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Page 6 — Office & Industrial Quarterly — December 2021 www.crej.com OFFICE — MARKET UPDATE INDUSTRIAL STRENGTH. Best-in-class strategy. Market-leading expertise. Innovative spaces for today and tomorrow. T R A D E @ 2 5 3 4 UPROPERTIES.COM F O L L O W U S P rior to the pandemic, North- ern Colorado was considered a very healthy real estate market, and the pandemic’s effect on the office market have been mostly short-lived. A few larger employers such as State Farm, Nutrien and Madwire are not utilizing a significant amount of their leased space. Although these vacancies provide opportunities for large users, they generally do not affect the overall market due to over 75% of the office leases being for space of less than 5,000 square feet. Employers continue to specu- late that a significant number of employees will work from home, at least part time, for the foreseeable future and that demand for North- ern Colorado will increase in 2022. n Fort Collins, Loveland and Larimer County. In the Fort Collins/Loveland market, absorp- tion was negative for six quarters (first-quarter 2020 to second-quarter 2021), a first for the submarket in over a decade. In the third quarter, absorption turned positive, and over the last 12 months, there has been 83,000 sf of absorp- tion in a submarket of approxi- mately 12 million sf. Once the pan- demic set in, the vacancy rate rose to above 7% from a healthy 3.91% rate reported in fourth-quarter 2019. The current vacancy rate stands at 6.4%. Additionally, there is 272,000 sf of sublease space, bringing the avail- ability rate up to 9.3%. The histori- cal availability rate has been 7.2%. There have been only five tenants leasing space greater than 10,000 sf over the last 12 months, with the most prominent being Animal Health International’s lease of 15,542 sf in the Centerra master planned development. Positive absorption is forecasted for the fourth quarter of this year and throughout 2022. The Fort Col- lins/Loveland market experienced a surge in unemployment to over 11% in April 2020 at the height of the governmental shutdowns and has rebounded well with Larimer County posting a September unem- ployment rate of 3.9%. Investment sales activity picked back up beginning in the fourth quarter of 2020, with office sales of $100 million over the previous 12 months. Historical sales in the sub- market have been approximately $52 million annually. Sales to own- er-users remain strong as Northern Colorado businesses continue to have a robust culture of ownership versus leasing. In a recent sales transaction, a group of physicians paid $410 per sf for a new building in core-and-shell condition that was in a premier location at Cen- Northern Colorado office market remains resilient Ron Kuehl Broker/partner, Realtec CRES Loveland Jamie Globelnik Broker, Realtec CRES Loveland Please see Kuehl, Page 14 Office Space Absorption 2021 Larimer & Weld Counties Office Vacancy Rate During Recessions Larimer & Weld Counties