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Relationship Based Commercial Real Estate Advisors

25 Years

Of Commercial Real Estate Advising

Keep Up With Us NO.: 11-013 - Page 1

2012

Q4

MARKET OVERVIEW COLOR ADO SPRINGS Q4 2012

OFFICE

INDUSTRIAL

Colorado Springs • 4445 Northpark Drive Suite 200 Colorado Springs, CO 80907 • 719.630.2277 • www.hoffleigh.com

RETAIL


OFFICE MARKET

Relationship Based Commercial Real Estate Advisors

COLORADO SPRINGS • Forth Quarter 2012

COLORADO SPRINGS OFFICE Sheet 1 Space Available 2,470

713,751

Figure 1.1 About Tableau maps: www.tableausoftware.com/mapdata Map based on Longitude (generated) and Latitude (generated). Color show s sum of Space Available. Details are show n for Postal Code.

OFFICE SUBMARKET MAP

AIR FORCE ACADEMY

NORTH

NORTHWEST

CENTRAL

EAST

DOWNTOWN CORE

Inventory Hoff & Leigh tracks more than 28 million square feet of office space throughout the Colorado Springs MSA. The North and Northwest submarkets represent the largest share of inventory with over 5 million square feet each. Monument represents the smallest office submarket with just over 250,000 square feet. Of the 9 million square feet of Class A office space in Colorado Springs, over 4 million is located in the North submarket followed by 1.4 million in the Downtown Core.

WEST

Vacancy

DOWNTOWN PERIPHERY

The overall office vacancy rate for the Colorado Springs MSA is 14.42%, up from 14.31% last

SOUTHEAST

SOUTHWEST FORT CARSON

Q4 2012 Office NNN Asking Rates

quarter, representing around 4.16 million SF of vacancy. With nearly 30,000 SF of negative absorption in this quarter, the Colorado Springs office market sits at a positive 63,000 SF of absorption through 2012. The highest concentration of vacancy is in the North and Central submarkets, though the North has continued to improve – sitting at just 18.44% vacant, compared to 21.16% in quarter 2 of 2012. More Class A space was absorbed in the North following last quarter’s 100,000 SF of positive absorption, this quarter showed an additional 60,000 SF of absorption. Class A and Class B vacancy dipped for the

Office Market Average Asking (NNN) = $11.10

$16.00 $13.48

$14.00

$11.76

$12.00 $10.00

$12.83

$12.30

$12.76

$12.00 $10.75

$9.61

$9.30 $8.18

$8.00 $6.00 $4.00 $2.00 $-

Central

Downtown Core

Downtown Periphery

East

Monument

North

Northwest

Southeast

Southwest

Colorado Springs • 4445 Northpark Drive Suite 200 Colorado Springs, CO 80907 • 719.630.2277 • www.hoffleigh.com

West


OFFICE MARKET

Relationship Based Commercial Real Estate Advisors

COLORADO SPRINGS • Forth Quarter 2012

Q4 2012 Office Vacancy West Southwest Southeast Northwest North Monument East Downtown Periphery Downtown Core Central 0.0%

5.0%

second straight quarter while Class C vacancy rose for the third straight quarter. Asking Rates Overall asking rates were up again, to $11.10 from $11.04 last quarter – though asking rates were at $11.51 at the beginning of 2012. Class C asking rates rose

10.0%

15.0%

20.0%

above $9.00 to $9.14, up from $8.94 a quarter ago. Asking rates for Class A were up - $13.51 from $13.33 last quarter, while Class B rates dropped slightly to $10.68 from $10.82. Outlook Positive absorption in the Class A market continues to pace

25.0%

30.0%

the market - over 160,000 SF since the third quarter of 2011. Shuffling tenants from Class B and C properties is still a problem as the overall vacancy numbers have not shown much of a shift. Price increases overall, even slightly, suggest that the market is keeping pace even as higher priced spaces are absorbed.

