Colorado Springs is still the focus of investors due to strong economic factors combined with quality of life.

Coming out of the Great Recession, Colorado’s Front Range has rebounded more than other areas of the country. Colorado Springs has outperformed many other cities in terms of both population and job growth. Our quality of life has attracted millennials and others to relocate to the area resulting in Colorado Springs being labeled the #1 city in the US for relocation by millennials.

Construction costs are reported to be up 17% and the cost of land continues to rise. Rental rates for new construction often do not support development of new projects, especially in the office market. Due to the low industrial vacancy rates, we are starting to see some new industrial development. Rental rates are typically $10.00 to $12.00 NNN for new industrial properties. Medical office developments are on the rise to support the growing population and the new hospitals planned in the northeast area.

Rising land and construction costs are causing investors to seek existing properties with upside potential. The vacant Sears Building in Southgate, 145,675 sf, recently sold for $8.5 million ($58.35 psf) for redevelopment. The property, located in the Broadmoor Towne Center, was appealing for its strong location, visibility and access. The property will be subdivided and redeveloped into a multi-tenant property.

Rental growth continues to accelerate for apartments with increases just below 7% per year for the last two years. Vacancies for stabilized properties fell to a seven-quarter low of 5.23%. While the availability of apartment complexes for sale is declining, investors still consider Colorado Springs as a target market for acquisitions. Canyon Ranch Apartments, 328 units located on Parkmoor Village Drive, sold in the 3rd quarter for $56,985,000. Overall, sales are down for apartments in the 3rd quarter, however, this is related to lack of properties available for acquisition and not declining investor interest. Cap rates for multi-family still remain at sub 6% for well-located, newer stabilized projects as well as older projects with upside potential.

Kiplinger predicts steady growth in Colorado’s economy, but at a slower pace as the supply of skilled workers is running low.

The retail market in Colorado Springs will continue to be relatively stable throughout 2020, although economic headwinds are beginning to blow on a national and global level. Consumer confidence will continue to be at a high level as wage gains and a healthy job market will continue to spur spending on retail items. These important market drivers, as well as in migration of millennials spurring population growth, will allow 2020 to be a relatively stable year for the local retail market.

Retail fundamentals will continue to look good in 2020. Vacancies were at an all time low in the second half of 2019, driving average base rents continuously higher. This should continue through 2020. Average annual base rental increases have been in the 3% range, allowing a prediction of overall average market rent to reach $14.70 in 2020. Vacancy had a slight increase of .5% at the tail end of 2019, so the prediction is that vacancies will remain low comparative to historic vacancies in 2020, but will fluctuate some as old product empties and refills and there are new deliveries. Absorption in 2019 was over 250,000 SF, putting absorption and deliveries at an equilibrium. Over 260,000 SF of new construction was delivered in 2019 and larger tenants will continue to enter the market via new construction. Construction will continue to be centered in northern Colorado Springs where the population base continues to grow as there is land within city limits for new construction, and per household incomes are high.

Because there will continue to be positive growth in local universities, military bases, defense contracting and tourism, demand drivers for retail will be stable or see growth in 2020. Vacancy was 4.7% at the end of 2019 and the 0% year over year change from 2018 to 2019 is not expected to change much.

As in the last several years, larger and smaller vacated retail real estate locations are finding non traditional retail uses to fill vacant space. The latest announcement of this type is for Magnum Shooting Center to open a south location in the former Sears
at the Broadmoor Town Center. As shooting is growing in popularity, this allows people to learn safe shooting and gun handling skills within a proven club environment. The center, planned to be about 28,000 SF is scheduled to open by Fathers Day in 2020. Experiential concepts such as this are proving successful in former space exclusively used by retailers.

Investors and users of retail real estate continue to show interest in this market. There were over 180 investment sales by the end of 2019 with an average cap rate of 7.3%. Stable fundamentals and low interest rates will continue to drive investors to this market.