New Mexico isn’t the most robust of the Sun Belt states when it comes to self-storage, but the outlook is bright enough that owners and investors still consider their future prospects in Albuquerque and other parts of the state. This is particularly notable considering population growth has been stagnant compared to that of other states in the region.
For example, the Texas population grew 8.9% from 2010 to 2020, while Arizona increased 11.9% and Colorado jumped 14.8% during the same period. In contrast, New Mexico’s population increased just 2.8%, while its largest city, Albuquerque (915,000 people), grew by only 1.67%, according to U.S. Census figures. Many believe the slow growth is attributable to economic issues that have kept the state’s unemployment rate high in recent years. The jobless rate was 8.3% in April, which was above the national average of 6.1%.
In many ways, New Mexico—specifically Albuquerque and its immediate surrounding area—defies self-storage logic. Despite the low population growth, many in the industry are encouraged because the area is considered relatively stable, with steady markets whose long-term attractiveness should remain strong as long as Americans continue to flock to Sun Belt states in general.
“We’re not a high-growth market like other nearby states; but we’re still growing, and there are great opportunities here,” says Brian Patterson, vice president of development for Titan Development, an Albuquerque-based commercial real estate developer that’s built four self-storage facilities in New Mexico in recent years. “You can find micromarkets here that are underserved. New Mexico has been good to us.”
Overall, there are 187 self-storage facilities in Greater Albuquerque comprising about 9.4 million square feet. In terms of new construction, the metropolitan area has seen solid, though not hyperactive, with total supply increasing 9% since 2017, according to Radius+, a company that specializes in self-storage data, analytics and location intelligence. Meanwhile, the self-storage penetration rate (the amount of square feet per capita) remains high at 8.1, well above the national rate of about 6.
And yet, Albuquerque’s rental rates have remained relatively strong over the years. In May, prices were hovering around $175 per month for a 10-by-10, climate-controlled unit, according to Radius+, while occupancy levels remained above 90%. Santa Fe, the state’s scenic capital, is seeing even stronger rental rates in the $225 range, despite experiencing fairly active new construction in recent years. Occupancy levels are also strong there.
“It just goes to show how self-storage is really a market-by-market phenomenon when it comes to performance,” says Cory Sylvester, a principal at Radius+. “Overall, Albuquerque is not a dynamic market, but it’s stable. It hasn’t seen insane amounts of new supply. Generally speaking, it’s a pretty good market.”
In that regard, the dynamics driving Albuquerque and the state of New Mexico in general are similar to those of other self-storage markets across the country that are being buoyed by the pandemic and more people working from home. If you perform thorough and careful research, there are pockets of opportunity, so look carefully to identify underserved areas.
Though Albuquerque is considered a secondary market, large industry players have moved in, including real estate investment trusts. According to industry observers, what’s likely preventing it from becoming a “hotter” region in terms of population and self-storage growth is the lack of dynamic employers who offer jobs attractive to younger workers. Most agree the state needs more major employers and jobs to grow at a faster clip.
Dean Alexis, a member of the New Mexico Self-Storage Association and owner of two self-storage facilities in Santa Fe, says the state has been “mired in semi-economic malaise” for a while. “We’re certainly better than California, but not as good as Texas,” he says.
Still, the state has the respected University of New Mexico as well as the federal government’s Sandia National Laboratories, the Los Alamos National Laboratory and the Air Force Research Laboratory, all headquartered in Albuquerque. In addition, Netflix recently announced plans to boost its presence by expanding its ABQ Studios in Albuquerque’s Mesa Del Sol area, which includes a commitment for an additional $1 billion in production spending.
Despite the economic challenges, Ryan Goodman, a partner at Around the Corner Self Storage, which operates eight locations across the state, is among those who remain upbeat about New Mexico’s self-storage future. “It’s a good market that I think will grow,” he says. “I’m optimistic.”
Dylan Stallings is an advisor for The Storage Acquisition Group, which specializes in acquiring off-market self-storage facilities and portfolios nationwide. He uses his background in finance and economics to research markets and provide industry reports for potential acquisitions nationwide. The company also offers market-analysis reports, underwriting and closing support. For more information, call 757.867.8777.