Submarket

Inventory

Vacancy

Vacancy Rate

Central

4,739,480

1,106,235

23.34%

Average NNN Asking Rate $9.61

Downtown Core

4,611,453

295,853

6.42%

$13.48

Downtown Periphery

1,668,348

147,512

8.84%

$11.76

East

1,347,835

130,534

9.68%

$12.83

Monument

264,501

36,259

25.05%

$12.30

North

6,519,566

1,201,946

18.44%

$12.76

Northwest

4,365,883

455,407

10.43%

$9.30

Southeast

3,010,588

619,326

20.57%

$10.75

Southwest

870,924

55,330

6.35%

$8.18

1,591,987

60,427

3.80%

$12.00

14.40%

$11.10

West TOTAL

28,870,836 SF

4,163,104 SF

Colorado Springs • 4445 Northpark Drive Suite 200 Colorado Springs, CO 80907 • 719.630.2277 • www.hoffleigh.com


OFFICE MARKET

Relationship Based Commercial Real Estate Advisors

COLORADO SPRINGS • Forth Quarter 2012

Q3 2012 Office Statistics By Building Class

A

Submarket Central Downtown Core

306,113

50,755

Vacancy Rate

Average NNN Asking Rate

16.58%

$15.43

2,289,113

114,813

5.02%

$15.69

49,749

6,515

13.10%

n/a

East

805,412

99,551

12.36%

$13.77

North

4,417,408

819,013

18.54%

$13.30

Northwest

831,167

175,428

21.11%

$11.80

Southeast

916,855

76,131

8.30%

$12.75

Southwest

230,431

7,085

3.07%

$9.50

West

114,406

11,389

9.95%

$16.50

9,960,654 SF

1,366,613 SF

13.70%

$13.51

Average NNN Asking Rate

Submarket

Inventory

Vacancy

Vacancy Rate

Central

2,205,420

391,848

17.77%

$9.61

Downtown Core

868,127

142,830

16.45%

$12.51

Downtown Periphery

385,107

24,799

6.44%

N/A

East

457,959

13,115

2.86%

N/A

Monument

144,772

36,259

25.05%

$12.30

2,102,158

382,933

18.22%

$12.13

North Northwest

3,460,076

247,955

7.17%

$8.02

Southeast

1,425,825

295,771

20.74%

$11.38

Southwest

552,444

40,795

7.38%

$7.89

West

928,145

28,066

3.02%

$10.30

12,530,033 SF

1,633,353 SF

13.00%

Submarket

Inventory

Vacancy

Vacancy Rate

Central

2,227,947

537,298

24.12%

$8.87

Downtown Core

1,454,213

38,210

2.63%

$11.50

Downtown Periphery

1,233,492

116,198

9.42%

N/A

TOTAL

C

Vacancy

Downtown Periphery

TOTAL

B

Inventory

$10.68

Average NNN Asking Rate

East

84,464

17,868

21.15%

N/A

Northwest

74,640

32,024

42.90%

$7.49

Southeast

667,908

247,424

37.04%

$7.58

Southwest

88,049

7,450

8.46%

N/A

West

549,436

20,972

3.82%

$10.89

TOTAL

6,380,149 SF

1,020,504 SF

16.00%

$9.14

Colorado Springs • 4445 Northpark Drive Suite 200 Colorado Springs, CO 80907 • 719.630.2277 • www.hoffleigh.com


INDUSTRIAL MARKET

Relationship Based Commercial Real Estate Advisors

COLORADO SPRINGS • Forth Quarter 2012

COLORADO SPRINGS INDUSTRIAL Sheet 1 Space Available 4,511

861,257

Hoff & Leigh tracks more than 33 million square feet of Industrial product in 6 industrial submarkets: North, South, East, West, Central and Downtown. The South and Central submarkets represent over half of the total industrial inventory at over 17.5 million square feet. The Downtown submarket has the least industrial square footage at 1.9 million.

Figure 2.1 About Tableau maps: www.tableausoftware.com/mapdata Map based on Longitude (generated) and Latitude (generated). Color show s sum of Space Available. Details are show n for Postal Code.

INDUSTRIAL SUBMARKET MAP

AIR FORCE ACADEMY

WEST

NORTH

CENTRAL

Inventory

The largest amount of Warehouse/Distribution building inventory is located in the South submarket, while the North and West submarkets house the largest concentration of Flex/R&D space.

