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Page 8 — Retail Properties Quarterly — May 2015
D uring first-quarter 2015, the
overall leasing market, and
specifically the retail leasing
market in Colorado Springs,
gave positive signals for the
future.Turner Commercial Research
reports that total absorption of office,
retail and industrial space for first-
quarter 2015 was 237,425 square feet
– a 79 percent increase compared with
first-quarter 2014’s total absorption of
132,307 sf.Total absorption in 2014 was
528,645 sf, so more than half of the
total absorption from all of last year
took place in first-quarter 2015.That is
a good and much needed positive indi-
cator for the Colorado Springs market.
Retail absorption accounted for
21,559 sf of the total absorption report-
ed.That it is a very positive sign for the
Colorado Springs economy. Histori-
cally the retail sector posts a negative
absorption number in the first quarter
of the year because struggling retail-
ers will stay open through the holiday
season to harvest those high sales
figures then close the business early in
the new year. Because of this, normally
retail creates a higher-than-average
increase in vacated space in the first
quarter annually.
Total leasing activity of all categories
over the first quarter was 582,779 sf.
Retail leasing accounted for 182,165 sf,
which beat leasing numbers from the
first quarter of last year by 52,600 sf.
The combined vacancy rate of office,
retail and industrial fell 0.2 percent in
first-quarter 2015, dropping from 10.8
to 10.6 percent overall.The vacancy rate
in retail stayed about the same as it
was at year-end 2014 at 10.4 percent for
all retail centers.The market is still see-
ing continued prog-
ress from a year ago,
as the retail vacancy
rate for all centers
in first-quarter 2014
was 11.5 percent.
Colorado Springs
saw a 1.5 percent
decrease in vacancy
rate of anchored
shopping centers
between first-quar-
ter 2014 and the
same period in 2015.
The vacancy rate fell
from 7.1 percent to
where it currently
sits at 5.6 percent.The southeast quad-
rant recorded a 10 percent reduction in
vacancy of anchored centers over the
same period.
Nonanchored shopping centers
showed a slight year-to-year difference
in vacancy rate, as it was 1 percent
lower in 2015. However, the overall
vacancy rates are much higher in these
centers – 18.4 percent in 2014 and 17.4
percent this year.The northwest sector
of the market had a 9 percent decrease
in vacancy of nonanchored shopping
centers year to year.
As mentioned in the previous Colo-
rado Springs market update, specific
shopping centers and certain retail cor-
ridors may have higher vacancy rates
than the averages. However, there is a
positive change in retail leasing activity
in Colorado Springs that has occurred
since the end of last year.
Signs of improvement are visible at
several shopping centers throughout
the city – new tenants have opened up
in long-vacant spaces, tenant finish is
in process and new owners are mak-
ing improvements to common areas
of shopping centers. Making headway
on the absorption of retail space in
Colorado Springs is an important indi-
cator that the market may be on its
way to catching the wave of economic
improvement that already has graced
the metro area of Denver and the
Northern Front Range.
Sales prices of retail properties in Col-
orado Springs also have increased since
last year.Turner Commercial Research
said that 73 retail properties sold for an
average price of $98.71 per sf in 2014
and 15 properties sold at an increased
average price of $122.89 per sf in first-
quarter 2015. Adjusted retail property
sales have hovered around the $100
per-sf mark for the past two years.
Speaking with appraisers in the
market, capitalization rates on retail
properties have averaged 8 percent
on anchored, occupied shopping cen-
ters. Appraisers said that cap rates are
somewhat lower for special properties,
although not much lower, and cap
rates are higher for unanchored and
more vacant properties.
When the current cap rates are com-
pared with the 6 percent and lower
rates that are common in Denver and
other markets throughout the country,
Colorado Springs retail investment
properties continue to represent an
opportunity for investors of all descrip-
tions.
Construction of all types always
drives any economy toward improve-
ment. Generally and historically, com-
mercial construction lags residential
construction. In Colorado Springs,
residential construction was surpris-
ingly flat in 2014 and is not forecast
to improve much in 2015. Engineering
News Record forecasts a slight, 1.5 per-
cent increase in residential construc-
tion in 2015 in Colorado Springs. Build-
ers and suppliers of residential con-
struction products also agree with this
Colorado Springs Update
Jay Carlson
Managing broker
and co-founder,
Front Range
Commercial,
Colorado Springs
A new color scheme and architectural finishes at Center Point attract new tenants like
Diamond Vogel Paint.