No funerals here - the retail market in Las Cruces is alive and well. New Mexico's second largest and southern most metro-area continues to post impressive growth in the local retail market. Amidst national economic sluggishness and sector specific performance impacted by a global credit crisis; retail activity remains strong in the Las Cruces MSA. This strength is reflected in data for employment, gross receipts and retail trade oriented construction activity.
Las Cruces spent the majority of the 90’s on the Census Bureau’s list of “Top Ten Fastest Growing MSA’s in the country. Located at the crossroads of Interstates 10 & 25, with El Paso 40 miles to the south and Albuquerque 220 miles to the north, Las Cruces is located in the middle of the southern “ice/snow free” transportation corridor. No longer “under the radar”, Las Cruces has received high rankings in a wide variety of national publications. The Las Cruces MSA was ranked “Best small metro area for business and careers“ by the Forbes-Milken Institute from 2002 through 2006. These consecutive high rankings reinforce the perception of the area’s strong potential for business location and expansion – and the retail businesses that follow that growth.
The thriving economy of Southern New Mexico is driven by the diversified industries serving the area: New Mexico State University - a Carnegie Level One Research Institution, border-oriented manufacturing and trade, value-added agriculture, aerospace related high technology, NASA, and the Southwest Regional Spaceport. White Sands Missile Range, located 30 minutes from the city center, will benefit from the Troop Relocation Plan that could swell the labor force by 77% - from its approximately 6,600 employees today to as many as 11,300 in just five years.
Another economic driver for this region is reflected in changing demographics: upper income people from a highly educated background are moving into Las Cruces because of quality of life and cost of living considerations. This includes retirees who have cashed out of housing markets when gains were to be realized. Money Magazine named Las Cruces as one of the “Best Places to Retire” in May 2004. AARP, through the largest circulated magazine in the world, made similarly glowing comments in an article entitled ‘Dream Towns’ in 2006.
Owing to this vibrant economy and steady population growth, Las Cruces has grown accustomed to strong, steady increases in commercial trade volume – Year End ’07 was no different. The Las Cruces MSA posted double-digit gains in the most recent year-over-year comparison of Total Gross Receipts and the widely watched Retail Trade figures - up 10% and 12% respectively. The strength of these figures have sustained high occupancy, driven impressive rent increases and resulted in strong interest from national retailers who continue to enter or expand their presence in this regional market center. Two large city annexations in 2007 will provide space and infrastructure for 10,000 new homes and additional retail ‘hard corner’ opportunities to serve the burgeoning population base.
Alameda Property Group recently announced the sale of 25 acres in the rapidly expanding East Mesa area to Wal-Mart (3rd for the city), who will anchor a 900,000 square foot commercial development called Rinconada Town Center. Walgreen’s has pulled simultaneous building permits for their 4th and 5th city facilities and you can’t drive five minutes in any direction without encountering yet another newly constructed Starbucks. While new entry of national players makes headline news, the expansion activity of existing retail entities speaks most directly to the health of the Las Cruces retail climate.
Our most recent Neighborhood / Community Center Survey saw a drop in vacancy rates to 5.5% coupled with a 6.4% increase in average asking lease rates with a range from $15.00 to $22.00 NNN. Comparatively, nationwide trends have seen retail vacancy rates creep to between 7% and 8% over the last six months, according to recent data from NAI Global. David Solomon, President and CEO of ReStore, NAI Global’s retail division, expects the vacancy rate could hit 10% by the end of the year.
By definition, Las Cruces is considered a "Small”, “Second-Tier”, or “Tertiary" market.
But Las Cruces is also a well-diversified, stable, ever-strengthening economy yielding above-average growth in employment, gross receipt revenues and returns on real property assets. Las Cruces has the potential to continue growing through the end of this decade and we enter 2008 with guarded optimism that the Las Cruces Retail Market will maintain positive momentum despite dampening consumer sentiment and spending trends borne of recession worries at the national level.
Randy McMillan is a principal at NAI 1st Valley in Las Cruces. Assistance in the production of this article was provided by Annette Hicks, Chief Operating Officer; and Pierre Autrey, NAI 1st Valley Market Research.
Sources:
Greater Las Cruces Chamber of Commerce, Mesilla Valley Economic Development Alliance
The Las Cruces Bulletin, Las Cruces Sun News
Las Cruces Retail Spotlight
