Market Data

Colorado Real Estate Rocks

Just east of the rugged Rocky Mountains lies the capital of Colorado, Denver, and the state's other major cities — Colorado Springs, Boulder, and Fort Collins — which were born during the gold rush of the mid-1800s. Although the gold rush ended more than a century ago, people haven't stopped flocking to the area. Along with a flourishing economy, the region enjoys a mild climate with an average of 300 sunny days per year, contributing to a population boom in the last decade.

Raging Retail Record land prices and strong developer demand have contributed to Denver's roaring retail market. “Denver was one of the hottest retail markets in the nation in 2000 and there is no indication of slowing [for] 2001,” reports Jeff Brock, CCIM, of CB Richard Ellis. Lease rates in new power centers such as the recently completed FlatIron Crossing mall in Broomfield have set a record of $35 per square foot annually. “Denver retail should remain one of the hottest markets in the country,” Brock predicts.

Chas Cowles, CCIM, of Cowles Commercial in Arvada agrees that Denver's retail market is booming. Most new development is almost completely pre-leased before construction, and Cowles predicts that future new construction will cluster in lower downtown and the central business district. 

The retail market in Fort Collins also is experiencing heavy activity, says David Everitt, CCIM, of Everitt Cos. Lease rates have increased from previous years, ranging from $10 psf to $25 psf annually. Both speculative and build-to-suit construction is occurring, and Everitt foresees continued growth in the retail market.

Located just east of Fort Collins, Greeley will see “tremendous growth next year as it becomes harder to develop along the front range mountain towns,” reports Ron L. Randel, CCIM, of Wheeler Management Group.

Healthy Office Leasing activity in the Colorado Springs office market reached a new high of more than 1.4 million square feet in 2000, says Gary L. Bradley, CCIM, of Highland Commercial Group LLC. A new absorption record also was established: nearly 1.7 million sf. High demand for office space fueled the construction of more than 1.6 million sf, of which less than 200,000 sf remained available at the end of 2000. Fourteen new office developments proposed for this year will add approximately 1 million sf of office space to the Colorado Springs market, Bradley says.

Denver office occupancy has stayed strong at 92 percent for the past three years, says Nancy Sevo, CCIM, of Sevo Miller. Lease rates in the CBD are up 8 percent to 10 percent from 1999, topping out at $30 psf annually. Sales prices are stable, ranging from $100 psf to $110 psf for class B space to $160 psf to $172 psf for class A space, Sevo says. “The demand for office space is in new product,” she reports.

Boulder's office market “has stayed consistently healthy during the past 12 months,” reports Paige M. Coker, CCIM, of the Colorado Group. Although the market has softened slightly with the downsizing of many technology-related companies, office occupancy rates in Boulder remain between 95 percent and 98 percent. The highest lease rates are found in the downtown area, reaching $28 psf annually, as are the highest sales prices, topping out at $300 psf, Coker says.

Hot Multifamily Almost 9,000 new units are expected to be added to the Denver multifamily market this year, according to Kathy Tourney, CCIM, of Dallas W. Tourney in Littleton. The city has maintained a 96 percent occupancy rate for the past four years, as absorption has kept pace with construction. Both lease rates and sales prices have risen steadily over the past few years, Tourney says, with prices ranging from $74 psf to almost $89 psf. She predicts that the upward trend in construction, lease rates, and sales prices will continue for several years.

James Ponder, CCIM, of Ponder and Associates concurs that the “Denver market is very hot.” The multifamily market is experiencing a rent growth in excess of 8 percent per year, and demand continues to exceed supply, he reports. Lease rates average between $1.20 psf and $1.75 psf, he says.

Lease rates for multifamily properties in Colorado Springs are rising, says Ken Greene, CCIM, of Grubb & Ellis; rates range from 60 cents psf to $1 psf per month depending on the quality and age of the property. Multifamily properties continue to be almost fully occupied, as the vacancy rate stands between 2 percent and 3 percent. Eight spec properties totaling 1,887 units are in development, and Greene predicts that new construction will continue in the northern area of Colorado Springs.

Slowing Industrial Although Boulder's economy remains strong, the industrial market here “has and will continue to soften as users seek more cost-effective alternatives outside of Boulder County,” reports Jason P. Kruse, CCIM, of the Colorado Group. Lease rates remain stable, however, ranging from $7 psf to $12 psf annually. Sales prices have increased to $80 psf to $130 psf as more industrial users purchase their own buildings. Due to the increase in prices, spec construction will continue to slow, Kruse reports. He predicts, “Over the next four to five years, the industrial market will continue to move east as office users outprice the industrial market.”

The Fort Collins industrial market is about 10 million sf, according to Dan Eckles, CCIM, of Realtec, and vacancy rates have remained stable between 2 percent and 4 percent for the past five years. Lease rates currently average $6.50 psf annually, and sales prices range from $35 psf to $40 psf and are increasing about 10 percent each year, he says. The majority of new construction is build to suit, but, “new construction is slow due to the high cost of construction and time delays by government red tape,” Eckles says. He predicts that the need for distribution facilities in Fort Collins should expand over the next couple years.

Market Glance
New Orleans Tightens Up

With its “natural boundaries of the lake to the north, the river to the south, and the wetlands and bayou to the east and west,” New Orleans is experiencing a tight real estate market, according to Richard Stone, CCIM, of NAI/Latter & Blum. The topography makes new construction expensive, and New Orleans rapidly is running out of available land. Nevertheless, the commercial real estate market is holding steady across all sectors.

Office. Activity in the office market is consistent, according to Colleen Berthelot, CCIM, of Corporate Realty. Occupancy remains stable at 96 percent to 98 percent, yet the recent increase in sublease opportunities indicates a softening of the market, she says. No new development is occurring due to the cost of construction in the area, Berthelot says.

Retail. “There has been significant activity in the big-box arena,” Stone says. Retail lease rates range from $8 per square foot annually for neighborhood centers to $25 psf annually for community centers. Land sales have approached $50 psf in suburban areas for smaller parcels; however, because “unimproved sites remain few and far between,” no speculative construction is on the horizon, he says.

Multifamily. “Average multifamily occupancy is near 96 percent,” says Barrett Blaum, CCIM, of Standard Mortgage Corp. New construction is occurring, most of which will become available in the next two years; however, developers are forced to “be creative and build in an area that pushes the envelope for multifamily development,” because of the city's location, Blaum says.

Industrial. Lack of available land also is contributing to limited growth in the industrial market, says Max J. Derbes III, CCIM, of Max J. Derbes. Both occupancy and sales prices have been increasing due to the lack of quality product available. Lease rates are stable, ranging from $3.50 psf to $4.50 psf annually, Derbes says.

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