Industrial property slowing hasn’t depressed rents

Filed under: Real Estate | Tags:

Although Colorado Springs’ industrial building space saw significant slowing in 2001, rental rates haven’t slipped appreciably compared to most major Southwest cities.
Stalled technology sectors disrupted the Pikes Peak region’s industrial market and created a negative absorption rate between 2000 and 2001, according to the Grubb & Ellis/Quantum Commercial Group’s 2002 Real Estate Forecast. Industrial absorption declined from more than one million square feet in 2000 to a negative 525,000 square feet last year.
The rate measures how much space is filled over time.
Grubb & Ellis/Quantum attributed the steep decline to several large technology firms vacating space and dumping it on the market.
While that has hampered sales and leasing activity for larger facilities, multi-tenant buildings with less than 50,000 square feet are carrying the market, according to Grubb & Ellis/Quantum. The company expects solid demand for smaller industrial properties will keep that market segment strong through the year and stabilize pricing.
Asking rents for standard industrial property in 2001 was in the $7.20-per-square-foot triple-net range, according to the report—about the same as 2000.
Compared to other Southwest cities, that rate is more than those seen in Albuquerque, N.M. ($6.10); Denver ($4.82) Las Vegas, Nev. ($6.48); Phoenix ($0.34); and Salt Lake City ($4.58), according to Grubb & Ellis/Quantum.
Higher-end research and development industrial space wasn’t reported for Colorado Springs.
Phoenix and Salt Lake City reported highest industrial-space vacancy rates, 7.6 percent and 9 percent respectively, and Denver the lowest at 5.7 percent. Colorado Springs was mid range at 6.4 percent, along with Albuquerque’s 6.5 percent and Las Vegas’ 6.7 percent.
At year-end 2001, Colorado Springs had nearly 31 million square feet of industrial space, including owner-occupied properties. That compares with Albuquerque’s 22.5 million square feet, Denver’s 158.3 million square feet, Las Vegas’ 56 million square feet, Phoenix’s 208 million square feet and Salt Lake City’s 102 million square feet.
Grubb & Ellis/Quantum projects Colorado Springs’ strongest industrial-market growth to be around the city’s airport. The company sees the high concentration of defense-related industry in the area helping generate leasing and development activities.
Intel Corp.’s plans for the area also could have a major market influence. Intel, which already gave the industrial-space market a big boost last spring when it opened its new computer-chip fabrication plant in the vacant Rockwell International property on Garden of the Gods Road, has options on a 700-acre site near the airport.
The City Council also recently approved a 1,000-acre industrial-park master plan for city property just south of the airport.
Grubb & Ellis/Quantum gave the Garden of the Gods area a thumbs up for continuing to attract high-tech businesses, but it said don’t expect much construction activity because of little land suitable for building.
The Briargate Business Park and northeast sections of the city likely will see weak leasing, sales, and construction activity in 2002 because of excess inventory, according to the forecast. High-tech companies experiencing slowdowns, consolidations, and closings have left a trail of empty space in the area.
Economic troubles created the abrupt supply-and-demand imbalances for large industrial and commercial space in 2001, but Grubb & Ellis/Quantum projects an economic turnaround by the third or fourth quarter. That means as federal monetary policies trickle down and the economic outlook becomes more certain—even brighter—the industrial space market could tighten up quickly.