September 2-September 15, 2015
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COLORADO REAL ESTATE JOURNAL
— Page 3B
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THE GROVE
Thorton, CO
FEDEX DISTRIBUTION CENTER
Colorado Springs, CO
PRAIRIE CENTER
Brighton, CO
follow. Land sales for retail and
all other types of commercial
development came to a halt
from 2009 to 2011.
Trough.
This period
sometimes is referred to as a
depression period. Depending
upon the length of the trough,
this is the time where output
and employment are in an
inadequate place and where
businesses are looking eagerly
for the next phase of the cycle
to begin. Land sales generally
cease to exist by the time the
economy hits the bottom of the
trough.
Expansion and recovery.
The
economy grows once again and
moves away from the all-time
bottom experienced in the
trough. Income, production
and employment grow and the
economic climate is good. The
early stages of expansion and
recovery allow businesses to
acquire empty buildings as they
expand. A healthy expansion
will result in full absorption
of available building supply
resulting in land sales for new
development to occur.
So, where are we now,
Colorado? The recession finally
was put behind us starting
in 2014 as we experienced
major acceleration. Colorado
officially entered the economic
expansion and recovery period,
which resulted in an increase in
land sales and development.
Among the numerous
property types, multifamily
typically requires the most initial
new construction in order to
satisfy new demand. Other
businesses with larger building
requirements including
warehouse, distribution and
manufacturing facilities, follow
multifamily growth fairly
quickly. Office buildings usually
are the last type of commercial
real estate to require new
construction to satisfy new
demand.
The cherry on top for
a complete recovery is a
major rebound of land sales
for industrial and office
development, as this is an
indication of a much improved
and robust economy for
Colorado. Following are second-
quarter observations that
indicate a strongly improved
market. Statistics are courtesy of
Xceligent.
• The Denver industrial
market experienced strong
demand with 627,838 square
feet of positive absorption.
• The Denver office market
experienced another quarter of
positive absorption, with a net
gain of 92,254 sf.
• Land sales are up in the
Denver metro area. Industrial
users are building space because
the available supply is lesser
quality.
• Speculative buildings
are being fully leased prior
to completion. The pent-up
demand for space has users
willing to pay more for new
product.
• An uptick in sublease space
has driven the total vacancy rate
up to 11.1 percent from 11.2
percent last quarter.
• The southeast suburban
market is experiencing a push
in rental rates and activity, since
the submarket is not “energy
vulnerable.”
Several completed or
ongoing office developments
include IMA Insurance at
1747 Wynkoop St., the Hines
development located at 1401
Lawrence St. and 1900 16th St.
Outside of downtown Denver,
Arrow Electronics in Centennial
is occupied; the Charles Schwab
campus in Lone Tree has
the initial building occupied;
Mikron Corp. in Aurora has a
target occupancy of September;
and Mountain Man Nut & Fruit
Co. is moving its headquarters
to the Dove Valley Business Park
with a target occupancy of next
year.
There are many variables that
indicate the current economic
health around the nation. But,
for experienced commercial
real estate professionals
in Colorado, the strongest
indicators of the market’s
climate is the volume of land
sales that occur, along with the
volume of construction activity
zoned for commercial buildings.
Denver has made a strong
recovery from the recession
in comparison with other
secondary and tertiary cities.
Developers, enticed by revenue
growth and attractive demands,
are building and developing
aggressively, which yields a
rapidly growing volume of new
construction in the Denver
metro area. History indicates
that a steep ramp up in
construction typically weakens
the market’s fundamentals.
Despite this, Denver seems
immune to the usual effects of
new supply thus far, thanks to
a strong local economy that is
truly unique to the state.
Photo courtesy: Unique Properties
Mikron Corp. will occupy a new 70,000-sf building in Aurora.
