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.