On Tuesday, Colorado Springs City Council unanimously approved a resolution that will allow the Colorado Springs Airport to sell a 27.31-acre parcel of vacant city land to a company planning to develop the property for FedEx Corporation.
Under the resolution, the city will sell the property — located just west of Peterson Air Force Base near the intersection of Powers Boulevard and Airport Road — to Kentucky-based developer Setzer Properties, which specializes in building large ground and freight distribution centers for the international courier.
According to information from the Colorado Springs Airport (which had called confidentially called the deal “Project Vector” prior to city council’s approval of the sale), the sale has been negotiated at $2.33 million (1,193,987 square feet at $1.95 per square foot) and it anticipated to close sometime next month. Setzer plans to break ground on construction at the site in August.
“This is an opportunity for the airport that we think is a positive development,” said Greg Phillips, aviation director at the Colorado Springs Airport. “We think that it opens up additional future opportunities as well.”
Although only few details are known, the land deal is only the most recent in a series of developments at the Colorado Springs Airport (see cover story) that are being bolstered by continued commercial growth along nearby Powers Boulevard corridor and an uptick of activity in and around the city’s Commercial Aeronautical Zone.
The CAZ was created in 2014 to incentivize development in eastern Colorado Springs and to provide valuable revenue streams and operational partnerships to the Colorado Springs Airport, which is a stand-alone city enterprise not funded by tax dollars.
“The city and the county agreed several years ago to create a Commercial Aeronautical Zone in the airport’s vicinity to help bring aeronautic-related businesses to the general aviation side of the airport,” said Colorado Springs Mayor John Suthers. “Our airport is an enterprise — there are no tax dollars that go to it and it basically has to support itself, so it has an income stream from the lease and sale of land, gasoline sales and things like that. Everything that comes up short from there is made up for by our commercial carriers by paying fees that we call emplanement fees.”
The first major announcement to come out of the CAZ was news that Sierra Completions, a subsidiary of Sierra Nevada Corporation, planned to build an $88-million hangar complex that was expected to result in the employment of 2,100 locals. In January, Sierra received its Repair Station License from the Federal Aviation Administration (after a year-long application process) and will now be able to move forward with those plans, the company said in a recent statement.
Cutter Aviation broke ground on its new FBO Executive Terminal project at the CAZ in August, 10 years after the company launched its operations in Colorado Springs. In the years since, the company has enlarged its footprint to more than 16 acres that include 9,000 square feet of office space, 132,000 square feet of hangar storage space and the new terminal, which will serve customers flying into COS.
Phillips said the airport is also in talks to lease a large parcel of land to Peterson, and is also brokering an agreement with the U.S. Forest Service to house its localized air tanker operations.
“We have some additional conversations that are ongoing about some additional development over there,” Phillips said. “It seems to me that there is a lot that is in the works, but sometimes these deals take a while to put together or to develop. … I think that in the next several months we’ll move forward on some of these things.”
East Springs a hot market
The Colorado Springs Airport and Commercial Aeronautical Zone aren’t the only locales of the city’s eastern submarket to see recent commercial developments.
In its recently published “2017 Real Estate Outlook” report for Colorado Springs, Denver-based CBRE Research painted an optimistic picture of the local commercial real estate market — marking high levels of activity in the city’s east.
According to the report, east Colorado Springs had the tightest office submarket (with both the lowest vacancy rates and the highest asking lease rates), the third-tightest industrial submarket (with a 5.6-percent vacancy rate) and a retail submarket that accounted for 33 percent of all retail construction across the city (a total of 164,050 square feet).
But not all the change is positive: In early March, Texas-based natural foods retailer Whole Foods Market closed its store at First & Main Town Center as part of a larger cost-cutting strategy in which the company boarded nine stores in seven states.
“Notwithstanding the recent announcement from Whole Foods that it will close one [28,000-square-foot] Colorado Springs location on Powers [Boulevard] in the East submarket, little movement is anticipated in the big box market, so vacancy is expected to hover around 6.4 [percent],” according to the report. “New space is absorbed quickly and does not impact the vacancy or availability rates for long. At least four new shopping centers have been proposed and are expected to begin construction in 2017, keeping development levels elevated in the market. Most new development is targeted for the North submarket, although the Central submarket and [Central Business District] will also see some new retail as demographics improve in the area.”
Fred Veitch is vice president of Nor’wood Development Group, which owns and operates the First & Main development. He said that Whole Foods’ decision to leave the complex was unexpected.
“It came as a surprise because we were told their sales were improving and that the store was profitable,” he said. “In fact, they spent — I believe — over $100,000 doing upgrades to the store just six months ago.”
Veitch said that Whole Foods had recently signed a five-year lease extension, and will therefore be tasked with locating a tenant to take over the lease.
“They’re going to be in control of that lease and I understand that they are working with a third-party broker to work on releasing it,” Veitch said. “We’ve had several people contact us so far, but it’s still too early to speculate on what the use might be.”
Nor’wood has already been contacted by several potential tenants — including a few different grocers — according to Veitch. But he said it’s too soon to begin speculating about what company will fill the space.
“There are some other retailers that are not yet in Colorado Springs that might be desirable to have in that space,” he said. “Obviously we’d like to have somebody that has the same kind of quality that Whole Foods brought to the site.”
In the meantime, he said that the sprawling development is “doing very, very well,” with only two pad sites remaining.
“I’m not particularly concerned about refilling Whole Foods,” he said. “We think it’s a great location and we’re not overly concerned about being able to put another great retailer in that space.”
Although Whole Foods is responsible for making good on its lease agreement, Veitch said it’s never ideal to have a vacant space — especially one so large — because the potential that has to negatively impact the flow of traffic for other businesses in the complex.
“Grocers are always good traffic generators, but we have a lot of other good traffic generators as well,” he said. “And all of our other anchors are doing exceedingly well.”
One company that is poised to benefit greatly from Whole Foods’ decision to close the store is Sprouts Farmers Market, which last year announced plans to build a 30,000-square-foot store in the planned 125,000-square-foot Powers Pointe development southwest of Powers Boulevard and Barnes Road. Developers broke ground at the site in December and expect the store to be open by July.
“Coloradans love Sprouts and we’re excited to open our new store in Colorado Springs soon,” said Sprouts spokesperson Diego Romero. “We look forward to growing across Colorado.”
Another company that may inherit some of Whole Foods’ former customers is King Soopers, which is currently building a 123,000-square-foot “marketplace” at Claremont Ranch Marketplace. Soopers will anchor the 160,000-square-foot commercial development which is located northeast of Highway 24 and Marksheffel Road in unincorporated El Paso County. The store is expected to open in August. n CSBJ