FORT COLLINS — Realtors, developers and builders are keeping a keen eye out for what will happen to the national economy under the Trump Administration and how it could affect their businesses in Northern Colorado.
Promises of lower tax rates and billions of dollars possibly allocated for a massive infrastructure upgrade nationwide have them wondering how those two stimuli will affect interest rates and their own return on investments in the future.
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“The impact is unknown,” said Steve Stansfield, chief executive of Realtec Commercial Real Estate, during BizWest’s CEO Roundtable on real estate held Tuesday in Fort Collins. “Congress can’t reach a consensus. Seems we need to reach a crisis point before something is done. But if anyplace remains prosperous, it is probably here.”
Roundtable participants eye the future in a variety of lights.
Stu MacMillan, owner of MacMillan Development in Fort Collins, holds an optimistic view.
“I don’t see growth in Northern Colorado slowing down, and that’s all good. But I am looking for higher returns. We’ve been taking lower returns because construction costs are up.”
Josh Guernsey, a principal at Waypoint Real Estate in Fort Collins, believes the real estate sector will “continue to go well.” The infrastructure plan could be a “shot in the arm,” and he believes that if interest rates go up in slow increments, businesses will have “time to react.” But he added that changes in costs and interest rates would affect projects that take 18 to 24 months to complete, a common timetable attributed mainly to city planning processes.
Climbing construction costs and a shrinking construction workforce are major concerns.
Eric Holsapple, a partner of LC Real Estate Group in Loveland, said builders in the region can’t construct a home for less than $400,000 now, adding to the rising cost of buying a home and limiting the pool of qualified buyers.
Rising construction costs are also dampening efforts to build industrial and office space, something that is in demand by small users, but high costs make building smaller buildings a losing proposition.
Ryan Schaefer, chief executive of Chrisland Real Estate Cos. in Fort Collins, said, “the cost of construction doesn’t justify multitenant products in Northern Colorado. He said few developers in Northern Colorado are willing to build on speculation something that would attract a large employer.
Schaefer said adaptive reuse of existing buildings presents itself as a new opportunity.
Connie Dohn, chief financial officer of Dohn Construction Inc., said she doesn’t expect the workforce problem to get any better.
“Young people are not entering the trades. Half of the people in construction now are in it until something better comes along,” she said.
David Shigekane, CEO of The Neenan Co., said fewer schools teaching shop class is having a negative effect.
“Inner cities and rural schools are keeping shop class, the rest have done away with it. … They (students) need to understand that they can make six figures in a trade,” he said.
Schaefer added, “The biggest threat we face is in the future labor force. When the last of the baby boomers get out, who will replace them?”
Participants fear that one segment of development — apartments and student housing — may be overbuilt.
Many recent projects are being backed by outside investors because rental rates have reached an all-time high in the area.
“Rents are softening because so much is coming online,” Dohn said.
Steve Kawulok, SVN Colorado manager, said outside investors have taken notice of Northern Colorado for some time because of its economic and population growth, and its proximity to Denver and universities. That influx of outside capital now is driving much of our growth, he said.
“We’ve been punching above our weight,” Kawulok said.
Mark Bradley, managing broker, Realtec Greeley; Julia Crawmer, broker, Mountain-n-Plains Inc. Real Estate Services; Connie Dohn, chief financial officer, Dohn Construction Inc.; Joshua Guernsey, partner, Waypoint Real Estate; Eric Holsapple, founder, LC Real Estate Group LLC; Steve Kawulok, managing director, Sperry Van Ness/Denver Commercial LLC; Tom Livingston, founder, Livingston Real Estate & Development LLC; Stu MacMillan, founder, MacMillan Development LLC; Ryan Schaefer, CEO, Chrisland Real Estate Cos.; David Shigekane, president, The Neenan Co.; Steve Stansfield, broker/partner, Realtec Commercial Real Estate Services Inc. Moderator: Christopher Wood, publisher/editor, BizWest. Sponsors: Russ Henninger, Hub International; Chris Otto and Josh Billiard, EKS&H; Elevations Credit Union.