October 22, 2026

Albuquerque and El Paso are not the headline industrial markets, but both sit at interstate crossroads and are benefiting from the national recovery in industrial production. The opportunity is real but uneven: El Paso logistics shows the strongest demand, Albuquerque flex is tightening, and cap rates in both metros have not yet adjusted to higher interest rates.

Albuquerque sits where I-40 meets I-25, and El Paso sits on I-10, giving each metro routes to markets from Phoenix and Tucson to San Antonio, Oklahoma City, Santa Fe and Denver. This month’s outlook, prepared with economist Dr. John E. Silvia of Dynamic Economic Strategy, looks at what the national numbers mean for each metro’s fundamentals and for valuation.

The national backdrop is supportive

U.S. industrial production contracted year over year in nearly every quarter of 2023 and 2024 before turning positive in 2025. In 2026 2Q, total output was up 1.5% and manufacturing output was up 1.7% from a year earlier. The recovery is modest, but it supports demand for industrial space.

Rising transportation costs point the same way. The producer price index for transportation costs was up 13.6% year over year in 2026 2Q. The outlook attributes that to the national rise in inflation and to the revival of industrial production.

Labor markets are cooling without a jump in unemployment. Albuquerque employment slipped 0.6% year over year in 2026 2Q, with losses in each of the last four quarters, and the regional benchmark of Colorado Springs slowed from 5.8% to 0.2% growth over the same period. Yet unemployment was little changed between 2022 1Q and 2026 1Q, moving from 4.5% to 4.6% in Albuquerque and from 4.5% to 4.4% in El Paso. The outlook reads that as a sign both labor markets remain tight.

Demand momentum favors El Paso

Year-to-date net absorption through August equals 3.6% of inventory in El Paso, versus 0.6% in Albuquerque. In logistics the gap is wider, at 4.6% in El Paso and 0.8% in Albuquerque. The 2026 figures cover eight months, so they are not directly comparable to the full-year readings for earlier years.

The gains in industrial production are consistent with the improvement in net absorption overall and in logistics for El Paso, but less so for Albuquerque. El Paso’s demand has also been uneven from year to year. Overall absorption reached 5.6% of inventory in 2023, fell to 0.2% in 2024, and rebounded to 1.7% in 2025 before this year’s pace.

Pricing is edging higher, while vacancy is mixed

Overall sales price per square foot has improved gradually in both metros. Through August it reached $83.01 in El Paso, up 2.8% from 2025, and $114.13 in Albuquerque, up 0.5%.

Vacancy tells a less uniform story. Albuquerque flex vacancy fell sharply, from 4.5% in 2025 to 2.6% year to date, while its specialized industrial vacancy rose from 4.1% to 7.1%. In El Paso, flex vacancy rose from 4.9% to 7.6% and specialized industrial vacancy rose from 2.6% to 3.1%.

Strong absorption in El Paso has not lowered vacancy in either of those two segments, and the outlook does not say why. That is a gap worth watching, and it is the kind of detail that market-specific analysis is meant to resolve.

Cap rates have not repriced to higher rates

Overall cap rates rose about 110 basis points between 2022 and 2024 in both metros and have been essentially flat since. Through August they stand at 9.1% in Albuquerque and 8.5% in El Paso.

That stability sits against a sharp move in interest rates. The 5-year Treasury yield rose from 3.67% in 2025 4Q to 4.50% in 2026 3Q. The outlook notes that growth in the national economy and in industrial production has not shown up in cap rates, and that the recent rise in rates may alter those calculations.

Credit is a partial offset. A net 11.3% of banks eased standards on nonfarm nonresidential commercial real estate loans in 2026 3Q, which the outlook ties to strong national economic gains and above-trend profitability.

Valuation takeaways

  • Selectivity matters. Investors who are selective on metro, property type and price can find value the market has overlooked.
  • El Paso logistics shows the strongest fundamentals, and in Albuquerque, flex is the bright spot.
  • Flat cap rates against rising yields leave valuations exposed to cap rate expansion.
  • Local employment trends and market-specific analysis remain essential as conditions shift.

TVG translates macroeconomic context like Dr. Silvia’s into defensible value conclusions through market-specific analysis grounded in observed evidence.

Download the full report

Download the full October 2026 Economic Outlook here.

Data sources in the outlook: CoStar Industrial Market Reports for Albuquerque and El Paso (September 2026), U.S. Bureau of Labor Statistics, Board of Governors of the Federal Reserve System, American Trucking Associations, U.S. Census Bureau, and Dynamic Economic Strategy.

Let’s talk

We welcome the opportunity to discuss what these trends mean for your portfolio, your assignment, or your market. Schedule a virtual or in-person briefing with the TVG team and Dr. Silvia through our Connect page, or reach us at info@teelvg.com or 713-467-5858.

The economic views expressed in this outlook are those of Dr. John E. Silvia and Dynamic Economic Strategy. They are general in nature, do not constitute a forecast adopted by Teel Valuation Group, and are not relied upon in any specific TVG valuation assignment. Each TVG appraisal reflects conditions as of its stated effective date.