The forecast looks mostly sunny for real estate investors in 2013, according to a series of speakers who gave presentations during the Institute of Real Estate Management’s Southern Colorado economic forecast this morning.
Though apartments have been hot for the last couple years, it’s still a good time to invest in them, said Doug Carter, an apartment broker with Sperry Van Ness. Low interest rates, continued asset appreciation, sustained rent growth and persistent low vacancy should continue throughout the year, he said.
“There might not be the great deals this year,” he said. “But make a deal.”
The commercial market is also seeing some positive trends, said Brian Wagner, an office broker with Sierra Commercial Real Estate.
There was a lot of new office construction leading into the recession and slow job growth has kept vacancy rates high. But Wagner said he’s optimistic the market will turn around. In average years, there is about 10 percent vacancy in the office market. That’s about 17 percent now.
There is a mismatch in expectations, he said. Property owners want a certain rent and business owners are looking for a deal.
The retail market has remained mostly steady, likely because of continued population growth. Vacancy and rent has stayed mostly within the average ranges except in more depressed parts of the city with older real estate.
“I am a little concerned about the industrial market,” Wagner said.
The industrial world has changed. It’s not a dirty business with heavy trucks and men in clunky work boots anymore. It’s highly technical and well-paying. But there is a shortage of modern industrial space in Colorado Springs, he said. And a surplus of ill-equipped space that has seen declining rents during the last decade.
“We need to find a way to reinvent that market,” he said.
Bob Cope, a commercial real estate broker who works as an advisor to the City of Colorado Springs, said he has been working with Mayor Steve Bach to create streamlined approval and permitting processes along with custom-tailored economic incentive packages for businesses considering a move to Colorado Springs.
Bruce Betts, broker owner of Re/Max Advantage, spoke about the residential real estate market. While sales volume and average sales prices are still down from their peaks in 2005 and 2006, they are better than they have been in years.
There were 10,235 home sales in the Pikes Peak MLS region in 2012.
“That’s the first time we’ve been over 10,000 since 2007,” Betts said.
It’s still far below the 15,000 houses local Realtors sold in 2005, he said.
The average home sales price was $222,499, which is down 11 percent from the average sales price in 2006, but up 6 percent from 2011.
Rents were up dramatically in the MLS. Rental rates for single-family homes, condos and townhomes rented through the MLS climbed 5 percent in 2012, Betts said. And investors should take advantage of low home prices, low interest rates and the high rents.
The average rent for a three-bedroom, two-bathroom house with a two-car garage in the Powers Boulevard corridor was more than $1,200 a month. To buy the same home, would cost $776 a month in principal and interest if there was no down payment, Betts said.
He said he suspects, best case scenario, sales and home prices will increase another 10 percent for lower-priced homes in 2013.
There will be growth on the higher end as well, but it won’t be as significant.