Jason Gibbs, Las Cruces Sun-News
LAS CRUCES – Multi-family housing in the area is lacking, the medical industry is rapidly growing and commercial construction is lagging, according to industry experts speaking at the Mesilla Valley Economic Development Alliance Business in the Borderplex meeting last week.
Randy McMillan, with NAI 1st Valley, said the number of new commercial construction permits dipped to 20, with a value of $10.5 million, in 2015. That is a drop from the 25 permits valued at just over $21 million in 2014 and a far cry from recent high marks of 48 permits for commercial construction in 2008, valued at more than $56 million.
“Office space is tough across the nation,” McMillan said.
But the largest sticking point in Las Cruces’ commercial development is housing, he said. The number of multi-family housing units permitted in 2015 tallied only two, although that is an increase over 2014 when no permits were requested. Single-family units rose from 292 in 2014 to 379 in 2015.
But the city is currently at a 99 percent occupancy rate for multi-family housing – essentially apartments, condos and duplexes. Rental rates, due to the decreased supply, have settled in the past two years at roughly $700, he said.
“Housing is key to (the city’s) continued expansion,” McMillan said.
Looking at the city’s commercial corridors, not too much has changed. The downtown commercial corridor had a vacancy rate of 15.64 percent, with space renting at $15.18 per square foot in 2015. In 2014, the vacancy rate was 19.25 percent with footage renting at $14.97. Along the Telshor trade area, lease rates fell to $15.82 in 2015 from $16.34 in 2014, with vacancy rates spiking to 34.04 percent from 18.16 percent over the same period. Along the East Lohman corridor, rent rose from $21.11 per square foot in 2014 to $27.67 in 2015. During the same period, vacancy rates dropped from nearly 14 percent to just over 8 percent.
Retail trade has seen a dip as well, McMillan said. From a high of $2.098 billion in 2013, total trade dipped to $1.712 billion in 2014, the last year for which complete numbers are available. While the primary commercial areas remain the same, the simple fact is some are almost at capacity for new development. The former Golden Corral at 601 Telshor Ave. is one of the few available spaces. Local realtors said the space has been purchased by a physician from El Paso, but it remains unclear as to what the location will become.
“Lohman continues to be ground zero for retail development,” McMillan said. “But tenants will be required to broaden their site selection playbook due to lack of opportunity.”
Development around the new Wal-Mart Neighborhood Market is expected to spur more growth. Also, on the East Mesa, The Game II is under construction, Sonic has purchased land and several other lots have sold in the surrounding area, McMillan said. And the work to build a new Good Samaritan nursing home will likely draw additional need for commercial space in the area.
Medical office space will be increasingly in demand as a result of development by Memorial Medical Hospital, MountainView Hospital and the Burrell College of Ostepathic Medicine.
Kary Bulsterbaum, of Steinborn TCN Commercial Real Estate, said 2016 was “very active and housing is off to a great 2016 start.”
The market is evolving due to the changes in medical landscape and some industry segments like manufacturing, Bulsterbaum said. And there is an increasing demand for national, regional, state and local retailers to expand existing businesses or to enter the market as commercial needs change. Two areas to watch are retail and dining.
Construction is showing signs of a rebound, with lot sales and new home starts up. There are also signs that, once again, Las Cruces may become more of a retirement destination, with sales of upscale homes on the rise. The commercial demand, Bulsterbaum said, is for high-quality office space.
The city has shown a 2.4 percent job growth rate in 2015, 1.5 percent annually since 2010. Combined with 12 percent population growth since 2010 and double-digit growth expected by 2020, the demand for commercial space and especially mulit-family housing is going to grow.
Development around the New Mexico State University campus, including off-campus housing and potential commercial ventures on the eastern edge of campus — including Arrowhead Park and the areas near the golf course — also hold potential, Blusterbaum said.
“Will available land lease options at University and Telshor put the retail and medical world on notice?” Blusterbaum asked. “Spec space at Arrowhead is pending. Is Pan Am Plaza about to see major changes? Will the hotel near the convention center be a game changer?”
While those questions remain to be answered, one thing is certain.
Change is coming to the Las Cruces commercial markets.