With vivid memories of an up and down 2001 behind us, the New Year looks promising. Recession fears, though real, are subsiding as the word, “recovery” is popping up among some economists. The country may not be completely out of danger, but the business and real estate communities have worked hard to keep a sense of “business as usual.” Here’s to a stable and sound Year 2002!
Among many year end updates comes a story, “Foreign Money Continues To Flow Into the U.S.,” from a Dec. 26, 2001 Realty Times article by Lesley Hensell. From the Association of Foreign Investors in Real Estate (AFIRE), says Hensell, come the results of a member survey taken since Sept. 11. “Foreign investors continue to rank New York and Washington, D.C. among the top five cities in the world for their real estate dollars,” Hensell reports. Reasons for the continued preference for U.S. real estate include the country’s political stability, its economic leadership, its size and its diversity according to David Sherwood, chief executive officer for Alecta Investments Management and chairman of the board for AFIRE. “This is perhaps why many foreign investors in U.S. real estate require lower returns than U.S. investors require from foreign real estate,” Sherwood says.
Forty-five percent of survey respondents said their primary reason for investing in U.S. real estate was a favorable risk-adjusted return, Hensell notes – and the remaining reasons include market fundamentals (36.5 percent), stability (23.5 percent), and diversification (20 percent). Interestingly, about 55 percent of respondents said that their perception of New York City as a desirable location for real estate investment has not been altered by the terrorist attacks. Says Hensell, “Even though Americans may envision the U.S. economy as facing tough economic times, our foreign counterparts still believe it is by far the strongest in the world. In the survey, 58 percent said the U.S. provided the most secure and stable real estate investments. The closest competitor was United Kingdom with 18 percent.”
Here’s to some high quality investment capital flowing to the Pikes Peak region and Colorado…
Palmer McAllister publishes year end market findings
In its final quarterly report for 2001, Palmer McAllister president, Gary Hollenbeck, says that for the first time in a decade, office and industrial sublease space availability outpaced absorption – and that as a result, rental rates on vacant space have fallen 10 percent since the beginning of the year. With 4,600 layoffs since January (85 percent or 3,910 in the technology sector), Hollenbeck says both second and third quarter activity plummeted with a “slight up-tick” in leasing inquiries and activity in the fourth quarter. The impact on office/commercial was due to the barrage of once-leased large office facilities that are back on the market – out of an overall 11.3 percent vacancy rate, 3.5 percent is subleased space.
Hollenbeck also points to existing vacant space including Phase II of Plaza of the Rockies, the Aerospace Tech Center Building on Fountain Boulevard, and DPC’s Briargate Corporate Center as contributors to the community’s overall 15 percent vacancy rate.
The report further states that in the Industrial sector, large floor-plate building owners such as Quantum (200,000 square feet.), Wigand Manufacturing (110,000 square feet), Ampex Corporation (120,000 square feet), and SCI (150,000 square feet) are now offering their former facilities for sale or lease. With over one million square feet of vacant space available, Hollenbeck does note, however, that because such industrial spaces cannot be subdivided easily, the number of unleased units do not translate into a market glut. “…when you factor out these large blocks of space, the industrial market for typical users remains fairly tight. Consequently, industrial lease rates have remained stable – with the exception of the large blocks of space, which are negotiable.”
Retail and land sales, says Hollenbeck continued to provide a “bright spot” in an otherwise up and down commercial real estate scenario.
Pikes Peak region apartment market update
Landlords may have to tighten their belts and offer more rent concessions, according to Doug Carter’s December apartment occupancy and rent review. He notes that highest vacancies were in North Colorado Springs in the new and more expensive apartments where vacancy rates climbed as high as 15.5 percent for 1990s vintage properties and more than 13 percent for 1980s vintage properties. Lowest vacancies were in the older, more affordable properties in southeast Colorado Springs. Resulting lower rents were also evident – especially in the newer, more expensive properties. “Citywide rent rates dropped slightly to $641 per month compared to $656 one year ago. 1990 vintage apartments city-wide dropped 8.2 percent while older 1970s vintage apartment rents remained largely unchanged.” Carter attributes changes in the rental market to employment losses this year and low interest rates for first-time home-buyers. Doug Carter, an 18-year veteran of the Colorado Springs Apartment industry specializes in brokering multi-family properties, as well as in multi-family research, consulting and transactions.
