- January 18, 2017
- Quarter Report
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Market Trends & Commentary
Q3 & Q4, 2016 Sales
Northern Colorado Commercial Real Estate Report
for Boulder, Larimer, and Weld Counties.
Just when things slowed up in mid-year, the last two quarters sales activities pulled 2016 to its best sales year since the recession ended. At approximately $1.8 billion, the tri-county sales transactions featured many notable large properties as investors from around the country added northern CO to their portfolios. These investors largely purchased higher rated buildings, and bought at cap rates of 6% or below. Demand for quality cash flowing commercial real estate is high in the region. The market demands for space was such that vacancy remained below 6% even though 4 million square feet of new construction was added to the supply.
A Few Significant Regional Sales Transactions
Out of state investors drove the NoCO market in terms of these larger deals in the second half of 2016. Portfolio deals often included NoCO assets. One buyer even came from Kuwait. A general demand for yield drove these investment deals. Multi-family sold at the lowest cap rates compared to other property types.
Q3 & Q4, 2016 Lease Activity – Northern Colorado Commercial Real Estate Report; Boulder, Larimer, and Weld Counties
After a very strong first half of the year, the tri-county region drug down to a year with over two million less square feet of leasing activity. Despite this slow close, vacancy rates held in the 5% overall range, and new construction was absorbed. 4.6 million square feet of activity resulted in a net absorption across the region of two million. Much of the new construction is user oriented, versus speculative. Thus, the new buildings have ready made occupants.
A Few Significant Regional Lease Transactions
From the Author: Summary / Market Trends:
- The second half of 2016 was marked much more by large sales than it was by leasing activity. Multifamily sales continued to draw out of area investors seeking the university city surroundings of northern CO. Several of these sales met all time high pricing points (and lowest cap rates in memory). The investment community is bullish about our tri-county region!
- Leasing activity slowed considerably in the second half of 2016, totaling 6.7 million square feet for the entire year. Even so, absorption was a positive 2 million square feet, despite the delivery of 4 million square feet of new buildings. With 10 year low vacancy rates, many users are building their own space rather than lease less suitable or non-available spaces. Landlords have been able to raise rates in past years, but are holding steady in 2016, albeit at these higher rates.
- 305 Land parcels sold in our region last year, Sales volume for those sales was $317 million, or about $1 million per sale on average. One of the larger sales was a mobile home park in Fort Collins, which sold for over $16 million. Technically, that is a land sale as the mobile homes rent land slots. About 15 were specifically for new multi-family projects, and that use is likely part of the PUD and Residential developments being planned as well. The residential population trends are drawing developers and builders to our region.