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Page 10 — Retail Properties Quarterly — February 2018
RETAIL CONSTRUCTION DELIVERED
BY EXPERTS SO YOU CAN FOCUS ON
BUILDING YOUR BUSINESS.
El Five Restaurant, Denver
L ast year was another year of
recovery for the entire Colorado
Springs market and, specifically,
in the retail segment of the
commercial real estate market.
Retail development follows roof-
tops, specifically new rooftops. Most
cities on the Front Range of Colorado
grow to the east, as the mountains
define the limits of development to
the west. In addition to the west-
ern boundary, Colorado Springs has
an eastern boundary known as the
Banning Lewis Ranch, a 30,000-acre
property that has changed hands
and been divided over the years,
but which still is predominantly
undeveloped. This has caused home
developers to hopscotch across this
property to the east and build in the
Falcon area.
Over the last 15 years, this area has
grown dramatically with hundreds of
new rooftops and the retail develop-
ment to follow it. Residential devel-
opment on the east side of Colorado
Springs has filled
in against the west-
ern boundary of
the Banning Lewis
Ranch property,
which is gener-
ally defined by
Marksheffell Road
running north and
south the entire
length of the city.
The Banning Lewis
Ranch property
will define the resi-
dential growth of
Colorado Springs
for the next 50 years. Infrastructure
costs have been the prohibiting fac-
tor in developing this property, but
city and county governments are try-
ing to make changes that will allow
this property to be developed and
provide adequate infrastructure.
So, most of the new residential
development in the last few years in
Colorado Springs has taken place at
the north and south ends of Colo-
rado Springs as well as in the last
few undeveloped parcels on the east
side of town, and retail has followed.
King Soopers opened one of its new
“super” stores at Marksheffell and
Constitution in 2017, which was one
of the only anchor retail stores to
open last year.
Other areas of new retail activity
took place along the north Powers
Boulevard corridor between Consti-
tution and Briargate Parkway; along
Interstate 25 at the Interquest exit
around the new Great Wolf Lodge
redevelopment; and at the Northgate
exit around the Bass Pro Shop in
the Polaris Point retail development.
An urban renewal project on South
Nevada Avenue south of downtown
is starting to open new retailers and
redefining the area with trendier
residential redevelopment coming as
well.
Downtown is seeing a resurgence
of development, with Oscar Blues
opening its new restaurant, while the
Atomic Cowboy, Denver Biscuit Co.
and Fat Sully’s New York Pizza are
coming to the Trolley Garage redevel-
opment on South Tejon Street. The
U.S. Olympic Hall of Fame is under
construction west of downtown and
there are more than 600 residential
units in the pipeline in the down-
town area.
In 2017, retail development led the
way in new commercial structures.
Most of the new development was
in smaller multitenant buildings and
most of the new tenants were fast-
casual restaurants either new to the
market or expanding after an entry
in the last few years.
Vacancy rates in retail centers is
6.5 percent in anchored centers and
14 percent in unanchored centers.
Average retail rents have broken the
$12 per square foot, triple-net mark
for the first time since 2009. Many
older centers that sold recently are
being refaced and redeveloped to
accommodate the shrinking demand
for retail. In 2017, Chapel Hills Mall
at the north end of Colorado Springs
went into foreclosure, reflecting
the changing status of the national
demand for brick-and-mortar retail
centers.
In 2017, only two retail proper-
ties over 100,000 sf sold in the area,
but more than 23 properties under
100,000 sf sold. Capitalization rates
on retail properties have been falling
here; cap rates were about 8 percent
in 2016, 7.5 to 7 percent in 2017, and
will be in the 6’s in 2018. Even in the
6 percent range, cap rates in Colo-
rado Springs offer a 1 to 2 percent
benefit to those currently available in
the Denver retail investment market.
Experts say there is only a 15-day
supply of residential inventory in
Colorado Springs. Our retail vacancy
rates are approaching 5 percent on
average. Denver workers are buying
homes in the Colorado Springs area
and commuting to their jobs because
of home prices in Denver. There is an
abundance of opportunity for retail
developers and residential develop-
ers in Colorado Springs in 2018 and
into the next decade.
But do you know what Colorado
Springs residents are most excited
about in 2018? In-N-Out Burger is
opening its first Colorado location
here this year. V
Market Spotlight
2017 Colorado Springs general market statistics
• Population of Colorado Springs: 465,000
• Population of the Colorado Springs metropolitan statistical area:
698,000
• Total home sales: Up 7 percent over 2016, while 2015 and 2016 were
both record years.
• Single-family new construction permits: 3,405 permits, up 8.2
percent over 2016
• Unemployment rate: Less than 4 percent
• Overall average commercial vacancy rate: 7 percent
• Overall average commercial lease rate: $12.48 per square foot, triple
net
• Retail absorption in 2017: 355,000 square feet
• Apartment vacancy rate: 5 percent
Jay Carlson
Managing broker
and co-founder,
Front Range
Commercial LLC,
Colorado Springs
Front Range Commercial LLC