Colorado Springs’ commercial real estate market saw slight gains in the first quarter, but still has a long way to go before it recovers from the downturn of the last few years, a report released Thursday shows.
The combined vacancy rate for offices, industrial buildings and shopping centers stood at 11.5 percent in the first quarter, according to Turner Commercial Research of Colorado Springs. That’s down from 11.9 percent in both the first and fourth quarters of 2012.
By comparison, the combined vacancy rate was below 7 percent in 2006, before the local and national economies fell into recession.
The average asking rent for the combined market rose to $9.64 per square foot in the first quarter, up a penny from the same period last year and up from $9.57 at the end of 2012, the report shows. Rents averaged well above $10 per square foot before the economy tanked.
The local jobs picture has brightened in recent months; the Springs-area unemployment rate fell to 8.5 percent in February, a nearly four-year low. When businesses employ more people, they need more space and rents rise — positive signs for the market.
“Certainly, this first quarter report provides some hope for the local commercial real estate market,” Paul Turner, who heads turner Commercial Research, said in his report.
Still, the market hasn’t yet turned the corner in its recovery, Turner added in an interview.
Some of the improvements can be tied to local businesses and developers investing in the market. But many of them are getting tapped out financially, Turner said, and the area needs more out-of-state investment if the commercial market is to see a more robust recovery.
Turner’s first-quarter report showed:
• The office vacancy rate fell to 13.7 percent, down from 15.1 percent a year ago and 14.5 percent at the close of 2012. Rents averaged $10.26 per square foot, unchanged from a year ago and down a penny from the fourth quarter of 2012.
The vacancy rate for Class A, or top quality, offices fell to 20.1 percent, down from 21.7 percent during the same period last year and 21.4 percent in the fourth quarter of 2012. Class A rents averaged $13.35, up from $13.28 in last year’s first quarter, but down from $13.47 at the close of 2012.
• Industrial buildings had a 9.3 percent vacancy rate, slightly better than the 9.4 percent rate in both the first and fourth quarters of 2012. Industrial rents averaged $6.23 per square foot, ticking up from $6.07 in the first quarter of 2012 and $6.12 late last year.
• The vacancy rate for shopping centers — excluding the area’s two regional malls — showed no real improvement. The first quarter rate of 12.2 percent was up almost a full percentage point from 11.3 percent during the same period in 2012 and was unchanged from the fourth quarter of last year. Rents averaged $12.43 per square foot — down from $12.56 a year ago and up from $12.34 in the fourth quarter of last year.
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