Colorado Real Estate Journal - August 5, 2015
Despite feeling more upbeat about the current state of Colorado Springs’ office market, the statistics don’t look much different than two or even three years ago, according to a second-quarter report by Colorado Springs Commercial, a Cushman & Wakefield Alliance. The vacancy rate has remained close to 21 percent and quoted lease rates have had only a modest increase in the Class A and B market, the MarketView report noted. While this is a vast improvement since the market’s low point in 2010, when vacancy approached 35 percent, the momentum the market experienced from 2011 through early 2013 that led to positive absorption and dwindling vacancy rates has been lost, added report authors Greg Phaneuf and Peter Scoville of Colorado Springs Commercial. Colorado Springs’ office market has been impacted by major employers, such as Everest College, Focus on the Family, Quantum Corp. and Verizon, reducing their workforces or closing operations and bringing to the market large blocks of vacant space. Compounding this has been companies that have historically leased space to take advantage of poor market conditions instead purchasing their own space to occupy. These events, according to the report, have added large blocks of space – in some cases more than 100,000 square feet – to the overall market vacancy and the spaces are often difficult or cost prohibitive to subdivide for smaller users, thus remaining available for an extended period of time. On the positive side, smaller companies, especially those in high-tech, are growing organically within the community, adding staff and leasing more space, including Value Options, Spectranetics, Cherwell, HGST, Care Core and Home Advisors, which have experienced positive growth. However, a new company coming to the community and leasing up one of the large blocks of space has yet to be experienced, continuing a slow path to recovery. The overall vacancy rate ended the quarter at 21.25 percent with an availability rate of 22.61 percent. “With the general health of the economy, the real estate market will likely continue to get better but at a modest pace, meaning for the time being there will remain ample opportunities for tenants to find space that works for them and at reasonable rates,” the report added. Other News Colorado Springs’ multifamily market strengthened heading into the summer leasing season, according to Apartment Insights’ recently released Statistics/Trends Summary. The reported noted that in the second quarter, rents reached new highs – growing at a “healthy” annual pace of 6 percent. While the quarterly vacancy did not reach a new low, the decline was substantial and the trailing four-quarter average is very close to a historical low. During the second quarter, the stabilized vacancy rate for the Colorado Springs area decreased by 71 basis points to 5.32 percent. The current vacancy is nine bps above the 5.23 percent seen a year ago and higher than the recent low of 4.79 percent reached in the third quarter of last year. Absorption was strong during the quarter, according to the summary, with a gain of 311 occupied units – more than offsetting the last two quarterly losses – resulting in a four-quarter total absorption of 377 units. The average rent for the metro area increased by $20 in the second quarter to $849 per unit and $1.04 per square foot – a new high. The 12-month increase is $48, or 6 percent higher than a year ago. At the time of the report, four sales closed in the quarter with a total of 955 units at an average price of $60,288 per unit and $82.43 per sf – down considerably from first-quarter figures as the newest property to trade was built in 1986. However, Apartment Insights noted that buyer interest is still strong, resulting in a steady pace of sales of apartment communities. “All signs point to continued steady improvement in the rental market,” the report commented. LaPlata recently renewed and expanded its office lease at 1755 Telstar Drive in Colorado Springs. It signed a 6,116-sf lease with landlord DAR Briargate LLC. Greg Phaneuf of Colorado Springs Commercial, a Cushman & Wakefield Alliance represented the landlord.