Keepin it Real: Comments from Colorado Springs-area realtors

Craig Anderson and Marty Johnson CB Richard Ellis

"The office market has been doing well so far in 2007, but with Northrop Grumman, The Aerospace Co. and SI International all leaving lease space for new buildings, you'll see another 300,000 square feet on the market as lease or sublease space. But out of a total inventory of 25 million square feet, that's not bad.

The defense industry has really helped the local economy.

"The big loss to our local economy is all the construction jobs we've sacrificed since the days of 5,000-plus building permits submitted in 2006. That means less spending in the market. Our market is very well balanced with an overall industrial, office and retail vacancy rate of 8 percent. That's much better than national trends that show more than a 13 percent vacancy in office and 9.2 percent for industrial space. Intel won't really impact the industrial sector because it's such a one-of-a-kind property. We will miss the jobs, however.

In the retail sector, the city reported sales were up 9.5 percent this May over last year. In addition, we don't have a dozen new shopping centers coming online. Our unemployment rate is at 4.3 percent, down from 4.9 percent last year. Lease rates for retail and office space have been trending up.

Hotel activity is very strong along Interquest. We've gotten six calls in the last few months from hotel developers looking for sites.

Even with the upset in the financial markets, there's a lot of money waiting on the sidelines. Our fundamentals in the Pikes Peak region are still very good."

Paul Turner Turner Commercial Research

"Certainly Colorado Springs is beginning to feel the outside effects of a national slowdown. Vacancies are up slightly as of June 2007; however, a more perceptible increase will be noted at the close of 2007. Job losses, especially in the high tech industry, are our main concern at the present time.

Investors continue to purchase commercial properties and developers continue to build specialty buildings. Apparently these investors are set to ride out a pending downturn and are positioning themselves to be in the market when the downturn is over. The watchword for now is 'patience.'

The industrial market will show a marked increase in vacancy by year-end. Several large buildings will come on the market; however, the smaller owner buildings will remain in demand and their vacancy rate will be low."

Ben Lowe Sierra Commercial Real Estate

"Colorado Springs is distinguished in the national market by several factors. It's not a large city, but our educated work force can be a drawing card. We also have very low unemployment. Our industrial market, unlike the national scene, won't attract big distribution centers because we're not a transportation hub. But we have seen excellent absorption of lease and sublease space in the last few years. The commercial real estate market hasn't been hit that hard here. We are actually seeing a fairly tight office and industrial market."

Tim Leigh Hoff & Leigh Real Estate

"I've refocused my operation. Residential sales are slowing and banks are lending less money. I've seen it coming for a long time. As a result, small business is beginning to see the credit that allows small business to expand drying up. Unfortunately that means we'll be hoarding rather than spending the money we have. Seventy- five percent of the economy is driven by consumption. That's what fuels local business.

Some building owners are finding that their lenders won't renew financing because their properties are considered over-valued. But Colorado Springs has always been a micro-centric market. The north end and Powers corridor -- or anything along I-25 is still robust. On the other hand, central Academy Boulevard and Nob Hill are hurting.

I always say you can't screw up a real deal if your timeline is long enough. In a down cycle, just hang on and get to the next rise in the market. At that point, valuations typically exceed the previous high point. Right now there are some properties selling for less than replacement value."

Nate Winterfield Front Range Commercial Group

"Commercial real estate is much better off than the residential market. There's no irrational exuberance, but if you have a good property, properly priced, there's no problem getting it sold. And there aren't any huge distress sales out there yet. Of course, it's a softer market than a year or two ago, and cap rates are going up.

That, combined with Colorado's Gallagher amendment, mandating that business property owners pay higher taxes, and land price escalation in the past few years, has impacted the commercial market. As an investor, myself, my strategy is to buy low and sell high -- but today it can be hard to make the numbers work. A $100,000 house may be taxed at $1,000 per year; a building owner, on the other hand, could see taxes of $3,000 annually. That makes a big difference over 15 or 20 years."

Ethan Reed CB Richard Ellis