EAST

DOWNTOWN

SOUTH

for Colorado Springs is 10.68%, down from 10.96% in quarter 3, representing approximately 3.51 million square feet of vacant space with nearly 100,000 SF of positive absorption for the quarter. The Central, East, South and Downtown submarkets each saw declines in vacancy. A majority of the positive absorption occurred in the Downtown submarket (nearly 44,000 SF). Vacancy rates in the Central submarket (5.40%) and the East submarket (4.67%) are the only two submarkets in single digit vacancy. Nearly 2/3 of the total vacancy is located in the South and West submarkets. Asking Rates

Vacancy

FORT CARSON

The total industrial vacancy rate

The overall Industrial NNN asking rate is $6.22, down from

Q4 2012 Industrial Asking Rates (NNN) By Submarket Industrial Market Average Asking (NNN) = $6.22

$9.00

$7..85

$8.00 $7.00

$7.07 $5.76

$5.71

Central

Downtown

$6.68 $5.81

$6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $East

North

South

Colorado Springs • 4445 Northpark Drive Suite 200 Colorado Springs, CO 80907 • 719.630.2277 • www.hoffleigh.com

West


INDUSTRIAL MARKET

Relationship Based Commercial Real Estate Advisors

COLORADO SPRINGS • Forth Quarter 2012

Q4 2012 Industrial Vacancy Rates By Submarket West South North East Downtown Central 0.0%

2.0%

4.0%

$6.34 a quarter ago, though still up from $6.19 in the third quarter of last year.. With the highest concentration of Flex/R&D product, the North submarket has the highest average asking rate at $7.85 NNN, down from quarter 2’s high of $8.09. The West is the only other submarket with asking rates above $7, at $7.07. A majority of the vacancy is located in the South where asking rates are lower, pushing the averages down.

6.0%

8.0%

10.0%

12.0%

The most affordable rates can be found in the Downtown submarket where the average NNN asking rate is $5.71, up from $5.68 last quarter, followed closely by the Central submarket ($5.76) and South ($5.81). The East and South submarkets were the only ones to see increases in asking rates. Industrial Outlook A look back to last year at this time shows positive absorption

16.0%

18.0%

in Industrial product to the tune of 120,261 SF, not a significant trend and asking rates are slightly below this year-end at $6.22 compared to $6.30 a year ago. New Industrial product hit the market in 2012 (buildto-suit products) were mostly absorbed. Look for that trend to continue as the lack of diverse Industrial space coupled with attractive land deals creates the opportunity for more build-tosuit projects.

Submarket

Inventory

Central

8,353,944

450,734

5.40%

$5.76

Downtown

1,880,894

299,806

15.94%

$5.71

East

4,702,890

219,590

4.67%

$7.07

North

2,754,340

355,844

12.92%

$7.85

South

9,260,426

1,362,445

14.71%

$5.81

West

5,983,519

828,781

13.85%

$6.68

3,517,200 SF

10.70%

$6.22

TOTAL

32,936,013 SF

Vacancy

14.0%

Vacancy Rate

Average NNN Asking Rate

Colorado Springs • 4445 Northpark Drive Suite 200 Colorado Springs, CO 80907 • 719.630.2277 • www.hoffleigh.com


R E TA I L M A R K E T

Relationship Based Commercial Real Estate Advisors

COLORADO SPRINGS RETAIL

Inventory

Sheet 1 Space Available 4,511

861,257

Figure 3.1 About Tableau maps: www.tableausoftware.com/mapdata Map based on Longitude (generated) and Latitude (generated). Color show s sum of Space Available. Details are show n for Postal Code.

RETAIL SUBMARKET MAP

AIR FORCE ACADEMY

NORTH

NORTHWEST

CENTRAL

EAST

DOWNTOWN CORE WEST

DOWNTOWN PERIPHERY

COLORADO SPRINGS • Forth Quarter 2012

SOUTHEAST

Hoff & Leigh tracks over 23 million square feet of Retail product in Colorado Springs. The retail inventory includes: Shopping Centers, Strip Centers, Retail Stores and Restaurants, and excludes Regional Malls (Citadel Mall and Chapel Hills Mall). Almost 7.7 million square feet of retail space is located in the Central submarket which houses the Central Academy Corridor and in terms of total inventory, represents the largest submarket. The next largest submarkets are the North with 3.5 million square feet and the East with 3 million square feet. The least amount of retail space is located in the Downtown Core and Downtown Periphery with just over 500,000 square feet each, followed by Monument with 814,000 square feet.

