Springs apartment vacancies are stabilizing, report says

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The latest multifamily market report indicates that vacancies in the Springs have stabilized and, in newer communities, are beginning to increase.

That’s in sharp contrast to two years ago when double-digit vacancy rates were common in some neighborhoods, and rents, while generally flat, were accompanied by frequent incentives.

Today’s third-quarter vacancy rates — a metric reflecting the multifamily market’s general health — rose slightly to 6.6 percent. While that’s slightly higher than the second quarter, apartment landlords and owners are breathing easier compared to a year ago, when vacancy rates were a full 2.3 percentage points higher.

Also, the average apartment rent in the third quarter rose to $707 per unit, a 17-quarter high.

Sperry Van Ness broker Doug Carter said that the quarterly statistics tell one part of the story, but it’s worth taking a look “under the hood” to really understand what’s happening.

In one of the strongest signs, 1980s-vintage buildings with fewer amenities have joined their newer, more luxurious counterparts in seeing reduced 5- to 6-percent vacancy rates over the past 12 months.

The biggest change, Carter said, has affected apartments built pre-1974 where vacancy rates have dropped considerably, from 10 percent 15 months ago to 7.3 percent last quarter. They stand at 7.6 percent today.

Colorado Springs has also seen few multifamily properties in foreclosure.

Apartment Insights’ data showed the city’s average “net rent” was flat last fall, winter and spring but increased $7 this summer and another $12 this fall. Net rents, a measuring stick used by apartment owners to determine profitability, reflect actual cash after any move-in incentives or concessions are subtracted.

Until the recent increase, the average rent had varied by only $20 during the prior three years — mostly in 1990-and-newer buildings.

In light of these improvements, should more sales of multifamily units be expected?

“We’re on track with last year with eight closings for the past eight months, or about $55 million in sales,” Carter said.

In contrast, there were 21 sales totaling $215 million in 2007.

Biggest closing of the year

The big news last week was that El Paso County completed its $25 million, 289,000-square-foot office and industrial building purchase at the former Intel campus, now dubbed the Corporate Ridge Office and Technology Center.

Grubb & Ellis broker Michael Palmer, who represents the Los Angeles-based Industrial Realty Group ownership, working with Grubb & Ellis brokers Stan Kensinger and Jim DiBiase who represented the county, shepherded the deal through months of negotiation.

A $2.6 million sticking point that involved dividing utilities and mechanical systems as well as removing an existing skybridge had to be overcome before closing. The seller agreed to help fund the extra costs, but move-in plans were delayed.

The Department of Human Services will be the first to move in, probably by year-end, according to county spokesman Dave Rose.

The County Health Department will follow in the spring, once its second floor space is build-out for medical offices, exam rooms and other custom facilities.

“We’ll actually go out to bid on some of the interior finish work in the next few weeks,” Rose said.

Stan Kensinger and Jim DiBiase of Olive Real Estate Group represented El Paso County and worked with County Administrator Jeff Greene and the county’s ownership entity, El Paso County Facilities Corp.

Chef’s Catalog re-ups

Less than a mile away from the Corporate Ridge site, there was more news, this time as Chef’s Catalog signed a six-year lease renewal for its headquarters office and warehouse space at 5050 and 5070 Centennial Blvd.

CEO Tim Littleton said the company’s substantial growth during the past five years made the decision easy to justify.

“Our fiscal year just ended and revenues were up 14 percent over last year,” he said.

The company moved into the former Hewlett Packard facility five years ago and will celebrate its sixth anniversary on Nov. 1.

While Littleton said no facility expansion plans are on the horizon, the company will be doing seasonal hiring.

Steve Bach and Mike Helwege of Bach Real Estate Partners negotiated the 105,000-square-foot lease renewal with landlord, Centennial Realty Partners LLLP.

The brokers have sold some of the city’s largest vacant buildings including the former Citadel Macy’s building earlier this summer and Current’s former 120,000-square-foot headquarters building, now occupied by a growing Diamond Wire Technologies.

“This is really a good example of a locally based success story. We need to continue to support companies like this that bring jobs and anchor our business community,” Bach said.

Contact Becky Hurley at 719-329-5235 or email her at becky.hurley@csbj.com. Friend her on Facebook.