CREJ - Retail Properties Quarterly - November 18, 2015
Colorado Springs finally is starting to see improved retail activity, and the box-space component is no exception. The 18-month lag in the - economy that Colorado Springs normally sees in relation to Denver is narrowing in 2015 as occupancy for box space increased over the past year and a half. Driven by strong retail sales, the vacancy for box space remains low in the majority of the Colorado Springs submarkets and is resulting in new retail developments throughout the area. The Colorado Springs market has four prime retail trade areas: North Academy, Powers, Broadmoor and Citadel. The North Academy area is located between Woodmen Road and Interstate 25 in northwest Colorado Springs. This trade area has no box space available. Recent additions to the market include Sky Zone, occupying 31,372 square feet in April 2014, and GolfSmith, which took 34,043 sf in March 2014. Nordstrom Rack is occupying 31,047 sf at Chapel Hills East Shopping Center, which is scheduled to open in April. To make room for Nordstrom Rack, Office Depot reduced its existing footprint and relocated, absorbing the 16,500-sf vacancy next to Barnes & Noble. The North Academy submarket continues to be very strong, seeing 100 percent box occupancy for the last two years, with average lease rates ranging from $10 to $13 per sf and $16 to $20 per sf for junior-anchor space. The Powers submarket in east Colorado Springs has a lone box vacancy of 84,000 sf, formerly occupied by Kmart at Palmer Park Boulevard and North Powers Boulevard on the south end of the submarket. The area saw some significant new tenants with the October opening of Sierra Trading Post, operating in 25,377 sf. Other recent additions over the last two years include Planet Fitness and Big R, located at Constitution Avenue and North Powers Boulevard. The new Sprouts-anchored shopping center at Barnes and Powers is slated for mid-2016 delivery and will bring new box opportunities to the north part of the submarket. The Broadmoor submarket in southwest Colorado Springs is tight for box retailers as well. The former Albertsons at Cheyenne Hills Shopping Center is the only vacancy. New box development began at South Academy Highlands with the opening of a national chain discount-department store and a national chain discount-warehouse store, and phase two of that development will bring more box options for the southwest submarket. The Citadel area in central Colorado Springs has the most opportunities for box retailers, as the area’s average annual household income of $41,000 prevents some traditional retailers from entering the submarket. Currently, there is approximately 500,000 sf of space available, including Rustic Hills North and South, the former Macy’s department store at The Citadel mall and several other smaller box spaces. In the last two years, Conn’s Home Plus and At Home – The Décor Superstore absorbed large blocks of space. The two retailers combined to take 170,843 sf, which was very impactful in the submarket. The strong box occupancy is supported by the increased retail sales throughout the entire trade area. The city of Colorado Springs recently released the Sales and Use Tax Revenue Report for August showing 2015 sales tax collections were up 10.4 percent year over year. Specifically, restaurant sales tax collections were up 7.98 percent and clothing store sales and department and discount store sales were up 3.5 percent and 2.76 percent, respectively. In September, sales tax revenues dropped 1.3 percent from the high seen in August. However, restaurant sales tax collections in September totaled $2 million, which is the largest collection recorded by an industry in the month. Retail vacancy in the market has consistently declined over the last seven years to 5.5 percent in the third-quarter 2015, compared with a high of over 8 percent in 2009, according to Moody’s Analytics. The growth activity in Colorado Springs continues with positive absorption for the retail market over the last six quarters, according to CBRE Research. Due to the high occupancy of the retail box market in the majority of the Colorado Springs submarkets, demand for box space is outpacing supply. Looking ahead, the lack of box availability in Colorado Springs is spurring development around the metro area. With 125 acres of proposed new anchored retail developments between Monument and South Academy, construction in Colorado Springs is very active. National retailers such as Boot Barn, King Soopers, Tractor Supply, Sprouts and Conn’s are growing their presence in the market. Overall, Colorado Springs residents can look forward to enjoying new and expanding retail shopping and dining opportunities in the immediate years ahead.