytime population.

Median Income

The population’s wage levels are a significant part of retail site requirements. Higher incomes show a good place for top end retailers, and middle wages are good for blue-collar retailers such as auto equipment stores.

Median Age

Age data is more useful to retail investors than other investor categories. Depending on the type of center (grocery anchored, entertainment anchored, big box retailers) the age of the populace could attract desirable retail tenants.

Property Tax Rates

The prior illustration of the way property tax rate information is used by industrial and apartment complex investors pertains to retail investors also. Higher taxes equate to higher rents which increase vacancy rates, and places with expanding tax rates frequently have shrinking property values.

In an area showing elevated property tax rates, it’s even more important to check if the property isn’t overpriced by the tax office. Protesting property taxes can be outsourced to the best commercial real estate lawyers in New Mexico.

Office space is leased to companies that need a place for their employees to operate. Office areas could be big or small. Major brands often prefer to utilize their money for business improvement instead of buying property.

The lease contract utilized for office renters is a gross lease agreement, sometimes called a “full service” lease. These kinds of lease agreements add the landlord’s expenses, such as real estate tax and insurance into the rent. You could deal with modified variations of gross leases that are altered to fit that specific circumstance.

Long-term investments such as office properties provide long-term rental income and the expected income from the ultimate sale of the asset.

Population

The populace demographic data that office space investors hunt for needs to demonstrate a sufficient supply of workers for office tenants. This includes the populace’s size, age, and education level. It’s critical for landlords to realize what their prospective tenants want and to study the area accordingly.

Property Tax Rates

A properly managed city or county that attracts potential office employees to the market will not have excessive or constantly rising tax rates. Good tenants for your property will analyze this factor and so should you.

Incomes/Cost of Living

Office tenants see existing income standards as one indication of the qualifications of the labor pool. The statistics also helps the lessees budget for labor expenses.

Education

The level of education completed by the possible market’s populace is specifically significant to major office renters. A call center might not need college graduates, but a law services firm could.

When an investor obtains a property, renovates it, leases it, refinances the asset, and then repeats the procedure, it’s called a BRRRR category of investment. It’s a Buy and Hold investment because the investor owns the property for a long period of time. This plan has the benefit of providing short-term (rental) income and net income from the long-term appreciation in value.

First the investor buys a rental property, then they rehab it and locate a renter. When a profitable income stream is achieved, the landlord takes capital out of the property by refinancing their loan. This becomes the down payment on their subsequent property, and they repeat it all again.

Conventional commercial property loans aren’t an option for buy and rehab deals. These deals pose a high risk for conventional lenders.

Look at our directory of commercial real estate vendors to find the top commercial rehab lending companies in New Mexico and the top New Mexico commercial private and hard money lending companies.

Also, don’t miss out on the professional knowledge of the best commercial real estate agents in New Mexico. They can educate you on the important local market dynamics described in the following section.

Median Gross Rents

Investors have to know how much rent they can charge and if it is probable that rental rates will increase in the future. This one item is important when the final market choice is made.

Property Value Growth

If real estate values aren’t going up, a buy and hold investor loses 1/2 of his or her investment plan.

Population

The key populace data for buy and hold investors is the growth rate. Sluggish residential markets that they want to avoid will have flatlined or declining rates.

Income

Residential investors ought to know their desired renter, notably their income levels. If you are satisfied holding mid-priced properties, you don’t need to see high wages.

Property Tax Rates

Growing taxes obviously eat into an investor’s profit. Stable, realistic taxes are an accurate signal that the area is a vibrant environment for business.

Be advised that local tax offices’ appraisals of property market worth are often inaccurate, which makes investors pay unfair tax amounts without knowing. The top-rated New Mexico commercial property appraisers and the top commercial property tax protest companies in New Mexico are used by thrifty property owners to review the value.

Professionals in the real estate industry consider development as creating whole residential neighborhood ventures or any kind of commercial property. Developers purchase land that permits the creation of homesites bought by homebuilders or commercial structures that are rented.

