CREJ

Page 30 — Office & Industrial Quarterly — December 2021 www.crej.com INDUSTRIAL — TRENDS T he end of 2021 is in sight and, like 2020, it’s a year we won’t miss. This year has seen 30% to 40% increases in overall industrial build- ing costs – not to mention the long lead times for materials like steel and roofing. Last fall, lead times for those items were three to four months whereas now we’re wait- ing seven to 10 months for them to come in. With those trends in mind, here is what we expect to see carry- ing into 2022. n Sites are hard to find. We are starting to see shortages of avail- able sites and, as a result, many of those that are available require rezoning, or have significant slopes, demolition requirements or landfill components. Rezoning is possible but adds sig- nificant time – in some cases eight to 12 months to get through the approval process. It also puts con- siderable risk on the land’s buyers if they commit to purchase without jurisdictional approval contingen- cies. In today’s tight market, some buyers are choosing to waive these contingencies to win land. And with jurisdictions and local neighbor- hood groups becoming increasingly resistant to construction projects, risks are high for buyers who waive rezone contingencies. Sloped sites also can represent significant costs for projects. Right now, the cost for dirt export sits at roughly $17 per cubic yard, and import is $17-$25 per cubic yard, depending on specifications. There’s a lot of money to be won or lost by carefully designing your site to reduce import/export and by working with your geotechnical engineer to ensure that import specifi- cations provide the team with options. Another tactic that can be utilized is a sloped slab, which can reduce the amount of import required, is barely noticeable at only half a percent slope and is widely accepted by the industry here in Colorado. As the value of land increases, sites with existing buildings on them are becoming more common. When crafting a demolition bud- get, be sure to account for asbestos abatement in addition to standard demolition costs. Many buyers don’t realize that Phase I and Phase II report protocols do not require asbestos testing, but state law requires testing on buildings of any age before demolition can be per- formed. This requirement stands in all circumstances, unless the build- ing’s original architect of record is willing to certify that no materials containing asbestos are present in the building. Landfill sites also have become much more common in the past several years. On these sites, chal- lenges can include buried construc- tion debris, which is the easiest and least expensive landfill type to build over. Another, household waste, brings in the added requirements for structural slabs and methane mitigation. And finally, brownfield sites contaminated with chemicals and heavy metals can require sig- nificant early planning to deal with the long-term legal and monitoring risks on the site. n More activity outside central Den- ver. As land becomes harder to find and logistics companies continue to try to serve last-mile locations, we are seeing more activity outside the Denver metro area. There is sig- nificant activity in places like Mead, Johnstown, Loveland, Brighton, Monument and Watkins, as well as more activity than usual in Colo- rado Springs and Fort Collins. n Solar ready. Owners for many of the speculative buildings we cur- rently have under construction are asking for the option to have the building constructed with solar in mind. That means the inclusion of a conduit from the main electrical room to the roof. Additionally, add- ing a solar array on a building’s roof imposes added structural load on the building. There are a few ways that this load can be handled, one being to design the joist and deck to support the solar panels. In our experience, the premium for this upgrade is roughly $2 to $3 per square foot. Additionally, you could have the solar panel provider install a system that locates the supports near the columns of the building to support the loads between columns. This strategy can result in a signifi- cantly reduced cost to the building’s structure. n Cost and supply chain predictions. With contractors currently main- taining a strong backlog, and the October Architectural Billings Index for Commercial/Industrial prac- tices at 57.4, demand for industrial buildings is not likely to slow down through 2022. We can expect the pace of price increases to slow but not reverse until late in 2022. Even then, while we may see some soft- ening, prices are unlikely to return to pre-2021 levels. While a few of my sources tell me they could see materials prices subsiding to a level that would bring pricing down around 10% by late next year, I’m not sure I believe that materials suppliers will be willing to give back that kind of ground. By the second or third quarter of 2022, materi- als like steel and roofing will likely maintain lead times in the six- to eight-month range, an improve- ment from the recent seven to 10 months but still above pre-2021 levels. In many ways, 2021 has been a huge improvement over 2020, but the industry still is working to normalize itself. We continue to encourage customers to bring a contractor on board early to help navigate these trends and get cus- tomers into their space faster and at a lower cost than with a tradi- tional design-bid-build process. s chris@alcornci.com Construction: Looking back for a view of the future NORTHERN COLORADO INDUSTRIAL OPPORTUNITIES 3665 John F. Kennedy Parkway, Bldg 2, Suite 202 Fort Collins, CO 80525 naiaffinity.com NEW DISTRIBUTION/WAREHOUSE SPACE FOR LEASE 2534 (SEC OF I-25 & US 34) - 4200 RONALD REAGAN BLVD, JOHNSTOWN, CO Available 22,800± to 45,600± Sq. Ft. For Lease: $6.95/SF NNN - Outstanding rate! TI Allowance: Negotiable Features: Temperature-controlled warehouse space (<70 degrees, >50 degrees), 32’ Clear Height to lowest structural member, Dock High and Drive-In Doors Available This new, high-quality warehouse space was recently completed within the 2534 master- planned development as an expansion of the High Country Beverage Building. The space is a 32’ clear, insulated warehouse with dock-hi and drive in doors. Spaces available are from 22,800 to 45,600 sq. ft. Shorter term leases of three years or less are preferred. NAI Affinity: Jake Hallauer, CCIM | Ryan Schaefer | Joe Palieri, CCIM | 970 663 3150 Realtec Commercial: Gage Osthoff | 970 396 5166 NEW CLASS A 280,323 +/- SF, 3-BUILDING INDUSTRIAL PARK FOR LEASE 2534 (SEC OF I-25 & US 34) - NEC OF RONALD REAGAN BLVD & TRADE STREET, JOHNSTOWN, CO Available: 15,000± to 280,323± Sq. Ft. Lease Rate: To Quote Clear Height: 24’ - 28’± Delivery: Core & Shell with TI allowance to quote Trade@2534 is under construction within the 2534 master planned development. The project consists of three Class A industrial buildings. Building 1 (72,896 sq. ft., front entry, rear load) and Building 2 (145,008 sq. ft., cross-dock) are under construction and slated for completion in March 2022. Construction of Building 3 will commence as needed or upon completion of Buildings 1 & 2. Space is available from 15,000 sq. ft in Buildings 1 & 3 and 25,000 sq. ft. in Building 2. NAI Affinity: Jake Hallauer, CCIM | Ryan Schaefer | Joe Palieri, CCIM | 970 663 3150 Newmark: Mike Wafer & Michael Wafer, Jr. | 303 260 4242 or 303 260 4407 @ @ 25 34 25 34 25 34 25 34 25 34 25 34 DE TRADE DE E TRADE E @ AT AT AT Owned and Developed by: Co-listed by Co-listed by Chris Alcorn President, Alcorn Construction Inc.