Office sector leading Colorado Springs’ commercial real estate

Office space is the hottest commercial real estate sector in Colorado Springs.

While the Colorado Springs commercial real estate market slowly improves, there's been one sector that has been rejuvenated more than others.

Citing a forecast from the Colorado Springs-based Quantum Commercial Group, The Gazette reported that the city's office space has improved greatly from a few years back.
The vacancy rate for office space dropped to 11.5 percent in the closing months of 2013 after hitting levels as high as nearly 20 percent in 2009.

"Have we turned the corner?" Michael Palmer, a broker with Quantum, asked The Gazette. "We've certainly turned the corner from the downturn. But I think we're in the middle of a very slow grind upwards."

Office lease rates were also up, as was the amount of occupied space. Lease rates went from the five-year average of $16.36 per square foot to $17.11 in 2013, and 560,000 square feet of office space was occupied or absorbed this year, more than double the annual absorption average over the last five years, according to Quantum.

Dale Stamp, president of Quantum, told The Gazette that the improvements might not be happening as quickly as some have hoped, but there is reason to believe the city's commercial real estate sector will continue to expand.

"It's slow growth across all the sectors," Stamp said of the office, retail, industrial and land markets. "It's positive. You've got an air of confidence in the entire city."

Could Denver help Colorado Springs?
Palmer told The Gazette he expects Colorado Springs to enjoy a better commercial real estate outlook as projects in nearby Denver continue to gear up for development. Denver has been one of the top markets in the state and has flourished thanks to growing employment opportunities. Palmer believes certain affluent investors in Denver are now eyeing Colorado Springs as an appealing secondary market for investing.

"Colorado Springs is seeing the benefit of that," Palmer said. "That's why there's activity, just because it's a better value market right now than some of the others."

With the job market improving in Denver, David Delich, president of Sierra Commercial Real Estate, told The Gazette that Colorado Springs must create more jobs in order for the city's real estate to thrive.

"That's the critical element in improvement in 2014," Delich said. "We need to have jobs come into the marketplace, both internal growth and external relocation into the market, in order for this area to become healthier as we go through '14."

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