Commercial Real Estate Market Overview Ethan Reed Sr. Research Manager CoStar Group
Commercial Real Estate Overview
Market fundamentals National perspective Denver & Colorado Market
Economic Trends Job Growth
Economic Threats
Economic Danger Zones for 2011 and beyond
Retail Sales
Market Fundamentals
Traditional market cycle
Expansion Expansion
Market Unbalance (Hyper-supply)
Contraction
Excess space absorbed
Market Fundamentals
Four Quadrant Market Cycle
Cap Rates
Replacement Costs
Tenant Demand
Construction Activity
Rent Prices
Sale Prices
Square Feet
Construction SF
Market Fundamentals
Four Quadrant Market Cycle
Cap Rates
Replacement Costs
Construction Activity
Rent Prices
Sale Prices
Square Feet
Construction SF
Tenants Demand
Increases
Market Fundamentals
Four Quadrant Market Cycle
Cap Rates
Replacement Costs
Construction Activity
Rent Prices
Sale Prices
Square Feet
Construction SF
Tenants Demand
Increases
Market Fundamentals
Measurements of Market Health/Trends Rents
Office Rents Full Service Gross Industrial Rents Triple Net Retail Rents Triple Net
Vacancy rates physically vacant and available Availability rates available regardless of occupancy Absorption change in occupancy Leasing activity total volume of leases signed Construction activity under construction Sales price average price per square foot Sales volume total square feet or dollars sold Cap rates overall cap rate
National Trends
Re-valuation of risk Banks Investors Developers Tenants
A downturn like no other Lack of hyper-supply Conformity of demand movement Lack of shadow space Conformity among product types and indicators Capital structure revolution
National Trends - Office
National Trends - Office
National Trends - Office
National Trends - Office
National Trends - Office
National Trends - Office
National Trends - Office
National Trends - Office
National Trends - Office
National Trends - Office
National Trends - Industrial
National Trends - Industrial
National Trends - Industrial
National Trends - Industrial
National Trends - Industrial
National Trends - Industrial
National Trends - Industrial
National Trends - Retail
National Trends - Retail
National Trends - Retail
National Trends - Retail
National Trends - Retail
National Trends - Retail
National Trends - Distress
Colorado Market
Colorado Market
How does Colorado compare?
Denver-Boulder-Fort Collins
80% of all CRE in Colorado
Considered one of the best investment opportunities in
the country over the next 5 years
Denver Market - Office
Denver Market - Office
Rent Trends Average Office Rent - $19.81 Since 4Q08, rents declined 7.3% Concessions increasing
Free months rent TI packages Moving allowances Lease buyouts
Vacancy Trends Average Office Vacancy 13.9% Absorption 4Q08 to 3Q09 (982,3741) SF Absorption Since 3Q09 3,004,706 SF Sublet SF Decreased from 1,541,899 SF (1Q10) to 1,425,632 SF (4Q10)
Denver Market Industrial
Denver Market - Industrial
Rent Trends Average Industrial Rent - $5.92 Since 4Q08, rents declined 4.5% Concessions increasing
Free months rent TI packages Moving allowances Lease buyouts
Vacancy Trends Average Industrial Vacancy 7.2% Absorption 4Q08 to 3Q09 (1,142,122) SF Absorption since 3Q09 3,665,380 SF Sublet SF Decreased from 876,805 SF (1Q10) to 639,640 SF (4Q10)
Denver Market - Retail
Denver Market - Retail
Rent Trends Average Retail Rent - $14.54 Since 4Q08, rents declined 13% Concessions increasing
Free months rent TI packages Moving allowances Lease buyouts
Vacancy Trends Average Retail Vacancy 7.9% Absorption 4Q08 to 3Q09 (769,815) SF Absorption since 3Q09 2,524,404 SF Power Center Vacancy 7.5% Neighborhood Center Vacancy 10.5% General Retail Bldg Vacancy 6.0%
Denver Market Multi-Family
Denver Market Multi-Family
Denver Market Current Development
Renaissance Hotel (hospitality) 500,000 sf
IKEA (retail) 400,000 sf
Briargate Lifetime Fitness (retail) 226,077 sf
Alta Aspen Grove (multi-family) 200,000 sf
Fitzsimons Village 100 (office) 168,029 sf
Marriott Springhill Suites (hospitality) 156,604 sf
South Boulder Community Center 154,974 sf
Belmar Target (retail) 140,000 sf
Belmar Nodrstrom Rack/Best Buy 130,000 sf
Colorado Market Grand Junction
Office stats: - Vacancy: 8.2% - Average Rental Rates: $13.81/psf
Industrial stats: - Vacancy: 12.1% - Average Rental Rates: $5.62/psf
Retail stats: - Vacancy: 6.0% - Average Rental Rates: $10.81
Colorado Market
- Pinon Ridge
-Southgate Towne Center
-The Shops at La Bella Piazza
The Shoppes @ Delta 60,000SF retail Family Dollar 8,000SF retail
One Steamboat Springs 80 unit resort
3 Indicators to Watch For Signs of Return of Demand
JOBS! JOBS! JOBS!
What future trends can we expect?
Polycentric metropolitan movement Ft. Collins/Loveland/Greeley Broomfield Castle Rock DIA Colorado Springs Pueblo Summit County
Mixed Use & Flex Green trends will become a larger factor Shorter lease terms + much higher transaction volume = busy brokers! Queue Theory demand will outpace supply, but shorter pipeline
The recovery will be as different as the
downturn