Vacancies in Colorado Springs area commercial buildings edged lower in the third quarter, but vacancy rates have been slow to fall as many businesses are moving into empty buildings they had built specifically for themselves instead of moving into other buildings available for lease.
The combined vacancy for area office, industrial and retail properties fell to 11.4 percent in the third quarter from 11.5 percent in each of the two previous quarters, according to a report on the local commercial real estate market by Turner Commercial Research. The combined vacancy rate was 12.2 percent a year earlier and dropped sharply during the next six months, but has been little changed in the past six months. That reflects a slow-moving recovery in the local economy, said Paul Turner, president of the research firm, which released the report Wednesday.
"Most of the space that has been absorbed by the market in recent years is owner-occupied. Once you subtract that out, there has been very little speculative commercial space occupied and that is why the vacancy rate hasn't dropped very much," Turner said. "Businesses are building their own buildings instead of leasing."
The local economy has been slow to recover, especially in the July-to-September quarter, Turner said. Businesses dependant on federal spending delayed or shelved expansion plans amid fears of a federal government shutdown and a possible default on U.S. government securities as Congress and the President couldn't reach a compromise before the federal fiscal year began on Oct. 1. Much of the federal government shut down for more than two weeks this month until a last-minute deal was reached Wednesday on both the federal budget and debt limit.
Area commercial building rents sought by landlords reflected a similar trend, increasing just 4 cents, or 0.4 percent, during the past three months, and 2.1 percent from a year earlier to $9.77 per square foot. Turner cautioned in the report that many leases are still being completed at rates between 25 percent and 40 percent below the asking rates.
The report also showed:
- The office vacancy rate fell to 13.3 percent at the end of the third quarter from 13.7 percent in the April-to-June quarter and 15 percent in the third quarter of 2012. Rents remained little changed from either the previous quarter or a year ago at $10.20 per square foot, down 3 cents in the past three months and 8 cents in the past year.
- The vacancy rate for Class A, or the highest-quality, office space declined sharply to 19.5 percent in the third quarter, from 20.7 percent three months earlier and 22.2 percent a year earlier. Landlords cut rental rates to fill those buildings with the average rent falling 0.5 percent from the previous quarter and 1.4 percent from a year ago.
- Vacancies in industrial buildings, which includes manufacturing plants and warehouses, rose to 9.4 percent during the third quarter from 9.1 percent at the end of the second quarter, but were down from 9.6 percent a year earlier. Despite increased vacancies, industrial rents rose 2.5 percent from the previous quarter and 7 percent from a year ago.
- Vacancies in shopping centers fell sharply to 11.9 percent in the third quarter from 12.3 percent in the second quarter and 12.5 percent in the third quarter of 2012. Retail rental rates remained little changed in the past three months, declining 1 cent to $12.67 per square foot, but were up 2.2 percent from a year ago.
Contact Wayne Heilman: 636-0234 Twitter @wayneheilman
Facebook Wayne Heilman