Buoyed by a robust economy, growing population and a newfound interest in the Pikes Peak region by out-of-town businesses and investors, Colorado Springs’ residential and commercial real estate markets will continue to enjoy good times in 2020 — though not without challenges.
That was the picture painted Jan. 23 by four real estate industry members during the 29th annual economic forecast breakfast hosted by the Colorado Springs chapter of the Institute of Real Estate Management, an industry group. About 200 people attended the event at the Great Wolf Lodge.
Here’s a snapshot look of what the speakers had to say:
• Housing. Last year’s surging demand for single-family homes will continue in 2020, thanks to low unemployment, solid job growth and low mortgage rates that attract buyers, said Bruce Betts, owner/broker of Re/Max Advantage in Colorado Springs.
Homes will continue to sell briskly in 2020, while average and median prices will rise by 5%, he said.
Pikes Peak Association of Realtors figures show single-family home sales topped 16,000 last year for only the second time in history, while December’s median sales price of $329,990 climbed nearly 10% on a year-over-year basis.
But the housing market will continue to struggle with supply; there’s a shortage of homes available for sale, particularly in lower price ranges, Betts said.
For example, only 48 homes priced at under $250,000 were available for sale on Jan. 20 in the Colorado Springs area, which was the equivalent of a 12-day supply based on sales of similarly priced properties over the last 90 days, said Betts, citing Realtors Association figures.
Looking for a home priced between $250,000 and $500,000? The current supply would last just 17 days, based on the pace of sales over the last three months, he said.
Even though sales will remain strong in 2020, the low inventory will hold back some deals.
“It’s even worse than it was a year ago,” Betts said of the housing shortage. “It’s kind of crazy out there.”
• Commercial real estate. The three key sectors — office space, retail and industrial buildings — will enjoy varying degrees of success this year, said Caleb David, a broker with CameronButcher Commercial Real Estate in the Springs.
The area’s office vacancy rate of 8.4% will rise this year, but not because employers are fleeing their spaces, David said. Instead, newly constructed projects will join the mix of existing space, which will increase the supply and push up the local office vacancy rate, he said. Still, it will be well below the double-digit office vacancy rates in the Great Recession years.
Despite more space available, office building owners will seek higher rents from tenants; rents averaged nearly $21 per square foot last year, David said. Expect construction costs to rise, too, he said.
The area’s retail vacancy rate of 4.7% will remain steady in 2020, while average asking rents of $16.40 per square foot will be slightly lower, he said. Some local retailers are expanding, while regional and national retail brands will continue to show strong interest in the Springs.
Industrial space is in particular demand; the 5% vacancy rate for warehouses and other buildings will get even tighter in 2020, David said. The average asking rent of $8.69 per square foot also will rise this year.
• Apartments. Several factors are attracting apartment buyers and investors, said Saul Levy, a director with the Denver office of Newmark Knight Frank Multifamily.
Among them: a growing population; an influx of millennials; more jobs and higher wages; a flurry of high-profile development projects downtown and in outlying areas; business expansions on the part of In-N-Out Burger, Centura Health and others; and the formation of the Space Force armed-service branch, which at least for now is based in the Springs.
With so much activity, the demand for apartments is high and rents keeping rising, averaging $1,142 per month in the fourth quarter, Levy said.
“That’s a tremendous amount of opportunity for a lot more income for people who are renting apartments,” he said.
Though apartments are in demand, including by some renters who can’t afford rising home prices, developers still haven’t built enough multifamily projects to keep pace, Levy said. Nearly 1,400 units were completed in 2019, and about 1,700 more are expected to come on line in 2020, he said.
Even so, he said, “more apartments are needed.”
• Construction. High- profile projects include the new Summit House atop Pikes Peak; the downtown U.S. Olympic & Paralympic Museum and a multiuse stadium housing the Colorado Springs Switchbacks; and a new headquarters for Ent Credit Union, said Ryan Heeter, chief operating office of GE Johnson Construction in the Springs.
Still, construction costs keep rising, driven largely by a scarcity of labor, he said.
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