By Rich Laden, The Gazette, Colorado Springs, Colo. Knight Ridder/Tribune Business News
Dec. 20--Colorado Springs' sputtering commercial real estate market didn't rebound as expected this year and likely will remain lackluster in 2003, a new report suggests.
Unless the national and local economies improve, and unless sectors such as electronics and high-tech turn around, large industrial buildings will stay empty, office construction will remain stalled and some rents will fall.
That's the gist of a forecast by Grubb & Ellis/Quantum Commercial Group in Colorado Springs, one of the city's largest commercial brokerages.
A similar Grubb & Ellis/Quantum Commercial report a year ago anticipated a turnaround for commercial real estate by mid-2002.
Some good things happened during the year.
In the local office market, the square footage occupied increased by 576,000 square feet from the start of the year. Major retail projects included new Wal-Mart and Target stores, a Galyan's sporting goods store and the launch of the upscale Shops at Briargate on the city's north side.
But there was plenty of bad news, too.
Even as more office space was occupied, the increase was far less than the boom years of the late 1990s. Office vacancies by year's end rose several percentage points to 8.7 percent -- or 12.1 percent if space being subleased by various businesses is included. On the industrial side, the square feet occupied fell by 543,000 square feet.
'We've had kind of a triple whammy, which has been (Sept. 11), the stock market crisis and the meltdown of all the dot coms and the high-tech sector,' Grubb & Ellis/Quantum President Dale Stamp said.
Still, market conditions aren't as bad as they were in the late 1980s and early '90s. During the current economic slump, interest rates are low and real estate owners aren't saddled with as much debt, meaning they can ride out the economic storm.
As the commercial real estate industry looks for new employers to come to town in 2003 to help fill space, there are some bright spots.
The arrival of U.S. Northern Command, the Pentagon's new homeland defense command, potentially will lure defense contractors and vendors who will help fill commercial space, said George Swintz, a Grubb & Ellis/Quantum Commercial office specialist.
And although large manufacturing plants will be tough to fill, demand remains strong for smaller -- 25,000 square feet and smaller -- industrial buildings, industrial specialist Rich Kelly said.
High-traffic areas such as along North Academy Boulevard continue to be attractive for retailers, retail specialist Cameron Mogadam said.
Because the overall market is soft, tenants can negotiate lower rents, and landlords and building owners invest money to upgrade properties.
'Astute tenants will realize there is downward pressure on lease rates,' office specialist Jerry Knauf said. 'They can lock themselves into a good aggressive rate.'
To obtain a copy of Grubb & Ellis/Quantum Commercial's 2003 forecast, call 590-1717.
To see more of The Gazette, or to subscribe to the newspaper, go to http://www.gazette.com
(c) 2002, The Gazette, Colorado Springs, Colo. Distributed by Knight Ridder/Tribune Business News.
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