CREJ

Page 6 — Office & Industrial Quarterly — December 2020 www.crej.com OFFICE — MARKET UPDATE J ust when employers thought they had figured out the “secret sauce” to optimize office environments that attract and retain employ- ees, another black swan landed and the pandemic turned all business planning upside down. Last year all of the pundits were talking about collaborative design, coworking and experiential environments, all to improve attraction and retention. Today, employers are speculat- ing that a significant number of employees may permanently work from home. Due to the pandemic and resulting governmental restric- tions, the current office demand throughout the United States has fallen to its lowest level in nearly 20 years as tenants shed space and occupancy losses have now surpassed the declines during the Great Recession. n Fort Collins, Loveland and Lar- imer County. In the Fort Collins/Love- land market, there was approximately 38,000 square feet of negative absorption in the first quarter of 2020 prior to the onset of the pan- demic. Over the last 12 months, negative absorption is reportedly 345,088 sf; 2020 is the first time in a decade that the mar- ket has experienced three consecu- tive quarters of negative absorption. Prior to the pandemic, Fort Collins/ Loveland was a very healthy office market, with a 3.91% vacancy rate reported in the fourth quarter of 2019. With the recent negative absorption, direct vacancy rates have risen to 7.1%. Additional nega- tive absorption is forecasted for the fourth quar- ter with a modest recovery begin- ning in 2021. The Fort Collins/Love- land market experienced a surge in unemployment to over 11% earlier this year and is rebounding well from the downturn, with Larimer County posting a current unem- ployment rate of 5.2%. Job growth is expected to accelerate in 2021. Investment sales activity decreased considerably beginning in the second quarter, with office sales of only $24 million during the sec- ond and third quarters. Office sales volume in the first quarter, prior to the pandemic, was approximately $34 million. Investment sales are not expected to pick up until mid- way through 2021 when the under- writing environment for buyers is less challenging. n Greeley and Weld County. The Greeley/Weld County office market is comprised of 5.7 million sf of inventory, compared to an inventory of 11.3 million sf of office in Fort Collins/Loveland. Over the last 12 months, net absorption in Greeley was negative 160,218 sf. The Gree- ley/Weld County direct vacancy rate was 2.44% at the beginning of 2020 and stands at 5.83%. State Farm had previously vacated 150,000 sf of its three-building office campus at Promontory Park in Greeley. In November, State Farm announced that it will be vacating an additional 310,000 sf and transition into a remote-working status for all of its Greeley employees. After the space is vacated, the vacancy rate will go up by an additional 5%. On a posi- tive note, this facility will provide opportunities for economic develop- ment and bringing new employers to Greeley. Since 2014, the Greeley popula- tion has increased by approximately 15%, one of the fastest growth rates along the Front Range. Earlier this year, the unemployment rate in Greeley peaked at 9.6% and current- ly stands at 7%. Predictions on the recovery of the unemployment rate to the prepandemic 3.2% is hard to predict due to the uncertain envi- ronment for the oil and gas indus- try, which employs a significant percentage of nonfarm jobs. n Northern Colorado going forward. Although the current preference among employees is to work from home, after the pandemic subsides, employers will evaluate their at- home options based upon costs, productivity, ability to attract and retain talent, and the effect on Northern CO office sector predicted to outperform Ron Kuehl Broker/partner, Realtec CRES of Loveland, ronk@ realtec.com Jamie Globelnik Associate broker, Realtec CRES of Loveland, jamiek@ realtec.com Please see Kuehl, Page 16