A Different Kind of Development
Conservation development may sound like a contradiction, but as Montana and other Rocky Mountain states cope with increasing populations, this model of preserving open space may become an accepted practice. A good example is the development of McCauley Butte, a Missoula-area open-space landmark. After purchasing the property more than two years ago, Northern Lights Development Co. signed conservation easements on 257 acres of the butte in exchange for county commissioners granting approval for a high-density, 126-home development on the remaining 19 acres near the butte’s base. While the land remains private property, the easements protect it from future development. The easements were signed over to the Five Valleys Land Trust, one of many trusts in the Western states that work with land buyers and sellers to protect open spaces and agricultural lands from development.
Large Industrial Users Enter Market
High construction costs are pushing industrial developers toward bigger, more-efficient buildings that are attracting large companies to the Reno-Sparks market.
Construction Progress, 1Q07
|Owner-occupied/build to suit
|Total product delivered
Source: CB Richard Ellis
Highlights by State
Arizona — The Shoppes at Chandler Heights, a $20 million, 19.5-acre retail and entertainment center in Chandler, will break ground in November and is expected to be completed in October 2008, according to Glimcher Ventures Southwest LLC.
Colorado — Downtown Denver’s direct office vacancy rate tightened to 8.2 percent in 2Q07 as seven of the Mile-High City’s 10 largest leasing deals landed in the CBD, according to Cushman & Wakefield.
- Idaho — Nearly 600,000 sf of new retail space came online in the Boise area in the first half of 2007, most occurring at Treasure Valley Marketplace in Nampa and Centerpoint Marketplace in Meridian, according to Thornton Oliver Keller Commercial Real Estate.
Montana — In western Montana’s Bitterroot Valley, GlaxoSmithKline’s $100 million expansion and Rocky Mountain Laboratories’ new $66 million facility are fueling a growing biotech industry in Hamilton as well as possible plans for a 15,000-sf entrepreneurship center to house biotech support services, according to Missoulian.com.
Nevada — The Reno-Sparks industrial market is experiencing steady demand and record-level construction. More than 1.5 million sf will be vacated by tenants moving into larger properties, which will increase vacancy to 8 percent from 5.5 percent earlier this year, according to Miller Industrial Properties LLC.
New Mexico — Albuquerque’s 2Q07 office vacancy rate fell to 11.4 percent, a 10-year low, partially due to developers and owners converting about 125,000 sf to office condominiums, says Grubb & Ellis.
Utah — The Environmental Protection Agency will provide liability relief to DV Luxury Resorts, which will develop an environmentally sensitive luxury resort at Daly West Mine, a Park City, Utah, Superfund site.
Wyoming — In Laramie, a 15-acre site owned by the University of Wyoming is being developed into the University of Wyoming Plaza that will include a 135-room Hilton Garden Inn, a conference center, and a 100,000-sf retail, commercial, and condominium development, according to the Casper Star-Tribune.
World’s Largest Computer Comes to Town
A 20,000-sf computer, five times larger than any current computer on the planet, is scheduled to begin operation in 2011 in a 24-acre plot in Cheyenne, Wyo.’s North Range Business Park, near the intersection of Interstates 80 and 25. The National Center for Atmospheric Research and the University Coalition for Atmospheric Research have chosen that site to build a $60 million geosciences data center that will be used to study climate, weather, and atmospheric processes. The center will transform Cheyenne into a national center for computational science and increase Wyoming’s ability to attract knowledge-based industries. The Cheyenne site was chosen over Boulder, Colo., current home to the Mesa NCAR lab, because the necessary infrastructure and electrical power were available.
The supercomputer facility under construction in Cheyenne, Wyo., will replace the National Center for Atmospheric Research’s Mesa Laboratory in Boulder, Colo., which was built in 1966.
Medical Office Snapshot, 1Q07
Number of properties
||6.4 million sf
|Total net absorption
|Average lease rate
Source: Colliers International
Salt Lake City
Small Is Big
Spaces under 5,000 sf experienced the biggest jumps in lease rates and sales prices in Salt Lake City’s industrial market. Rents for small spaces increased from $.41 psf in 1Q06 to $.46 psf in 1Q07. Sales prices saw a huge gain from $67.54 psf to $86.16 psf in a year’s time. The largest increase in transaction volume also occurred in the 5,000- to 20,000-sf range. The increased small-space activity results from Utah’s small-business expansion, particularly among light-manufacturing and assembly companies.
Source: Commerce CRG
Industrial Construction Increases
Under construction (sf)
% of product under construction
Average rent ($/psf)
Average sale price ($/psf)
Source: Colliers International
Office Market Outlook, 2Q07
- Direct vacancy stands at 10.5 percent, multitenant vacancy at 13.8 percent.
- Net absorption was 468,000 sf, but likely will taper off through year-end.
- Construction activity is at 400,000 sf, comparable to last year.
- Submarket South Meridian has the highest net absorption with nearly 100,000 sf.
- Office land sales are concentrated in the Meridian submarket.
Source: Thornton Oliver Keller Commercial Real Estate
Private Equity Funds Mixed-Use
Related Cos. and Thomas J. Klutznick Co. are developing High Street, the first phase of City North, a 144-acre mixed-use development northeast of Phoenix, with private equity firm JER Partners providing $379 million in financing. Scheduled to open in fall 2008, the project will create 293,000 sf of retail, 306,000 sf of office, and 409,000 sf of residential space.
Development Land Prices
Price Per Acre Range
Source: NAI Global
Office Scene Soars
The Denver metro area is on track to absorb more than 3 million square feet of office space for the third straight year, indicating increased interest in the Mile-High City by corporations looking to relocate or expand into the western states. The city’s higher profile also has increased developer and investor interest. Developers will add more than a million sf of new space this year, and investor sales are forecast to top $6 billion. The flip side for tenants of course is increased rents, as CBD rental rates have risen by 20 percent this year and other submarkets rose 8 percent to 12 percent. While class C buildings are only experiencing a 7 percent rise in rents, A and B buildings have gone up 17 percent and 18 percent respectively.
Denver Office Under Construction
Source: Grubb & Ellis
Record-Breaking Multifamily Portfolio Sale
The Bethany Group’s acquisition of Bascom Arizona Ventures 12-apartment property portfolio was the largest multifamily sale in Arizona’s history in price and number of units. At $427.5 million and more than 5,000 units, the per-unit price was about $82,500 for primarily class B properties located in the greater Phoenix area. Bethany plans to spend about $50 million to renovate the properties.
Retail Stats, 2Q07
Type of Center
Vacancy Rate (%)
Net Aabsorption YTD (sf)
Asking Rent ($/psf)
Source: Grubb & Ellis
Dracula’s Castle for Sale
For those seeking a unique property to add to their portfolios, Bran Castle, known throughout the world as Dracula’s castle, is on the market, represented by New York-based Baytree Capital. Located in the Transylvania region of Romania, the 700-year-old castle was the inspiration for the setting of Bram Stoker’s 1897 novel Dracula. Seized by communists in 1948, the castle was returned to Archduke Dominic Habsburg last year. One of Romania’s top tourist attractions, the castle has caught the interest of investors seeking to cash in on development opportunities related to Romania’s ascension into the European Union.