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— Retail Properties Quarterly — February 2016
T
he Northern Colorado com-
mercial real estate markets
have experienced remarkable
growth over the past decade.
Fort Collins-Loveland and
the Greeley metro market combined
added over 3,600 jobs to the local
economy during the past 12 months,
led primarily by strong growth in the
professional and business services
industry, which added over 1,100 jobs.
Despite the decline in the oil sector,
vacancy remains tight throughout all
product types with average asking
rates increasing during the last quar-
ter in office and retail product types.
Retail occupancy levels rose a fair
amount in 2015, with net absorption
increasing to 96,604 square feet and
occupancy levels to approximately
96 percent. Vacancy rates continue
to decline, reaching their lowest level
since prior to the Great Recession,
hovering around 4.5 percent through-
out Fort Collins, Loveland and Greeley.
This is well below the historical five-
year average of 6.2 percent.
Northern Colorado experienced a
surge in new construction prices due
to a shortage of quality subcontrac-
tors and tradesmen and an increased
appetite for development. During
the recession, construction jobs were
eliminated, leaving many with no
option but to take other career paths.
We have seen a rise in the demand
for new construction projects, pre-
dominantly in the multifamily sector
but retail and office developers also
are dusting off projects and looking to
move those forward. The big question
is whether developers can justify their
projects with the increased construc-
tion costs.
On the retail
investment front,
the net-lease sector
noticed a significant
cap rate compres-
sion over the course
of 2015. Triple-net
retail properties
registered lower
cap rates across
all submarkets in
Northern Colorado.
The competition
for quality assets
pushed closing
prices higher, espe-
cially for the most
coveted properties,
which include bank
branches, pharma-
cies and national
food chains. Anoth-
er variable of cap
rate compression
is the low-interest-
rate environment.
A low interest
rate coupled with
increasing demand
to place funds,
whether it is from
a 1031 exchange,
private or institu-
tional investors’ interest, or increased
demand for quality assets. Buyers are
getting into bidding wars for these
types of assets, sometimes seeing
multiple offers once listed. It became
a sellers’ market.
The redevelopment of the Foothills
Mall by Alberta Development and
Walton Street Capital proved to be a
catalyst project in Fort Collins. The
$320 million redevelopment of the
mall is in the final stages of comple-
tion and is attracting new tenants to
our region, such as H&M and Nord-
strom Rack.
In addition,Woodward Governor is
in the final stages of completing its
new corporate headquarters near Old
Town Fort Collins at the former Link
N’ Greens golf course. Bohemian Cos.,
in a partnership with Sage Hospitality
and McWhinney, is in the final stages
of planning before it breaks ground on
a 165-room, 85,000-sf luxury hotel in
Old Town Fort Collins.
In June 2015 a developer announced
an 830,000-sf retail center to be built
at Interstate 25 and U.S. 34 in John-
stown, anchored by a giant Scheels
sporting goods store. The North Dako-
ta retailer plans to open a 250,000-sf
“retail shopping adventure” that will
be the second-largest sporting goods
store in the country.
In addition, we cannot forget to
mention the investment that Colo-
rado State University is making for its
new on-campus football stadium and
new on-campus facilities.
We continue to see the rise in
exposure as being one of the top
places to live in America. Northern
Colorado has a bright future.With the
population increasing, we’ll see strong
demand in the retail sector.With a
strong education base at universi-
ties such as CSU and University of
Northern Colorado, as well as a strong
primary employment, we are going to
see commercial real estate values and
rents continue to increase.
s
Jim Palmer
Associate vice
president,
Cushman &
Wakefield, Fort
Collins
Aki Palmer
Vice president,
Cushman &
Wakefield, Fort
Collins
Market Update
Courtesy Cushman & Wakefield
Vacancy rates in Northern Colorado from 2011 to 2015
