Commercial market seeing strong demand
Despite economic indicators that are increasingly worrying, the commercial real estate market in Northern Colorado is still seeing incredible demand. That was the message from Ryan Schaefer, CEO of brokerage NAI Affinity, at the Northern Colorado Real Estate Summit hosted by BizWest last week.
“This is the hottest commercial real estate market I’ve seen in my career,” Schaefer said.
Schaefer’s commercial real estate forecast included bad news and good news. The bad news, Schaefer said, is that many broader economic indicators are trending in the wrong direction. Inflation has become excessive. The movement in the 10-year treasury is concerning. And the recent oil price shock following Russia’s invasion of Ukraine is also alarming.
“There is a 90% probability of a recession within two years of an oil price shock,” Schaefer said.
Despite all of that, though, the commercial real estate market in Northern Colorado is booming to unprecedented levels and shows no signs of slowing down. The hottest sectors, Schaefer said, are industrial, quick-service restaurants and rest stops.
Large industrial facilities are popping up all along the Interstate 25 corridor in Northern Colorado. Schaefer pointed to projects such as the Access 25 Logistics Park in Mead as an example. As the economy becomes increasingly reliant on e-commerce, these types of distribution, last-mile and warehouse facilities will start to phase out traditional retail developments, Schaefer said.
“Industrial is the new retail,” he said.
Schaefer also highlighted Amazon Inc. (NYSE: AMZN) as an example of this trend. The e-commerce giant is closing all of its brick-and-mortar retail stores in the U.S., effectively showing that strategy failed. However, it has become one of the biggest names in retail through its industrial projects such as the planned 3.8 million-square-foot distribution facility in Loveland, Schaefer said.
To go along with this, retail construction in Northern Colorado is slowing down.
“Every piece of retail built on the Front Range last year would fit inside one regional mall,” Schaefer said.
Now, the name of the game in retail is convenience, Schaefer said. This is exemplified by the continued development of quick-service restaurants and rest stops such as the planned 50,000-70,000-square-foot Buc-ee’s in Johnstown that is planned to open in 2024.
Driving all of this is a supply of commercial real estate that is still quite limited, Schaefer said. Demand is so great that he closed one sale last year in 45 days when the process usually takes eight to 12 months. Rents are increasing, and triple net leases are seeing greater interest.
“We are seeing tremendous buyer demand,” Schaefer said, “and tremendous increases in values.”
This article was first published by BizWest, an independent news organization, and is published under a license agreement. © 2022 BizWest Media LLC.
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