The higher you go, the farther you fall, as the old adage goes.
While commercial real estate data depict slow progress in recovery from recession-era lows, the region remains in better shape than hard-hit areas in states such as California and Florida, where real estate bubbles caused catastrophic crashes.
That said, the commercial real estate market — a key indicator of economic health — continues to bounce back in the Springs and surrounding communities, but still has miles to crawl.
Sierra Commercial Real Estate Inc.’s third-quarter report displays an encouraging snapshot of the region’s retail, office and industrial sectors. The MarketView report illustrates promising trends in vacancy rates, leasing costs and activity for the quarter and the year as an unfinished whole.
“[The market] is stronger than it’s been, but we’re chugging along at a slow pace compared to past recoveries,” said Ben Lowe, director of market research for Sierra Commercial Real Estate. “Every quarter seems to be better than the previous, but we’re not recovering at a very rapid pace.”
Lowe said that investment activity and up-and-coming developments such as Copper Ridge at Northgate are potential “shots in the arm” for our economy, but it’s too soon to tell what effect those stimulants might have.
“By historical standards, we still have a long way to go — we’re going in the right direction, but just not very quickly,” he said, adding that our economic trends typically lag nine months behind those of Denver.
RETAIL: According to the report, Colorado Springs retail real estate is riding high for the quarter after a “relatively calm first half of the year.”
Sierra reports that vacancy rates dropped 11 percent and lease rates dropped to $11.68 per square foot this quarter, while so far this year net absorption is up 85,000 square feet and lease activity increased by 440,000 square feet. These leasing rates remain low because of older retail centers carrying a larger percentage of available space, in contrast with newer, growing centers at which rents are steadily increasing.
The third quarter was also marked by some sizable sales and lease deals within the local market. Among those deals are the Promenade Shops at Briargate, a 231,847-square-foot lifestyle center at 1605 Briargate Pkwy. that sold for $96.8 million, and the Windchime Center at the corner of Rockrimmon Boulevard and Woodmen Road, a 67,084-square-foot shopping center that fetched $4.5 million.
OFFICE: Sierra reported that office real estate in the Springs area is experiencing a healthy season.
The organization reports that vacancy rates are down 15 percent and leasing costs are down to $10.67 per square foot this quarter, while net absorption is up more than 410,000 square feet for the year. However, year-to-date lease activity within this sector suffered a blow, bringing its rate down 942,000 square feet.
“The first three quarters of 2013 have demonstrated that the Colorado Springs office market has made further gains during the current recovery cycle that began in 2010,” according to Sierra’s report.
According to the report, several prominent office properties have been purchased during the third quarter. Among office properties sold are the 218,000-square-foot PrimeCenter at Briargate at 2315 Briargate Pkwy. for $18.7 million and the 82,984-square-foot Academy Point Offices at 1030 S. Academy Blvd. for $5.5 million.
“New ownership has the potential to inject creative ideas and additional resources to underperforming buildings, further helping in the overall recovery of the office market,” the report said.
INDUSTRIAL: Although statistics show that leasing costs are down for the quarter — thanks to supply and demand — they also show that the industrial property market “remains relatively slow.”
The Sierra report shows that vacancy rates are down more than 9 percent and the lowest since 2007, while lease rates have been reduced to just $6.22 per square foot this quarter. Net absorption is also up for the year by 206,129 square feet. And while lease activity is down in the third quarter, it remains up 757,361 square feet for the year.
“The Colorado Springs industrial market continues to show improvement through the first nine months of 2013, with additional gains anticipated during the fourth quarter and into 2014,” according to the report.
Prominent leasing deals for the quarter included the 75,988-square-foot former Hotsy manufacturing facility at 2150 W. Garden of the Gods Road and a 35,550 square-foot space at 5030 Centennial Blvd., while the largest sale was that of an 11,920-square-foot manufacturing facility on Northpark Drive to Sams Management LLC for $765,000.
The report adds anecdotal data suggesting that although El Paso County has lost half of its manufacturing jobs since 2000, the market has done relatively well at curbing such losses in the past few years.