The commercial real estate market in the Colorado Springs area continued to soften during the third quarter as vacancies edged higher and rents fell slightly, according to the latest report from Turner Commercial Research.
Conditions aren’t likely to improve until after the November election — and then only if the local economy starts generating jobs, said Paul Turner, owner of the local independent real estate research firm.
“Without people working in commercial buildings, there won’t be much additional leasing. Without a meaningful improvement in the jobless rate, you won’t see much change in vacancy rates,” Turner said.
The combined vacancy rate for offices, shopping centers and industrial buildings climbed to 12.2 percent as of Sept. 30, up from 12.1 percent during the second quarter and 11.9 percent a year earlier. The average asking rental rate for all types of space declined to $9.57 a square foot from $9.60 three months earlier and $9.89 a year ago.
Most tenants are “sitting on the sidelines until after the election and waiting to see what happens,” particularly with a series of tax cuts scheduled to expire at year’s end and automatic cuts to the federal budget totaling $110 billion — evenly split between defense and domestic spending — beginning in January, said Dale Stamp, president of Quantum Commercial Group, a local commercial real estate brokerage firm. “I have been in this business almost 25 years and I have never seen a situation where politics has played such a big role in business decisions.”
The vacancy rate for office space rose to 15 percent at the end of the third quarter from 14.9 percent in the previous quarter and 14.4 percent a year ago. Average office rents inched up to $10.28 a square foot from $10.27 in the second quarter, but down from $10.44 during the third quarter of 2011. Vacancy rates for Class A, or the best, office space jumped to 22.2 percent from 21 percent during the second quarter and 19.9 percent a year ago.
Shopping center vacancies increased to 12.5 percent during the July-to-September quarter from 12 percent in the second quarter and 11.4 percent during the third quarter of 2011. Average rents fell to $12.38 a square foot from $12.46 in the previous quarter and $13.10 a year ago.
Vacancies in industrial buildings dipped to 9.6 percent in the third quarter from 9.8 percent in the April-to-June quarter and 10.1 percent in the third quarter of 2011. Average rents slipped to $6.04 a square foot in the third quarter from $6.09 three months ago and $6.12 a year earlier.
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