CREJ - page 13

August 19-September 1, 2015 —
COLORADO REAL ESTATE JOURNAL
— Page 13
Larimer & Weld Counties
by Jill Jamieson-Nichols
A Fort Collins manufacturing
building will be converted to
office space after being acquired
by a local investor for $3.66 mil-
lion, or $91.36 per square foot.
The former Value Plastics
building at 3325 Timberline Road
will deliver 25,000 sf of office
space to the market, which has
seen little new office develop-
ment in the current commercial
real estate cycle.
“This transaction demonstrates
the real need today for high-
quality office space in southeast
Fort Collins,” said CBRE Senior
Vice President Peter Kast, who
represented buyer RPM Timber-
line TNC LLC with CBRE’s Pete
Kelly. “Our client recognized the
value of this property’s excellent
location and the potential it has
to become successful office space
with its high ceilings and abun-
dance of natural light.”
The 40,062-sf building’s trans-
formation into multitenant office
space is expected to start Nov. 1
and be completed by the end of
Value Plastics’ former building will become office space.
by Jill Jamieson-Nichols
Demand for commercial real
estate in Northern Colorado has
pushed vacancy rates below 5
percent for every product type
and, in some cases, to their lowest
levels in years.
DTZ’s second-quarter Market
Snapshot report says the vacancy
rate for office space dropped to 4.9
percent in the first quarter, its low-
est level since 2001. Retail vacancy,
also 4.9 percent, has been below 5
percent for the last three quarters,
setting historical lows for North-
ern Colorado. Industrial vacancy
is 4.77 percent, and multifamily
vacancy is next to nonexistent, 1.6
percent.
Cutbacks in the energy sector
don’t appear to be hurting the
market, DTZ said. If there is an
issue, it is meeting demand from
employers for quality commer-
cial real estate space, according to
Jason Ells, vice president in DTZ’s
Fort Collins office.
“The Northern Colorado com-
mercial real estatemarket remains
very vibrant. Demand for high-
quality space continues to remain
strong, and our region continues
to be a nationally recognized lead-
er in innovation and a desirable
place for families and business to
locate. The challenge we face as
we finish 2015 and look toward
2016 is a lack of existing options
for primary employers and the
growing cost of constructing new
facilities,” he said.
“Businesses ultimately have a
certain level of occupancy cost
they can afford, and the fear is that
wearepushing that envelopewith
new facilities. This cost vs. avail-
ability dilemma will continue into
the foreseeable future,making cre-
ative repurposing, public-private
partnerships and other unique
methods of delivering product to
the market as important as ever.”
Ells
said
there are a
variety
of
sites around
the
region
where new
office product
is planned,
designed or
permit-ready,
but increased
construction
costs have stifled construction.
“The economic rent required
by developers based on these
increased costs is 25 to 30 percent
higher than achievable market
rent, and until that gap narrows,
office development will likely be
constricted to primarily owner-
user projects,” he said.
DTZ’s second-quarter report
shows the average office rent,
$18.37 gross, was up 25 cents per
sf in the first quarter but was 15
cents per sf lower than in the sec-
ond quarter of 2014. Ells says that
is a function of high-quality space
having been absorbed. “With now
a lower inventory in the market
and less of that inventory consist-
ing of Class A space, the overall
asking rents have fallen slightly.
This is not a poor reflection on
the market at all, but rather a sign
of strength as demand remains
strong for well-located, high-qual-
ity space, and tenants are willing
to pay a premium for it.”
The same is true for retail prod-
uct, he said. Rates average $13.08
per sf triple net, 19 cents more
than in the first quarter but slight-
ly below the historical average of
$13.18 per sf.
There will be some overlap of
retailers with the opening of the
Foothills Mall redevelopment
in Fort Collins starting later this
year, but Ells said in general “the
mall will not take another slice
out of the pie but rather make the
pie bigger.” One of the things the
city hopes the redevelopment will
reverse is leakage of sales-tax dol-
lars out of the city.
“Ultimately we see the reopen-
ing of the FoothillsMall as a rising
tide that will bolster sales for the
market as a whole as its custom-
ers spill over to options that are
downtown, alongHarmonyRoad
or located along the midtown cor-
ridor,” said Ells.
Another major Northern
Colorado retail project will be a
250,000-sf Scheels “retail adven-
ture” store slated to break ground
at Interstate 25 and U.S. Highway
34 in Johnstown early next year.
The mall and Scheels will add as
many as 1.2 million sf of retail to
the Northern Colorado market.
More than2,000apartmentunits
are under construction in North-
ern Colorado, and asking rent is
at an all-time high of $1,074 per
unit, according to DTZ’s Market
Snapshot. A more detailed DTZ
Snapshot report on the multifam-
ily market reports rents at $1,173
per unit in Fort Collins and Love-
land and $882 in Greeley, whose
vacancy rate was 1.1 percent at
the end of the second quarter.
Fort Collins’ vacancy rate was 1.8
percent, and Loveland stood at 2.7
percent vacancy.
In addition to units under
construction, more than 2,900
apartment units are proposed
or planned. DTZ projects rental
rates will continue to stabilize
with increased development and
low salary growth, vacancies will
continue to climb slightly despite
“surprising” absorption and sales
of apartment communities will
increase.
Northern Colorado’s unem-
ployment rate dropped to 3.9 per-
cent in the second quarter, slight-
ly lower than the state average
(4.4 percent) and well below the
national average (5.3 percent).
s
Jason Ells
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