During the past year, downtown Colorado Springs’ retail vacancy rate has increased by more than 3 percentage points.
Ben Lowe, a researcher at Sierra Commercial Real Estate, puts the vacancy rate at 15.9 percent for the second quarter of 2006. A year ago, the rate was 12.5 percent.
“It’s gone up a little,” he said. “And I’ve been noticing it. It tends to come and go. There’s a lot of pressure downtown, rents are high. And as the population grows further and further away from downtown, there’s more pressure to go get a slice of the pie in Monument or Powers. Some retailers have chosen to do that.”
Regis University professor Marilynn Force said high vacancy rates show an area in transition.
“If a downtown has that level of vacancy — over 14 percent — then you have an area that is struggling to find an identity,” she said. “Everyone has to get on board; every stakeholder has a voice in the decision. Retail is pushed by other factors, and there are a lot of what if’s right now.”
Paul Turner disputes the double-digit vacancy numbers, however. His third quarter research shows a vacancy rate of 5.8 percent, about normal for downtown, he said.
“People walk around and see all the empty spaces and think, ‘there’s a lot of empty buildings down here,’” he said. “And there is. There’s 103,000 square feet of empty space total. But that compares to a total of 1.7 million square feet — and you can’t see all that space at one time.”
He said the difference in the numbers could come from several factors, including which buildings are counted and how wide an area is used.
Downtown is losing market share, admits Beth Kosley, executive director of the Downtown Partnership Association.
“We’ve lost tremendous market share over the last decade,” Kosley said. “We’re trying to get people to understand that by creating the Downtown Development Authority, we can stop that.”
The Downtown Partnership is in the middle of a campaign to create a development authority that would have taxing powers in the downtown area. The money generated would not be directly used to recruiting new retailers, however.
“The authority is designed to help focus on retail recruiting by creating new housing downtown,” she said. “Once we bring in more people, living downtown, the shops will follow. We’re on the march to get this passed.”
While Kosley admits downtown is experiencing a retail slump, the partnership does not know how large the slump is.
“We don’t track retail vacancy rates,” she said. “I just don’t know how many spaces are open.”
But Kosley believes the development authority — part of a mail ballot for downtown residents and businesses — is the only way to reverse the slump.
“We have great shops downtown, but we need more of them,” she said. “And with the DDA will be able to keep a percentage of the money through tax increment financing that normally flows away from downtown.”
Downtown rents are high, said Grubb and Ellis broker Candy Seaton. And possibly, they are too high, she said, leading some businesses to close — and others to choose other parts of the city.
“Looking at it over the long term, some of the buildings sold at pro forma rent rates that match the rents on new construction in other parts of the city,” she said. “In general — not all the time — it’s difficult for local business to make ends meet, paying those rates.”
The higher rates are reserved for national chains, she said. And many of those chains choose to build or move into newer areas that are growing ahead of downtown.
“Possibly, there needs to be some adjustment going in,” she said. “I think there are some leases getting done; sometimes they discount the rent in order to attract businesses.”
Another issue that’s going to affect downtown’s empty retail spaces: The Colorado Springs Metro Interstate Expansion project.
“The Bijou bridge is going to be (partially) closed for 18 months,” Lowe said. “That’s going to make a difference in filling those spaces. It could be a factor — there aren’t a lot of people who live downtown. And that’s going to make it harder for people to get down there.”
The problem with downtown Colorado Springs could be simply an issue of the right mix, Force said.
“Who fits the retail? Is there the population to support it?” she asked. “Those are the issues — there isn’t a silver bullet. It’s a real hard nut to crack. If the shops have been there for a while, it could be just the normal switch in businesses as people retire.”
Even vibrant downtown areas can suffer over time, she said. If the retail shops have been around for a while, leaders should look at the overall mix.
She agrees that retailers follow rooftops, noting that Denver’s downtown is working on 17 separate condo projects.
“That’s pushing the change,” she said. “The condo business in Denver is huge. People want to live downtown. And that’s bringing in new shops, new markets.”
Overall, Seaton believes new businesses will fill the spaces left by the old ones.
“I’m optimistic,” she said. “It’s not going to come overnight, but it will take time. Retailers see downtown as a very viable place.”
Retailers are interested in the two spaces next to Terra Verde, manager Laszlo Palos said.
“We’ve had lots of interest,” he said. “We probably show it a couple of times a week. But we are working on some internal things before we’re ready to let it go — actually, we’re probably holding it back, waiting for exactly the right fit.”