This requires suitable zoning, land use plans by civil engineers, construction plans for buildings, and permission of the local government. Once the okay is received, the property is developed, and the finished property is marketed to the targeted users.

Real estate development can take years to finish. Much can occur, before the project is finished, that could hurt the developer’s returns. That is why the most financially perilous kind of real estate investment is development.

Different events could force developers to put a building process on pause. During this delay, the construction may be damaged by vandals, weather conditions, or other factors. However, you can use the best commercial real estate insurance firms in New Mexico to make sure that you receive a reasonable compensation in this case.

Insurance is something you are likely to need to show lenders when qualifying for financing. The best commercial new construction financing firms in New Mexico can give you a list of companies they deem worthy.

Population

To make sure that their residential and commercial development ventures are located in suitable places, developers look at the identical populace size, population growth, household wages, and education level of the population that their intended users want to see.

Income

The income level of the market’s people will dictate the kind of retail development that the market will patronize. A neighborhood that does not attract a high-end retail store might be exactly what a low priced company is after.

Statistics on wages can help industrial and office tenants see what they’ll have to pay their labor pool in that place. Those developers look at income statistics as one indication of a site’s potential for success.

Education

Businesses that rent space in industrial and office developments have specific education requirements in consideration for their sites’ population. A lot of office occupants require college graduates for their workforce. Industrial employees do not require more than high school grads.

Age

Most developers need to find a youthful to middle-aged citizenry that provides a reliable tax base. Industrial and office developers need a working age population. Active employees and their families shop at stores and restaurants that rent retail real estate.

A working age population additionally has the most involved homebuyers that residential investors have to have.

Real estate loan note investors buy actual loans cheaper than the sum due and turn into the new lender. Lenders may sell loans to raise cash, but they typically sell them because they are not being paid as agreed.

Some note investors will restructure the loan to enable the borrower to continue their loan payments — for a long-term profit. They understand that if the borrower stops making payments, they can recover the property and unload it, which is a portion of the strategy.

Population

Loan note buyers, similarly to other investors, want to discover the number of people in the possible market and if that amount is growing or decreasing. Investors know right away if a market is a possibility by looking at population data.

Property Values

Expanding real estate values are the most significant indicator when promissory note investors assess a market. The investor is loaning on the strength of the property instead of the borrower’s reliability.

Property Tax Rates

When real estate taxes go up, the larger housing expense will be troublesome for distressed borrowers to keep up with. This is bad for long-term investors, but good for the ones who need to turn their investment around quickly via a sale of the collateral property.

An easy strategy to invest in the acquisition and oversight of real property is to acquire shares in a REIT (Real Estate Investment Trust). Lease receipts and periodic property sales create the REIT’s revenue.

These trusts must disburse 90% of profits to shareholders as dividends. Small investors prefer REITs because they can sell their shares when they want.

Individuals who buy shares in a REIT have no say in which properties are acquired or the way they are operated — they are passive investors.

People who want to become passive investors consider buying REIT shares. They purchase REIT shares after selling real estate.

A like-kind exchange is meant to save money for investors who consider doing so. Our resources — Can You Do a 1031 Exchange into a REIT? and What Is a DST 1031 Exchange? — will allow you to understand the benefits and rules of this transaction.

IRS requires that you request assistance from a 1031 Exchange Qualified Intermediary to consider the tax deferral lawful. Talk to some of the best 1031 exchange companies in New Mexico delivering this service.

Real estate investment funds are an attractive venture that gathers money to invest in real estate. It’s a fund that invests in other real estate-connected organizations, such as REITs.

This investment vehicle doesn’t pay dividend revenue to their investors. The investor’s profit is created by the valuation of the fund’s stock.

The most popular investment fund types are mutual funds, ETFs (exchange-traded funds), and private equity funds for high net worth people. Shares in investment funds are purchased and liquidated on the open market which is convenient for beginner investors.

Fund investors do not have anything to do with deciding on properties or locations, as they are passive investors.