CREJ

November 2016 — Retail Properties Quarterly —

Page 23

lot of retail developers became over-

ly aggressive and forgot the adage

“retail follows rooftops” when they

built large developments in areas

that were sparsely populated.

Retail developers (and retailers)

are a lot pickier about site selection

now and are focused on infill areas

that are already dense and are either

stabilized or undergoing changes

(e.g., gentrification). Sprouts Farmers

Market is a good example. All of the

store’s new locations are in urban

infill areas.

In addition, Denver is seeing a

flood of retailers from outside of

Colorado plant flags here. We believe

they are attracted to our growing

population and, in some cases, fol-

lowing loyal customers who have

moved here from other states. For

example, if you moved here from

Texas (like many transplants), you’ve

probably known about Torchy’s

Tacos for years. The daily lines out

the door are a testament to its loyal

customers, many of whom probably

enjoyed Torchy’s for years before it

opened in Denver.

A lot of retail tenants took advan-

tage of the Great Recession to nego-

tiate concessions from which they

still are benefiting. We believe that

those remaining concessions will

provide upside to retail landlords

in the future as those leases burn

off. In those situations, landlords

will have the upper hand in lease

negotiations and will be able to sub-

stantially increase rents, which is a

situation that appears to be occur-

ring now.

Further, new projects are com-

manding rents as high as $50 a

square foot, which raises the bar for

everyone. Just as many thought that

multifamily rents couldn’t get any

higher in 2014 (and were wrong), we

believe that there is a long runway

for retail rent growth for the next

three years. Investors who acquire

retail properties with low rents will

be in a good position to capitalize on

the coming retail growth cycle.

interest rates still available.

Also, fueling some of the new

developments are the high number

of restaurants coming into our mar-

ket. Most of these are fast-casual

concepts such as Tokyo Joe’s, MOD

Pizza, Dickey’s BBQ, Pie Five and

Jersey Subs. These restaurants want

highly visible, convenient locations

with end caps and some with drive-

through capability. This has resulted

in the development of a number of

smaller strip centers in areas such

as Interquest Parkway and Inter-

state 25, Powers Boulevard and Dub-

lin Boulevard, and Northgate Boule-

vard and Voyager Parkway. Most of

these projects are on the north or

northeast side of Colorado Springs.

We also are starting to see a few

developments with more traditional

design driven by grocers. Sprouts

Farmers Market is opening two

stores in newly developed centers

at Powers Boulevard and Barnes

Road, and at Northgate Boulevard

and Voyager Parkway. Kroger is

opening a new King Soopers Mar-

ketplace, double the size of its nor-

mal store, at Constitution Avenue

and Marksheffel Road.

The future for Colorado Springs

commercial real estate market

looks to be very good. These devel-

opments comprise the largest

amount of retail development in

Colorado Springs for nearly the last

decade and the next few years look

to continue that trend. While there

is much more to be said, I think, the

best summary is to refer to chart

ern- and southern-most boundar-

ies – was slated to be broken into

four individual buildings. This would

not only open up three new sight-

lines into the center’s interior when

viewed fromWadsworth Boulevard,

but also would have the secondary

effect of creating pedestrian-friendly

entertainment and outdoor eating

spaces in these newly created open-

ings. That construction broke ground

in September.

“As part of our vision for the cen-

ter, we needed to open up lines of

sight from the street, effectively

partitioning specific buildings and

effectuating the relocation of many

existing tenants,” said Tim Roe, exec-

utive vice president, senior director of

leasing at Pine Tree. “Communicating

the reason for each tenant’s reloca-

tion, finding them comparable space

within the center, and keeping them

open and happily conducting busi-

ness as normal during the transition

were our top priorities.”

Relocating five tenants from the

soon-to-be partitioned western strip

of retail now referred to as the West

Shops at Arvada Marketplace, we

negotiated with the national and

regional restaurant users we origi-

nally envisioned occupying the space.

The open spaces next to the restau-

rants will serve some tenants as out-

door eating areas.

Arvada Marketplace soon will have

various planned outdoor seating

areas, sidewalks, new wayfinding sig-

nage, newly updated pylon signage,

new canopies and efficient LED light-

ing. We are hopeful our redevelop-

ment plans will serve to revive and

renew the shopping center when

finished next year.

At the time of the article’s writ-

ing, we are in negotiations with two

major national retailers to repurpose

the center’s existing Sports Author-

ity box for alternative use. And in

what is a commitment to the Arvada

submarket and the center’s planned

revitalization, Sam’s Club underwent

a major renovation this summer.

The West Shops at Arvada are

expected to open late spring 2017.

the average market cap rate may

find a ceiling that correlates roughly

with a point of positive leverage

assuming typical market debt terms

available to the private capital inves-

tor.

•

Livin’ the dream in Denver.

A best-

in-class airport, interconnected

multimodal mass transit, strong job

growth, world-class recreational pur-

suits and 300-plus days of sunshine

per year all contribute to Denver’s

popularity. The list of benefits to call-

ing the Colorado Front Range home

is having a huge impact with out-of-

market investors and retail tenants

alike taking note and planting their

flag in Colorado. Limited new con-

struction starts, a growing population

and high tenant demand is driving

tangible rent growth for proper-

ties along the Front Range. Savvy

investors are seeking opportunities

in well-located, underutilized and

undermanaged properties that offer

a path to value creation through driv-

ing net-operating-income growth.

Understanding the micro environ-

ment impacting the complex web of

factors influencing commercial real

estate investment in a given property

sector and geographic location is crit-

ical for an investor/seller to ensure

an optimal outcome when imple-

menting a strategic disposition or

recapitalization effort. An investment

brokerage adviser must demonstrate

real-time working knowledge of the

most active and aggressive buyers in

the market along with a deep under-

standing of the variable factors driv-

ing investment decisions.

Krieger

Winsor

Bremen

Henrichs

Continued from Page 6 Continued from Page 8 Continued from Page 22 Continued from Page 12

time to present loan requests to

lenders.

Since we’ve entered the fourth

quarter, life companies have shifted

their focus to 2017, and they’re

eager to fill fresh allocations for

commercial real estate loans. Their

allocations next year will be the

same, if not greater, and they will

continue to offer the best interest

rates. Since the CMBS market has

come back strong, life companies

have more competition for the time

being, but there’s still uncertainty

in the securitized market as Dodd-

Frank regulations pertaining to risk

retention and greater due diligence

become effective this Christmas Eve.

While our outlook remains posi-

tive, based on our experience in

2016, we’re encouraging investors

with 2017 financing needs to seek

loans during the first half of the

year while competition among life

companies will be fierce. Addition-

ally, we’re encouraging borrowers

to explore forward commitments.

In many cases, in an effort to win

opportunities early, life companies

already are considering 2017 loan

requests, offering forward commit-

ments up to 12 months early, which

allow borrowers to lock rates now

for future funding.

Salzman

Continued from Page 14

Farnsworth Group

The redevelopment will include various planned outdoor seating areas, sidewalks, new wayfinding signage, newly updated pylon signage,

new canopies and efficient LED lighting.