Commercial real estate makes slight progress in 2011

THE GAZETTE Statistically, there were slight improvements in some sectors of the Colorado Springs commercial real estate market in 2011, a new report shows. Realistically, the market has a ways to go before it rebounds to where it was five to six years ago.

The combined vacancy rate for offices, shopping centers and industrial buildings — key commercial market sectors — dipped to 11.7 percent in the fourth quarter of 2011, down nearly a full percentage point from a year earlier, according to the latest report by Paul Turner of Turner Commercial Research of Colorado Springs, which tracks the commercial market.

But Turner echoed previous reports when he said the commercial market won’t see a sustained turnaround — lower vacancies and higher rents — without an improved economy.

And a stronger economy hinges on federal lawmakers tackling the nation’s debt crisis and creating a better regulatory environment on health care that would encourage businesses to add jobs, he said.

“Any hope for a foreseeable recovery of the U.S. economy depends on Washington politics,” Turner said. “Investors are not investing, banks are not lending and industry is not hiring.”

Commercial real estate is a major part of the local economy. When the market is strong, new office buildings and shopping centers employ architects, engineers and many others to get projects off the ground, while construction workers spend months on job sites. Owners of existing buildings, meanwhile, employ businesses to manage and maintain their properties, commercial brokers to market them, janitorial firms to clean them and landscapers to mow lawns and trim bushes.

Turner’s report shows the area’s office vacancy rate ended 2011 at 14.5 percent, unchanged from a year ago, but down from 16.1 percent in 2009. The latest rate was nearly double that of five years ago. The average asking price for office rents, meanwhile, declined to $10.26 per square foot — part of a steady decrease since 2007.

“Until demand picks up,” Turner’s report said, “asking rental rates will remain as a subjective starting point for effective rent negotiations.”

Fourth-quarter shopping center vacancies rose to 11.7 percent from 11.3 percent a year earlier; five years ago, the rate was 6.4 percent. Average rents, meanwhile, fell to $12.72 per square foot, from $13.37 a year ago.

Industrial building vacancies fell to 9.2 percent in the fourth quarter from 11.6 percent at the end of 2010. The decline was a bit deceiving, Turner said. The rate fell, in part, because a few big industrial spaces were filled as a result of deal involving nonprofits; Goodwill Industries is leasing space from the El Pomar Foundation, while the University of Colorado at Colorado Springs turned a building on North Nevada Avenue into an expo center.

Industrial rents averaged $6.17 per square foot, nearly unchanged from a year ago, but down about $1 from 2006.

Source: http://www.gazette.com/articles/commercial-131629-real-market.html