Colorado Springs’ commercial real estate market finally has left the post-Great Recession doldrums behind and is poised for a banner year in 2020, according to a forecast by Quantum Commercial Group, a local brokerage.
“Almost in all phases in commercial real estate, it all just has gotten better,” said Dale Stamp, Quantum’s president. “It’s been, what, almost a decade now since 2010? From that downturn, it just keeps rolling along.”
The much-improved local, state and national economies are driving key commercial real estate sectors in the Springs. Employers are leasing more office space for workers, while stores and restaurants are chasing rooftops and adding locations, especially in newer parts of town.
And the buzz surrounding Colorado Springs and its quality of life — U.S. News & World Report has named the city as the nation’s most desirable place to live for two straight years — is helping to attract expansion-minded businesses and investors looking to buy apartment complexes, shopping centers and other commercial properties.
Colorado Springs also is increasingly on the radar of millennials, who are embracing the city’s quality of life, its proximity to the mountains and its lower cost of living and lack of traffic congestion — at least, compared with Denver.
“So many companies are getting priced out of Denver and so many people are getting priced out of Denver,” said Andy Oyler, a Quantum broker.
Taylor Stamp, another broker and Dale’s son, said younger people, in particular, realize that Denver is too expensive.
“Expensive to buy housing, expensive to rent,” Taylor Stamp said. “You don’t have amenities like Colorado Springs has as far as access to the mountains. A lot of people are going to start coming back as they realize that they can’t afford housing, can’t afford rent for commercial spaces.”
Highlights of Quantum’s 2020 forecast include:
• Offices: The area’s vacancy rate, which had soared close to 20% a decade ago, finished 2019 at 8.5%. An additional 212,000 square feet of local office space was occupied by year’s end — less than the increase in 2018, but still beating the totals of 2016 and 2017.
About 150,000 square feet of office space also is under construction, mostly at the north-side Victory Ridge mixed-use development.
While employers are leasing more space, much of that growth has come from local business expansions, not necessarily outside companies moving to town. The offices under construction at Victory Ridge, however, could draw new employers, said broker Russell Stroud.
Major commercial projects taking shape in the Springs — a new Centura Health hospital, Ent Credit Union headquarters and In-N-Out Burger’s regional operation, all in northern Colorado Springs, along with a southeast-side Amazon distribution center — will boost all facets of the commercial market, especially the office sector, according to Quantum’s forecast.
If Colorado Springs becomes the permanent home to the new Space Force armed-service branch, the demand for office space should pick up in southeast areas near Peterson and Schriever Air Force bases.
“That’s going to attract a lot more jobs to the area,” Stroud said.
“There also will be (office) construction off base for various Department of Defense-related companies.”
• Industrial: The vacancy rate of about 5% has fallen from the beginning of the year and should continue to drop in 2020.
But while industrial space is in demand, construction isn’t keeping pace. Rental rates haven’t risen high enough to justify the cost of constructing speculative buildings, or space that isn’t pre-leased. Only about 72,000 square feet of industrial space was built in 2019, but upward of 200,000 square feet will be needed this year to accommodate industrial users.
“If you’ve got a user under 5,000 square feet looking right now, it’s very, very difficult to find space,” Taylor Stamp said, adding that the industrial market needs new buildings from as small as 2,000 square feet to as large as 100,000 square feet.
• Retail: The vacancy rate fell to 4.7% at the end of 2019, down from around 7% in 2012.
As more retail spaces fill up, rents are soaring, while shopping center and restaurant construction is strongest in the fast-growing areas to the north and northeast where household incomes are the highest.
“That’s where the housetops are, and the demand is,” said broker Mary Frances Cowan. “They can get their lease rates and solid 10-year leases or longer, with national credit tenants. That’s all very positive.”
Many consumers, buoyed by a stronger economy, are shopping and eating out, and retailers and restaurants are responding and looking for space.
“You just go out and see all these people shopping and dining,” Cowan said. “They’re feeling good about things.”
• Investments: Buyers from around the country have learned of Colorado Springs’ growing economy, which is attracting more institutional buyers, private capital groups, wealthy individuals and family trusts looking to invest in commercial properties.
Some investors are buying vacant big-box stores and remodeling them for multiple tenants, such as the former Sears building at the Broadmoor Towne Center that will house a new Magnum Shooting Center.
As millennials move to town and rent apartments, investors also are scooping up multifamily properties, where vacancy rates are low and rents are at record highs.