Commercial real estate bustling in Santa Fe

·5 min read

Jun. 7—Deals were made and relationships built at ICSC Las Vegas, the planet's largest retail conference, which drew a number of Santa Fe and Albuquerque commercial real estate agents and mall/shopping center operators.

And Las Vegas, Nev., could well be where the companion tenant to Dutch Bros on the former Cheeks location ends up having been found.

"On the Cheeks property, we had two meetings that will dictate the fate of that property," said Anthony Johnson, founder and president of Pegasus Group, an Albuquerque commercial real estate firm that is the broker for the Cerrillos Road site as well as the Plaza Santa Fe and Plaza De Santa Fe shopping centers.

The big ICSC Las Vegas conference, held in mid-May, was the first in three years due to the coronavirus pandemic. The world has changed since then, in ways that were not predictable during the lockdown of 2020.

Turnout for ICSC had not totally recovered, with 22,000 attendees rather than the usual 33,000 and more, but retail "speed dating" was as vivid as ever.

"You were able to connect more with people this year," Genieve Posen, an adviser at NAI SunVista, an Albuquerque commercial real estate firm with a Santa Fe office. "We were in scheduled meetings, but we were able to get impromptu meetings with retailers we didn't get to meet with before the pandemic. I would call it speed dating in its most honest form."

For decades, ICSC was the International Council of Shopping Centers, but last year the organization changed its name to Innovating Commerce Serving Communities.

The group brings together retailers, brokers, developers, builders, city officials, investors and tech people. Brokers take their best elevator speeches to woo retailers who don't quite measure Albuquerque and Santa Fe at the same level as Phoenix, Denver and Dallas.

Posen prepped NAI SunVista brokers for six years with their pitches for retailers before attending her first ICSC Las Vegas conference this year.

"In general, people are [now] looking at New Mexico," Posen said. "We had been recognized as the doughnut hole. They have targeted markets that surround us. A lot of those markets [in surrounding states] are getting saturated. The doughnut hole is getting recognized. We are able to show there are sales volumes in New Mexico that are highly competitive with out-of-state markets."

Retail is back and stronger than before in New Mexico, Posen and Johnson said.

"ICSC was as strong as ever," Johnson said.

In the 2010s, the thought was online shopping would doom brick-and-mortar retail, but that notion is changing.

"The biggest change people will see is a move to brick and mortar," Johnson said. "[Retailers] cannot exist solely online. Things online will be also go brick and mortar. I am discovering the biggest change is back to normal. ... People want to be in person touching and feeling. Living in front of a computer screen does not make your life better."

Consumers are not scared off by inflation or supply chain issues, Posen said, and they are embracing going to the store.

"For a while, everybody wanted to move online," Posen said. "They are now saying there is value to foot traffic. In general, they can expect more quick services restaurants and coffee concepts, convenience concepts, car wash concepts, very much so entertainment concepts, food hall styles."

Phillips Edison & Co., which operates the Coronado Center with Santa Fe's Trader Joe's, reported "a rising tide of quick-service restaurants," naming places like Scooter's, Dutch Bros, PF Chang's, Salad and Go, Krispy Kreme, Popeyes Louisiana Kitchen and Jimmy John's that are debuting drive-thru-only options. The Dutch Bros outlet building on the former Cheeks location is following that model.

Commercial retail is bustling so much in Santa Fe that there are barely any vacancies at Santa Fe Place and DeVargas Center malls, College Plaza and the Zafarano Drive corridor. NAI SunVista's Tai Bixby, a director at the Santa Fe office, didn't go to ICSC Las Vegas this year.

"I definitely have more business than I can handle at this time," Bixby said. "Southwest Cerrillos Road, all of that, is slated for build-out in the next

12 to 18 months [between Airport Road and Interstate 25]."

Katy Fitzgerald, senior project manager at Fidelis Realty Partners, a Houston commercial real estate company that in Santa Fe owns the DeVargas Center and College Plaza shopping center, said she stayed in Santa Fe while everyone else at Fidelis went to Las Vegas.

"This time I have everything leased up," Fitzgerald said.

DeVargas is fully occupied, except for one 333-square-foot space for which Fitzgerald is "talking to a couple [of] people." College Plaza is filled except for 22,000 square feet of the former Hobby Lobby space, for which Fitzgerald has a potential tenant.

"It's a lot of what we all see," Fitzgerald said. "A lot of people had pent-up energy. A lot of people have a lot of money [from not spending or traveling during the pandemic]. You are seeing a drive of more retailers. Everybody is very optimistic of the future. People want that in-person experience."

Office and industrial space is also tight in Santa Fe, Bixby said.

"On the office side, working from home is popular here like everywhere else," Bixby said. "Maybe 50 [percent] to

60 percent have gone back to the office. But office vacancies are way down to 5 [percent] to 8 percent. There is not a lot of office vacancy. Offices are leased up but only 50 [percent] to 60 percent filled. Industrial space has only 2 percent vacancy. That's driven by extremely strong demand for housing [with contractors needing to store supplies somewhere]."

But there is a dent in the armor of rebounding retail.

"There is a scenario across the board that we lost a lot of customer service, Fitzgerald said. "Tenants that will succeed and grow have to focus on customer service."