CREJ

Page 6 — Office Properties Quarterly — September 2020 www.crej.com Market Update 2 020 is certainly not the year anyone anticipated and fore- casting how the year may conclude seems naive, but at this point it is fair to say the Colorado Spring’s commercial office market has weathered the storm with little impact. While activity among traditional office users is light, and many still work remotely from home, there have been few cases to date of tenants looking to vacate or give back space and things appear to be picking up. Throughout the first half of 2020, activity among defense contractors was brisk, which has had the most impact on the airport submarket but also has overflowed to the north Interstate 25 submarket; this lease activity and absorption will cushion any negative effects of COVID-19 in these submarkets, and the central business district submarket seems steady for now. Overall, vacancy rates for the market are up slightly in the first half of the year due to two larger blocks in the north I-25 submarket being vacated, while lease rates and absorption have showed positive trends in the first half of the year, with average rates up $0.31 per square foot and overall positive absorp- tion of 107,119 sf registered. Given current activity in the market, we anticipate the year to continue expe- riencing overall positive absorption and lease rates to stay steady and likely improve. As of early September, total COVID-19 cases in El Paso County stood at 6,136. Outside of people wearing masks, the city of Colo- rado Springs “feels” fairly normal. While cases are spiking elsewhere in the country, which gives some uncertainty to the overall picture, the local economy continues to be healthy, with residential real estate very strong, unemployment low, new construction of every- thing from residential, apartments, hotels and office buildings still on track and with more planned. While we cer- tainly are not immune to the overall impact of the crisis, and the retail market has been adversely impacted, we forecast a general opti- mism for both the short and long-term out- look for the city. Space Command is appearing to have a positive impact with numerous General Services Administration and Department of Defense groups seeking larger blocks of space and drawing new employment to the city with high- paying jobs. The residual impact of this will keep Colorado Springs on a very positive trajectory. n Vacancy. Vacancy rates rose slightly in the first half of 2020 from 11.52% for year-end 2019 to 11.93%. The numbers reflect two larger vacancies created by tenants vacat- ing approximately 50,000 sf in the north I-25 submarket. The airport submarket dropped from 14.32% for year-end 2019 to 11.4% and the CBD submarket dropped from 6.51% for year-end 2019 to 5.24%. The market is tight although some fallout from COVID-19 is expected in the second half of this year, which is not antici- pated to adversely affect the overall market. n Lease rates. Lease rates continue to escalate, with the highest-end Class A properties in the low $20s per sf and new construction in the high $20s. Average lease rates jumped slightly in the first half of Optimism about Colorado Springs office market Greg Phaneuf Principal, Cushman & Wakefield, Colorado Springs Commercial Peter Scoville Principal, Cushman & Wakefield, Colorado Springs Commercial Please see Phaneuf, Page 25 ©2019JonesLangLaSalle IP, Inc.All rights reserved. *DealsecuredbyHollidayFenoglioFowlerLPorHollidayGPCorp. (“HFF”) prior tobeingacquiredbyJLLonJuly1,2019.HFF isnowpartofJLL. **BasedoncombinedJLLandHFFyear-to-dateU.S.CapitalMarkets transactionvolumeasofSeptember30,2019. in more than 540 U.S. office transactions year-to-date** How do we do it? Our advisors are the most strategic, creative and connected, with access to the global capital markets, on-the-ground experience and world-class research and data. Achieve your investment ambitions by partnering with us. jll.com/capitalmarkets 777 & 757 Grant* Denver, CO Office/Multi-housing 73,122 SF & 68 Units Financing CLOSED: SEPTEMBER 2019 Tuscany Village Center* Greenwood Village, CO Office 257,875 SF Sale & Financing CLOSED: NOVEMBER 2019 Central 64* Denver, CO Industrial 220,184 SF Equity Placement CLOSED: NOVEMBER 2019 4250 Broadway Denver, CO Industrial 82,980 SF Financing CLOSED: OCTOBER 2019 Clear Creek Office Park Wheat Ridge, CO Office 77,994 SF Sale IN CLOSING Gateway Centre Portfolio* Aurora, CO Office 299,614 SF Sale & Financing CLOSED AUGUST 2019 3500 Youngfield* Wheat Ridge, CO Retail 6,500 SF Sale MARKETING Conifer Town Center* Conifer, CO Retail 91,340 SF Sale MARKETING $29 B over