Friday, December 26, 2008

4th Quarter 2008 Commercial Real Estate Commentary

With all the economic uncertainty in the air and the media on a non-stop quest to feed the recession monster we thought it appropriate to provide our own commentary on the current commercial real estate market.
Yesterday the Rocky Mountain News released an article discussing the decline in across the board Colorado commercial real estate transactions in 2008 and the forecast for 2009 (see below). It is certainly clear that we are in the midst of a correction, there were flaws in the residential capital markets and people would argue some of those same flaws were evident in the way commercial money was loaned. We have, within our firm, experienced a flattening of commercial activity (vacant land, vacant buildings specifically) over the past 6 months. We are seeing relatively brisk lease activity, deals are taking longer to close as many tenants and investors are surveying the market a bit longer to see what’s around the corner. As lending markets have tightened we have seen a rise in companies either downsizing or looking to lease when they may have previously considered buying. We have also experienced solid activity in the investment market as those looking at income properties seek solid cap rates in the 7-8 range. All this to say, we are confident that Colorado and specifically the Southern Denver, Castle Rock, and Colorado Springs markets are in a stronger position than many other areas thanks in part to a couple of key fundamentals:

Jobs: Statewide the jobless rate rose to 5.3% in October – the US rate is 6.7% (Perspective: in 1933 Unemployment was 24.9%!)
The unemployment rate in Denver-Aurora has risen a mere .6% since October 2007 from 5.2%-5.8%

Income: As of late 2007 Douglas County is still the 6th wealthiest county (household income) in the nation nearly $93K annually, making it a desirable place for retailers and other types businesses to locate
2007: Average US Household income $50,233 – Average Colorado Household income $55,212

We attended the Annual Southeast Business Partnership Luncheon today and thought it would be helpful to highlight a few points from the keynote speaker Daniel Ritchie: http://sebp.org/

· The Colorado Aeronautics and the Defense industries will continue to experience solid growth in 2009, with the presence and expansion of companies like Lockheed Martin, Raytheon, and CH2MHILL
· Colorado and Douglas County housing will remain flat in 2009 with some gains possibly at the end of the year
· Technology companies are seeing an increase in sales as businesses seek to operate more efficiently and increase performance through enhanced IT solutions….this trend will continue in 2009

See the article below that was in the Rocky Mountain News yesterday.

http://www.rockymountainnews.com/news/2008/dec/04/drop-forecast-for-denver-commercial-property/

Please feel free to call me at any time to discuss.

Sincerely,

Matt Call
matt.call@edgecommercialproperties.com

Thursday, October 9, 2008

Commercial Real Estate Opportunities Abound

If you're a commercial investor now is the time to be in the game. During tougher economic times we so often see companies and investors pull out of the market too late and reengage too late. If you want to reap the financial rewards of times like these (too often people take the shoebox under the bed approach) you have to be on the lookout for deals. There are Commercial Investment deals to be had, whether you are an Investor seeking an income producing asset or a small business owner searching to buy an office condo. My firm (Edge Commercial) has several properties available that meet these requirements and we have access to many, many more that are great buying opportunities.

The upcoming election is sure to be a hurdle that once through will be a help to the nation in moving out of the current downturn, regardless of who is elected the clarity of knowing will bring a measure of certainty to economic conditions. Things will turn around and those that seize the opportunity when many others are on the sidelines will reap the rewards of their hard work.

Friday, October 3, 2008

Half Empty? Why are 6.5% and 94.3% important numbers?

So often the national media adopts the pessimistic glass half empty perspective relative to the economy and almost every other issue, hence the emphasis of this post. Things are certainly not as robust from an economic standpoint as they were just two years ago although many of our economic indicators are still very positive.



6.5%....was the increase in Colorado's personal income between the first quarter 2007 and the first quarter 2008. Nationally, the increase in personal income was 4.8% from '07 to '08. This type of growth is indicative of the solid underlying American economic fundamentals even amidst the turmoil we see in the credit markets and on Wall Street.



94.3%...is the EMPLOYMENT rate in the US as of August/September 2008. The national indicator for so many years has been the unemployment rate, the national media and even economists create commentary based on the how many people are not working. Why do economists focus on the unemployment rate which is always the smaller number? The answer: the trend in unemployment and the associated effects are what concerns economists, lack of productivity, drain on government welfare programs and the like.



The commercial real estate market along the front range has felt the effect of slower economic times during 2008. Lease rates have been relatively flat throughout Colorado for the first time in many years. There are more users looking to lease space as credit markets have tightened. On the other side for commercial investors there are deals to be made as larger inventories of industrial, office, and retail properties have created more opportunity to find a deal.

www.edgecommercialproperties.com, www.iedge.com