Transaction report
Talk about community-minded – Dar Faaborg and Keith Ketelsen, both local real estate investors, donated property valued at $1.5 million to the University of Colorado, Colorado Springs. The two brokers agreed to donate six acres of commercially-zoned land that extends north along Nevada Avenue from the four Diamonds Sports Complex and borders about one-half mile of existing university property. According to University officials, UCCS hopes to build an indoor sports complex on the property within the next few years.
From Palmer McAllister come reports of four new deals, closed before December 31. They include:
A 2,200 sq. ft. retail lease by Rather Brothers for a Quizno’s restaurant at the Market at Chapel Hills. The landlord was represented by Jay Rosenbaum and Warren Dean of Summit Commercial, and Rather Brothers were represented by Mark Useman, Greg Kaufman, and Kent Mau of Palmer McAllister.
Kent Mau partnered with Greg Phaneuf on the renewal of a lease of 5,581 square feet in the Presidio Building. They represented the tenant, Ajilon, in the transaction. The landlord, T.H. Group, was represented by Mike Walker out of San Francisco.
Mau and Dale Wheeler of Palmer McAllister, a Frederick Ross Company, also brokered the sale of 63.2 acres of residentially-zoned property to U.S. Homes. The seller was Picolan, Inc., represented by Steve Sharkey. Trammel Crow also cooperated in the sale.
Finally, Mark Useman and Greg Kaufman represented Rainbow, Inc, a photo finishing and incendiaries start-up in the lease of 3,369 square feet in Citadel Commons. The landlord is J & B Building and the listing company was First Properties, Inc.
Pikes Peak Board of Realtors update
Just before the holidays, word came that the state legislature had implemented the voters’ approval of a tax reduction for senior citizens, set to take affect beginning on Jan. 1, 2002. HB 1224, signed by the governor last April reduces the property taxes for qualified senior citizens by subtracting a portion of a home’s value to determine the amount of property taxes owed. Up to one-half of the value of a senior’s home, to a maximum of $100,000, can be exempted from property taxes. To qualify, seniors must be 65 years of age or older; they must have lived in the home for the preceding 10 years or be the surviving spouse of an owner/occupant who previously qualified for the exemption. In addition, the senior must complete and file an application. The El Paso County Assessor’s office will have information in the mail to homeowners by May 1, 2002.
From Al Ondaatje, local financial consultant, comes the following:
“Home ownership is making Americans wealthier. An average home has gone up in value from $118,600 in 1990 to $176,200 in 2000 [a recent Realtor survey in Denver says that number has grown to more than $250,000], says the National Association of Realtors. That represents an annual appreciation factor of 4.857 percent.
John and Judy Arends of RE/MAX Properties, North just earned their Quality Service Certification designation. The certification means that sales associates and brokers are committed to the delivery of a defined service process and to higher standard of accountability in customer satisfaction, according to Larry Romito, President and CEO, Quality Service Certification, Inc. The program was first accepted by the California Board of Realtors as a standard of care and service for consumers – and includes measurable standards for the real estate professional.
CSBJ’s hat is off to the Pikes Peak Association of Realtors for their donations enabling Care and Share to feed more than 11,000 people in Southern Colorado. Rosalinda Chaney, PPAR community relations chair, said that the membership was moved by Care and Share’s difficult time collecting adequate food this past season because of the economy and the number of people who sent contributions to aid victims of terrorism in New York City and Washington, D.C. “While we feel it is important to donate nationally,” she points out, “we also think it is essential to give to those in our community. That’s why PPAR decided to participate in the Harvest of Love food drive this year.”
Freddie Mac chief economist, Frank Nothaft talks about the effect of the economy on home mortgage rates: “Currently the market is focusing on an anticipated economic recovery within the next six months. That focus put some upward pressure on mortgage rates this week, causing them to rise.” On Dec. 28, 2001, 30-year fixed mortgage rates were up to 7.17 percent from 7.09 percent a week earlier. Nothaft cautions that “there remains a good bit of volatility, though, due to market speculation over exactly when and how strong the rebound will be.” One-year adjustable rate mortgages continue to hover slightly above five percent.