Page 10 —
COLORADO REAL ESTATE JOURNAL
— August 5-August 18, 2015
PEACE OF MIND
It is knowing your real estate investment is protected by
an industry leader
trusted for more than 162 years.
It is the confidence of having a financial partner with the
largest reserve for claim losses in the industry.
It is relying on a
nationwide team of professionals
ready
to help you with any type of real estate transaction.
It is having access to a
full array of title services
all
delivered by one strategic partner.
Chicago Title is a member of the Fidelity National Title Group,
the nation’s largest provider of Title Insurance services.
8055 E. Tufts
303-291-999
Greater Denver
space oil and gas companies have
put on the market has been sub-
leased, but Crane noted it will
take a greater number of workers
to absorb that space as oil and
gas companies typically lease 421
sf per employee vs. non-energy
users’ 234 sf per employee.
Among “headwinds” to watch
next year are higher assessed valu-
ations and, thus, property taxes,
which will make space more
expensive for tenants, and escalat-
ing housing prices, Crane said at
the NAIOP forecast.
Industrial
Denver’s industrial vacancy rate
has reached a record low of 4.3
percent, compared with 6 percent
during the previous peak, and
speculative development has been
measured. Of the 3.68 million sf in
development this cycle, 60 percent
is leased and the other 40 percent
is either under letter of intent or in
serious negotiation, according to
CBRE Senior Vice President Tyler
Carner.
Class B andC industrial product
have seen the sharpest rental rate
spikes year over year: 22 percent
vs. 6 percent for ClassAspace.
What is lacking in Denver’s
industrial market is new space for
users under 200,000 sf, which is
notable considering the average
size of a Denver industrial user is
31,000 sf.
Although lease rates haven’t jus-
tified construction of “small-bay”
product, Carner said that is likely
to change over the next several
months.
He also projects e-commerce to
be a growing force in the Denver
market.
Retail
“Overall, I would say that the
retail market in Colorado is very
strong,” said Daniel Miller, CBRE
senior vice president.
Although Denver has its low-
est vacancy rate in more than a
decade at 5.9 percent, Miller said
one area of concern is escalating
asking lease rates in hot markets
like Colorado Boulevard, Park
Meadows and Cherry Creek,
where some spaces are priced as
high as $70 per sf.
Multifamily
The Denver metro area is on
track to best last year’s $3.5 bil-
lion in apartment sales transac-
tions, accord-
ing to CBRE
Vice President
Matt Barnett.
Ap a r tme n t
a b s o r p t i on
has exceeded
the number of
completions
every year for
the past five
years, leaving
the state’s overall vacancy at 4.13
percent.
Despite escalating apartment
rents, Barnett said Denver still is
a relative bargain compared with
West Coast markets like Portland,
Seattle and San Diego. While for-
eign capital typically is attracted
to coastal markets, Barnett said a
large multifamily asset in Denver
will be purchased this year by an
international investor.
Investment
Investment activity continues
to be very high across the coun-
try and in Denver, with core real
estate yielding higher returns than
Treasurys, bonds and other invest-
ments, said
CBRE
Vice
Chairman Tim
Richey. Prices
are at all-time
highs, and cap
rates at all-
time lows.
Investment
in the Denver
market has
“not missed a
beat” due to the slowdown in the
oil and gas industry, and foreign
capital has begun pushing into
suburbanmarkets in seek of assets
– especially transit-oriented devel-
opment opportunities.
Richey predicted investment
activity will remain strong into
2016, cap rates in the mid-5 per-
cent range will become the norm
for core, Class A product in the
central business district, and a
Lower Downtown asset will trade
at a sub-5 percent cap.
Land
DTZ Associate Vice President
T.J. Johnson said there’s no reason
to believe commercial develop-
ment landwill not remain in favor
in the foreseeable future. Address-
ing land prices in Denver’s River
North neighborhood, which have
escalated over the last 12 months,
Johnson said at least one land deal
in that area is set to trade at $100
per sf, double what some other
parcels have sold for.
NAIOP Colorado’s Mid-Year
Forecast is presented by winners
of the organization’s annual Bro-
ker of the Year awards or their
chosen representatives.
s
Matt Barnett
Tim Richey
and long-term faith in downtown
Denver and the local economy,
according to Mark Sidell, presi-
dent of Gart Properties LLC.
“Not too long after we bought
Pavilions, it was painfully clear
that the market’s direction was
working against us,” Sidell
recalled.
The Gart family had a relation-
ship with Clarion since 2003,
when it took an 80 percent stake
in theGarts’ Village Boulder Shop-
ping Center.
Still, the Garts were ask-
ing for more money for the
349,566-square-foot Pavilions at
a time when many institutional
investors were not only unwill-
ing to put more dollars into proj-
ects, but also were selling them
at losses to more entrepreneurial
buyers who were willing to take
the greater risk for the potential
greater reward.
At the time, there was no guar-
antee that real estate in Denver,
or anywhere else, would bounce
back.
In fact,many
experts were
predicting the
next shoe to
drop would
be a collapse
of commer-
cial real estate
loans as big
or bigger than
what had hap-
pened to housing prices, fueled
by ill-timed subprime mortgages,
which led to record foreclosures in
Denver and across the nation.
Sidell and members of the Gart
family pitched their reasons why
Denver and the Pavilions would
bounce back better than ever.
After all, Denverwas their home
and they had seen it bounce back
from down real estate and eco-
nomic cycles many times.
“It was met with a certain
amount of eye rolling,” Sidell said.
The turning point came at a
meeting when Tom Gart pulled
out the “Nothin’ happens if
you don’t do nothin’,” quote
from Nate.
After that, the Clarion officials
were on board.
Also, the Denver Urban Renew-
alAuthority agreed to step in, with
financing for about 10 percent of
public improvements around
Pavilions.
More than the money itself,
DURA’s involvement gave Clari-
on officials confidence that the city
was behind Pavilions, too, and
wanted it to succeed, Sidell said.
Nate Gart
