The Colorado Springs-based real estate firm Quantum Commercial Group expects 2016’s strong economic trends to continue during the new year — across both the commercial and residential markets.
“We all believe that 2017 is staged for continued expansion and growth in both new and existing companies and employees for our city,” according to Quantum’s annual report, which cites population growth and a strong jobs market as two of the top predictors for the year ahead.
According to the report, the local office market continued to strengthen in 2016 and is expected to maintain that trend throughout 2017; the industrial market “may shine even brighter in 2017,” with the construction of new space; and retail growth is expected to remain strong, driven by developments at Interquest Parkway, Powers Boulevard and along the I-25 corridor.
A portion of this growth — namely in the retail and multifamily segments of the marketplace — will continue to be driven by local, regional and out-of-state investment activity, Quantum predicts.
“Investors see Colorado Springs as a great market for real estate acquisitions with opportunities for acquiring properties significantly below replacement cost with the potential for increased value as properties are stabilized,” according to the report.
Along with population growth and a strong jobs market, the Colorado Springs real estate industry is also reaping the benefits of peak consumer confidence throughout the country, said Quantum President Dale Stamp.
“The most exciting part is that the overall consumer confidence — which relates directly to commercial real estate — is very high,” Stamp said. “Everybody seems to be feeling that the economy is heading in the right direction; that there aren’t many negatives taking place right now.”
The strength of U.S. consumer confidence is underscored by campaign promises made by President-elect Donald J. Trump to invest in the Department of Defense, which translates to support of Colorado Springs — a community that has long relied on defense spending and its large military presence for economic and community support, Stamp said.
“That hopefully will bode well for our economy in the coming years,” he said. “That creates a ripple effect in the local real estate market.”
Stamp also said that although the Denver real estate market has started to level off, it still remains hot. In coming years, he sees this as a strength for Colorado Springs, which is geographically close, but offers more reasonably priced real estate options.
“We’re starting to see a ripple effect where people are starting to buy homes down here because the market is so expensive in Denver,” he said.
That was one reason Quantum decided last year to enter the residential market. Stamp said the company began to see a rise in demand for residential services among its commercial clients and that Quantum is “happy to fill that niche.”
Areas of strength
In terms of strong geographic commercial and residential markets this year, Stamp said the northeast quadrant of the city continues to be promising thanks in part to investor activity and development at Interquest Parkway, Powers Boulevard and along the I-25 corridor.
Stamp also expects to see substantial market growth in the Jackson Creek area in Monument and the southwest part of Colorado Springs, which is beginning revitalization projects along the South Nevada and South Tejon corridors that many are branding as a new gateway to the city.
“Those should completely change that part of town in the coming year,” he said. “I think those developments will really fill those niches down there.”
Infill development will continue to be a necessary and growing share of the local real estate market, he said.
Building should also increase to levels not seen in 20 years, he said, and will be led by demand for speculative building in the industrial market around the Colorado Springs Airport and along the I-25 corridor.
Retail growth throughout the city will also continue to do very well and promote residential growth in the neighborhoods surrounding it.
“They’re all marching forward very fast,” he said.
He added the caveat that rent prices aren’t quite high enough to promote building new office space — partly because the city already offers more supply than demand — but that he expects that to change in the coming year, as Denver companies continue to look south for more affordable and accessible options.
Investment activity will continue to embolden the Colorado Springs market, he said, as it did in 2016 with record-breaking purchases of hotels and apartments by a wide variety of buyers.
“It’s so hard to find reasonably priced investments in the Denver market,” Stamp said. “They’re always looking down here, but it’s very hard to find those properties down here because we just don’t have the numbers. When they go on the market, they get snapped right up.”
In concert with Quantum and its optimistic 2017 forecast is Chicago-based real estate company Cushman & Wakefield — which has a large presence in Colorado Springs and recently published its 2017 U.S. Macro Forecast. The forecast said the U.S. economy generally, and the real estate market specifically, should perform well in 2017, surpassing the successes of the past 12 months.
“Even before the election, the U.S. economic fundamentals were showing signs of heating up,” said Kevin Thorpe, the company’s global chief economist. “We observed a big [gross domestic product] number in Q3, accelerating wage growth, surging consumer confidence — a string of really robust trends were already forming. Now when you layer in the expected tax cuts and spending multipliers from the new administration, it creates an even stronger economic backdrop for the property markets heading into 2017.”
Cushman & Wakefield anticipates GDP growth to reach 2.3 percent in 2017 and 3 percent in 2018, which could generate up to 3 million new jobs and work wonders for the real estate market — especially in already-strong local economies such as Denver and Colorado Springs.
“By and large, the outlook for the U.S. economy over the next few years remains positive,” according to the report. “Although headwinds have come and gone and come again, the major force driving growth — the consumer — is still gaining momentum. … We believe there will be a net positive impact on economic growth as well as the property markets in 2017 and 2018.”