Albuquerque Journal, N.M., Richard Metcalf column: Metro's apartment market remains strong

Oct 20, 2008 (Albuquerque Journal - McClatchy-Tribune Information Services via COMTEX) -- CBG | Quote | Chart | News | PowerRating -- The Albuquerque metro's apartment market is showing no signs of the upheaval evident elsewhere in the housing market.

The occupancy rate was 95 percent and the average monthly rent was $683 in September, both higher than five months earlier, according to the latest apartment market survey by the Eagle Monette Multi-Housing Team at CB Richard Ellis. In May, the occupancy rate was 93.6 percent while the average monthly rent was $675.

"It does show a very healthy market," apartment broker David Eagle told last week's Apartment Industry Economic Forum held at the Albuquerque Marriott Pyramid. "I don't see a way we will not stay a strong market."

Rents are expected to go up an average of 3.5 percent this year, an unusually high increase for the Albuquerque market, said Jack McGillivray of Monarch Properties Inc., another speaker at the forum.

"That's exceptional," he said. "Historically, rent growth in Albuquerque has been pretty sluggish."

According to the forum speakers, the reason for rents going up a little faster than usual is essentially three-fold:

Demand has remained strong at larger, professionally managed apartment complexes. Albuquerque lacks competition from a significant "shadow market," which consists of houses or condos that are rented out by individual owners.

Metros with large shadow markets -- Phoenix, suburbs around San Francisco and Los Angeles, virtually anywhere in Florida -- are seeing apartment occupancy and rents fall.

With 70 percent of its apartment complexes built before 1990, Albuquerque is seeing a steady stream of apartment renovations. Renovations lead to rent increases. Each $1,000 spent to renovate a unit typically produces a $35 increase in monthly rent, McGillivray said.

Out-of-state investors have been steadily buying up apartment properties in Albuquerque. They tend to emphasize rate of return on their investment, achieved primarily through rent increases, rather than maintaining high occupancy rates at their properties.

Nevertheless, Albuquerque is still a comparably cheap place to rent an apartment. According to Novato, Calif.-based RealFacts, Albuquerque has the sixth lowest rents among the 31 markets that it tracks.

Strong colors

Albuquerque attorney Russ Whitener had a moment of inspiration when he walked into the Westin hotel in the Pacific Coast town of Ixtapa, Mexico, while on vacation.

"It was so beautiful, the colors and the style, that I wondered who designed it," he said. "The architect was Ricardo Legorreta, who is world famous and has designed some buildings in Santa Fe."

Whitener wanted that look in his two-story, 17,000-square-foot office building nearing completion at 4110 Cutler NE. DWL Architects and Planners of New Mexico won the commission to design what has turned out to be a $4 million project.

"Mr. Whitener said he wanted a building with a 'wow factor' -- you don't hear that very often," said Ron Burton, a principal in DWL. "He wanted a building with a strong presence, with the strong saturated colors you see in Mexico."

The result is a building that combines geometric shapes with a long sweeping curve visible on the north side of Interstate 40 at the westbound exit ramp to Carlisle NE. The exterior colors are red, yellow, blue and purple.

A hallmark of the building is the atrium with a twostory waterfall fountain and skylights above. "There's a sweeping circular stairway that wraps around the elevator," Burton said.

Exposure to traffic on I-40 is important to Whitener, who appears regularly in television commercials promoting the Whitener Law Firm. The building design incorporates a pair of 12-by-24-foot video billboards, together costing $300,000, that can be used to advertise the law firm and other tenants.

"We're the only law firm on the freeway," he said. "With that kind of visibility, we can help people traveling through who run into some kind of problem and need a lawyer."

The Whitener firm, which has four attorneys and more than a dozen legal assistants specializing in personal injury and medical malpractice, will occupy the 8,000-square-foot second floor. Whitener himself is leasing out the first floor by word of mouth.

The law firm currently occupies a 7,000-square-foot office condominium in the Third Central Plaza building in Downtown, which Whitener intends to sell at an asking price of just under $500,000.

In mid-November, the firm is also planning to open a 1,200-square-foot satellite office on the West Side at 9784 Coors NW, just north of Irving. The firm's four lawyers will probably take turns manning the office at first, Whitener said. One or two more lawyers will likely be hired in the future, he said.

Hatch recovery

The village of Hatch is poised to take another step in its recovery from the devastating floods of August 2006.

Construction is expected to begin by the end of this month on a 72-unit apartment project to house low-income families, many of whom have been living in FEMA trailers for two years. The $9.8 million project is being partially funded with emergency low-income housing tax credits.

The flood ruined the village's only incomerestricted apartment property, Los Caballos with 72 units, and damaged just over 400 of its approximately 650 single-family houses, said Mayor Judd Nordyke. All but eight to 10 houses have since been refurbished.

As for the Los Caballos residents, he said, "They had to find other housing in town, which was extremely limited, or get housing vouchers to move to Truth or Consequences, Deming or somewhere else."

Eventually, the Federal Emergency Management Agency provided emergency trailers where, at last count, 42 families still live, Nordyke said. Construction of 72 affordable apartments "is a very important step in getting people back within the municipal limits," he said.

The lead developer of Falcon Ridge Apartments is Farmington-based J.L. Gray Co., which partners with nonprofits and private investors on affordable housing projects. Gray also manages a portfolio of 85 affordable apartment properties with 3,040 units.

"It's been a very difficult and complex project," Nordyke said, praising Gray's persistence in seeing it through. "A lesser group might have thrown up their hands," he added.

The apartments at Falcon Ridge will be set aside for families making 50 percent or less of the local median income -- $21,600 a year for a family of four. The federal tax credits were issued through the New Mexico Mortgage Finance Authority to the local housing authority for Las Cruces and surrounding Dona Ana County, where Hatch is located.

Gray Co. is also working with the Navajo Housing Authority and Shiprock Community Development Corp. to build a 94-unit apartment complex on close to seven acres in Shiprock.

Chaco River Apartments will be a mixed-income project with some units set aside for families making 30 percent or less of the local median income, while others have no income restrictions. All of the units will have two or three bedrooms. The complex will include a 2,631-square-foot community building.

The funding recipe for the $15 million project includes a variety of tribal and federal sources.

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