As the clock struck midnight last New Year’s Eve, Colorado Springs real estate experts believed 2016 would prove to be one of the strongest years in the history of the city’s commercial and residential markets.
They were right.
The past 12 months have produced a meteoric rise in home values and sale prices, drastically decreased vacancy rates and a record number of building sales. According to some local Realtors, the sudden increase in market activity has exceeded even the most optimistic forecasts.
“It seemed like it happened overnight; the whole market tightened up,” said longtime Colorado Springs commercial broker Tim Leigh. “I don’t think anyone can really predict that.”
In a recent report, the Colorado Springs-based Quantum Commercial Group analyzed 2016 real estate data and validated claims that the Pikes Peak region’s strong commercial growth was driven by increasing numbers of both renters and homebuyers.
More than 15,000 homes — the most in more than a decade — were sold in El Paso County during the past 12 months, according to the report. Local experts attribute the numbers to the strengthening jobs market, historically low interest rates and elevated rental rates, which created the perfect storm that transformed renters into first-time buyers.
RESIDENTIAL REAL ESTATE
Longtime Colorado Springs Realtor Harry Salzman has done his homework.
In recent months, he has been preparing to represent the Pikes Peak Association of Realtors before Colorado Springs City Council on Jan. 23, when he will deliver a report on the state of the city’s real estate market.
“It’s hot, hot, hot — it’s terrific,” Salzman said, “2016 is above and beyond typical.”
Initially, the industry forecasts continued to be overshadowed by the market because of the likelihood of increased interest rates, he said. But as the year went on, interest rates remained at historic lows and continued to promote sales. Based on data gathered from the beginning of the last quarter of 2015 to the end of third quarter of this year, Salzman said few cities in the country are able to rival the housing market in Colorado Springs.
“The average appreciation for houses nationally was about 5.1 percent,” Salzman said. “When you look at Colorado Springs, our appreciation is at 8.9 percent. In other words, we are 60 percent better than [the rest of the] USA.”
Salzman said the industry was anticipating increased values, but the 8.9 percent appreciation in home values — which would amount to a $22,250 annual equity increase on a $250,000 home — was higher than anticipated.
“We didn’t forecast that we’d do that much better [than the rest of the country],” he said. “We’re thrilled with the appreciation, and we’re also at a record low for inventory. Because demand is high and inventory is low, that has been moving prices up.”
It’s also been a banner year for multifamily development, as reported in a recent Business Journal story. The third quarter saw sales upward of $150 million, which brought total sales volume for 2016 to more than $500 million — highest in the city’s history.
COMMERCIAL REAL ESTATE
According to the Quantum report, the number of new residents in Colorado Springs had a significant and positive impact on commercial growth in the city.
“The year 2016 was one of the most remarkable in the 30 years I’ve been in the business,” Leigh said. “We saw an abrupt about-face in the market. We went from a situation where we had more supply than demand to one where we have more demand than supply. It’s just amazing.”
Despite rosy market forecasts that predicted increased commercial activity in Colorado Springs, Leigh said he doesn’t believe anyone truly saw this coming.
“Nice buildings lease and shitty buildings don’t,” he said. “Now we’ve got a lot of happy owners with full buildings, which is being pushed by people moving to Colorado Springs.”
The retail real estate submarket met previous expectations and remained stable throughout 2016. In most instances, the rental rates for retail space in Colorado Springs also saw steady increases, while vacancy rates continued to decline throughout 2016.
The previously stagnant Colorado Springs industrial real estate market also began to flourish in 2016, with new construction of both large and small warehouse spaces. Much like investor activity in the multifamily and retail markets, Quantum reported signs of strength and affordability that it expects will drive more Denver-based companies to consider Colorado Springs as a viable option for relocation.
Job growth in 2016 helped strengthen the office market, lagging only slightly behind numbers seen in 2015, according to the report. However, office space in Colorado Springs remained more affordable than in other cities, and Quantum reported that it expects continued job growth to continue driving demand.
High sales volumes in both the residential and commercial markets were also coupled with a sharp rise in construction in both markets, according to data from the Pikes Peak Regional Building Department. The department’s latest permit activity report for November 2016 showed 4,582 new home construction permits pulled for El Paso County in 2016. Those permits account for an estimated $1.53 billion in volume and make 2016 the best year for residential and multifamily construction since the Great Recession.
The 47 new construction multifamily permits that have been pulled so far this year represent a total of 1,305 units compared to only 578 units for the whole of last year (a 126 percent increase). A group of local and out-of-state developers, including Nor’Wood Development Group, Griffis/Blessing, Weidner Homes and Crowne Partners, are launching apartment construction projects across the city.
More than half the nearly 2,000 apartments planned for Colorado Springs — in various stages of development and construction — are located in the area surrounding the intersection of Interquest and Voyager parkways, which has also seen a steep rise in investor activity in the retail and hotel markets.
“It is a safe haven from potentially overbuilt markets,” according to the report.
REAL ESTATE DEVELOPMENT
In years past, the Powers Boulevard corridor in east Colorado Springs has been the epicenter of economic and real estate activity in the region. This year, however, the nearby Interquest area has proven to be the latest and greatest hotbed for commercial development.
“That market segment is definitely hot,” Leigh said.
A wide variety of commercial projects is currently being built out in the area, as well as multifamily projects expected to include more than 1,200 units.
The developments include:
InterQuest Marketplace. The 135-acre, 900,000-square-foot shopping center located northeast of I-25 and Interquest has continued to grow throughout 2016. Originally conceived in 2003, the retail center is now anchored by the 311-room Great Wolf Lodge, which opened Dec. 16 and includes a 50,000-square-foot waterpark. The 264-unit Outlook at InterQuest Marketplace Apartments is also under construction as part of the development.
Interquest Commons. The 23-acre, 160,000-square-foot development located southwest of Interquest and Voyager parkways began construction this year. Plans include a car wash, restaurants, retail stores and eventually a hotel.
Gateway at Interquest Commons. Earlier this year, a Denver-based firm purchased 77 acres of vacant land southeast of I-25 and Interquest Parkway. Developers want to include apartments, restaurants, hotels and commercial space. Construction is expected to begin in early 2017.
Colorado Crossing. A Denver-based firm paid $22.1 million this year for the long-stalled 153-acre development southeast of Interquest and Voyager and wants to finish out the project with apartments, restaurants, hotels and other commercial spaces.