SOUTHWEST

Vacancy

FORT CARSON

The overall retail vacancy rate for the Colorado Springs MSA is Q4 2012 Retail NNN Asking Rates

Asking Rates The average asking rate (NNN) for the Colorado Springs MSA is $12.39, up $.09 from last quarter’s average of $12.31. Asking rates in the North submarket, with its Retail Market Average Asking (NNN) = $12.39

$20.00

$18.54

$18.00 $15.26

$16.00

$14.98

$14.18

$13.25

$14.00

$12.56

$12.10

$12.00 $10.00

9.98%, 10.1% in quarter 3, which represents a total of 2.29 million square feet of vacant space. Over half of the vacant space can be found in the Central and Southeast Submarkets; though Central submarket had positive absorption gains while the Southeast continued to add vacancy. The East submarket also added vacancy, with the vacancy rate in that submarket rising to 7.62%, up from 5.5% in quarter 3. Vacancy rates in the North, Northwest, Southwest and West continue to be solid, all at or below 5% vacant. Monument added new construction space to its submarket that has yet to be absorbed, raising the vacancy rate in Monument to 7.47% from 4.2%.

$10.14

$12.45 $9.09

$8.00 $6.00 $4.00 $2.00 $-

Central

Downtown Core

Downtown Periphery

East

Monument

North

Northwest

Southeast

Southwest

Colorado Springs • 4445 Northpark Drive Suite 200 Colorado Springs, CO 80907 • 719.630.2277 • www.hoffleigh.com

West


R E TA I L M A R K E T

Relationship Based Commercial Real Estate Advisors

COLORADO SPRINGS • Forth Quarter 2012

Q4 2012 Retail Vacancy Rates By Submarket West Southwest Southeast Northwest North Monument East Downtown Periphery Downtown Core Central 0.0%

5.0%

newer inventory and anchored strip spaces, continue to be the highest averaging $18.52, $17.80 in quarter 3. Asking rates for Retail space in the Downtown Core have dropped to $12.10 from $13.39 – the largest asking rate drop in retail. The Southeast, Central, Downtown Periphery, Monument, and Northwest submarkets all saw dips in asking rates. The East, North, Southwest, and West all saw rising asking rates. If you remove

10.0%

15.0%

20.0%

the North submarket’s high asking rates from the market the average drops dramatically to $11.44 psf NNN. Outlook Retail outlook continues to be positive in most areas with progress being made in the Central submarket. Look for asking rates to drop as new inventory hits the market and higher priced inventory continues to be absorbed. Much

25.0%

30.0%

of the big box retail in the Central submarket that had remained vacant is being re-purposed – this is having a positive effect on vacancy rates in those areas. As the housing market rebounds, look for residential construction to pick up and depending on the location of these developments added retail inventory will follow. Geographically Colorado Springs is most likely to develop East and to the North.

Submarket

Inventory

Vacancy

Central

7,689,745

755,106

9.82%

$10.14

Downtown Core

508,961

43,446

8.54%

$12.10

Downtown Periphery

537,804

63,293

11.77%

$13.25

3,022,277

230,300

7.62%

$15.26

East Monument

Vacancy Rate

Average Gross Asking Rate

814,123

63,035

7.74%

$14.18

North

3,513,001

161,689

4.60%

$18.52

Northwest

1,116,215

55,417

4.96%

$12.56

Southeast

3,037,067

755,764

24.88%

$9.09

Southwest

1,276,350

52,256

4.09%

$14.98

West

1,881,749

101,373

5.39%

$12.45

23,397,292 SF

2,290,119 SF

TOTAL

9.79%

$12.39

Colorado Springs • 4445 Northpark Drive Suite 200 Colorado Springs, CO 80907 • 719.630.2277 • www.hoffleigh.com


Q4 Market Report