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— Office Properties Quarterly — March 2016
N
orthern Colorado continues
to be one of the strongest
real estate markets in Colo-
rado. Driving the market is
strong job growth in both
Larimer and Weld counties. Larimer
County added approximately 5,400
jobs in 2015, whereas Weld County
added approximately 3,800 jobs,
despite the troubles in the energy
sector.
Looking forward, 2016 promises to
be another good year for real estate
as professional services, technology,
education, agribusiness and health
care all are anticipated to expand
over the next 18 months. Current
office vacancies for all classes of
less than 4.5 percent will provide
challenges for expanding business-
es. Developers with the foresight to
begin speculative office construc-
tion promise to gain from the sup-
ply-demand imbalance.
Although there is 520,500 square
feet of proposed new office projects,
only two developers have begun
construction on speculative office
space to meet the growing demand.
Both speculative office buildings
are within McWhinney’s Centerra
master-planned community in
Loveland. The two projects include
Rocky Mountain North developed
by Meyer Natural Foods, and Hahns
Peak Two developed by McWhinney.
These new projects will add 89,000
sf of new office space in Loveland.
Compared to the rest of the coun-
try, the Northern Colorado office
market did not experience a signifi-
cant downturn during the recession.
New speculative development came
to a stop and a
diversified econ-
omy helped keep
employment rates
and office occu-
pancies relatively
stable. Northern
Colorado develop-
ers have remained
conservative since
the Great Reces-
sion, and it is
more likely that
the demand for
new office space
will be satisfied
through build-to-suit projects for
larger tenants versus speculative
office construction. The cost of new
office construction has increased by
approximately 10 percent per year
for the last 24 months, and planned
new projects are quoting triple-net
rental rates of $21 to $23.50 per
rentable sf.
A combination of an improving
job market and little new supply
of office space coming on line will
allow landlords to see rental growth.
Absorption into 2016 will substan-
tially outpace the new product com-
ing on line. Office employers are
struggling to find top talent as the
unemployment rate has dropped
below 3 percent in Larimer County
and below 3.5 percent in Weld
County. Savvy employers realize
they need to have a quality, distinc-
tive work environment to attract
good candidates. Smaller businesses
with fewer than 10 employees have
few choices and when options for
space open up, they need to be pre-
pared to make quick decisions.
The same basic forces influence
demand for commercial real estate
and housing, causing both markets
to move together. The population
continues to grow as families move
to Northern Colorado to capitalize
on this strong job market, afford-
able housing and an active lifestyle.
Fort Collins is ranked first among
Colorado cities and fourth in the
U.S. in the 2015 Gallup-Healthways
Well-Being Index.
The Group Inc., a market leader in
Northern Colorado residential real
estate, reports that 10,229 homes
sold in 2015 and that four of the
top 11 metropolitan areas with the
highest rates of house price appre-
ciation in the U.S. were along the
Front Range. Fort Collins/Loveland
ranked No. 11 nationally with home
appreciation of 12.35 percent, and
Greeley ranked No. 5 with 13.8 per-
cent appreciation. The Denver MSA
ranked No. 8 nationally at 13.49
percent.
Fort Collins also ranked No. 2 in
the U.S. for the lowest vacancy of
available residential properties, at
0.2 percent, according to Realty-
Trac data. Home sales in 2015 were
only up slightly compared to 2014
and could have been much higher
if there would have been available
product. Demand was there for
an additional 8 percent in sales,
according to The Group Inc. Based
on all of the metrics in place, North-
ern Colorado promises to provide
opportunities throughout 2016 and
the foreseeable future.
s
Ron Kuehl
Broker, Realtec
Commercial Real
Estate Services,
Loveland
Market Update
Courtesy Realtec
