OIQ_091521

Page 6 — Office & Industrial Quarterly — September 2021 www.crej.com OFFICE — MARKET UPDATE T he first half of 2021 in the Colorado Springs office leas- ing and sales markets has been nothing short of excit- ing. In January the horizon was extremely uncertain and the indecisiveness in the marketplace was pervasive. There were some sales transactions, but in most cases underwriting was conserva- tive by most groups and the buyer pools were mostly those historically familiar with the Colorado Springs market. That said, the smaller ten- ants (5,000 square feet and under) in almost every sector remained active in their space needs. By June, the overall feel of the market was significantly different in several ways. First, Colorado Springs has main- tained tremendous momentum in the past 36 months with rapid popu- lation growth, a shift to a younger demographic, the construction of thousands of apartments both in the central busi- ness district and suburbs, and the completion of city-changing projects such as the U.S. Olympic & Paralympic Museum and Weidner Field, to name a few. In short, Colorado Springs seems to be truly “on the map” for national investors and users like it never has been historically. The capital inter- ested in investing in the city seems to increase daily, and with a num- ber of high-quality assets coming to market in the sec- ond half of the year, we anticipate very active third and fourth quar- ters. A second shift in the market in recent months has been a num- ber of larger spaces (greater than 30,000 sf) coming on the market, either as direct space or sublease space, as corporate users continue to define what the new-normal work environment will be. This has caused the overall vacancy rate to increase from 11.69% at year- end 2020 to 12.41% year-to-date 2021, with an increase in vacancy anticipated throughout the rest of the year. While on the surface this seems like the market is going in the wrong direction, based upon all of the interactions we have had with many of the major employ- ers and companies, we anticipate this to be a temporary market shift. There is limited supply of quality assets in the market and a general (and evolving) sentiment that most companies will be near or above pre-COVID-19 occupancy levels by the first quarter of 2022. The overall market has a very positive outlook as we forecast into the next 12 months with antici- pated continued rent growth and increasing demand in a market that has not been overbuilt. n Vacancy. Vacancy rates for the first half of the year posted at 12.41%. This represents a mod- est increase over year-end 2020 vacancy of 11.69% and year-end 2019 of 11.52%. The increase in 2021 generally can be attributed to three tenants in the north Interstate 25 submarket that vacated a total of 70,000 sf. The north I-25 mar- ket noted the largest swing, with vacancy rates rising from 15.09% for year-end 2020 to 16.28% year to date. Both the airport and CBD sub- markets remained fairly steady but noting a very minor increase. We do anticipate additional space being vacated in the second half of the year. Leasing activity, particularly in the sub-5,000-sf range, remains healthy; however, larger require- ments remain limited, although we anticipate those to pick up in the latter part of the year. Overall, the market remains tight, and we fore- cast this slight increase in vacancy rates to be short-lived. n Lease rates. Lease rates continue to escalate throughout the market, and despite the slight increase in vacancy rates we do not expect that to stop. Perhaps more significant Excitement throughout Springs office market Peter Scoville Principal, Colorado Springs Commercial, Cushman & Wakefield Greg Phaneuf Principal, Colorado Springs Commercial, Cushman & Wakefield Please see Scoville, Page 18 Class A and B vacancy vs. net absorption in Colorado Springs from 2012 to second- quarter 2021. GriffisBlessing.com info@gb85.com 303.804.0123 Your full service property management specialists for 35 years and counting. We make it our business to manage yours Over 6 Million Square Feet under Commercial Management