Industrial vacancy rates in the county have dropped from 8.4 percent just before the discovery of the Niobrara in September 2009 to 6.5 percent in the fourth quarter of 2011, according to data from CoStar.
CoStar’s data also shows that of the total 18.6 million square feet of rentable building area in Weld County, only 1.2 million square feet is vacant.
Steve Kawulok, managing director at real estate brokerage Sperry Van Ness said the few industrial spaces that are available in Weld County don’t meet the specifications of the oil and gas servicers that want to set up shop in the area.
“There is virtually no supply for what the market is demanding,” Kawulok said.
Oil and gas giants Anadarko and Noble moved into the market in 2010, and the trickle-down has brought suppliers, servicers and distributors related to the energy industry in droves.
The influx has been a saving grace for Weld County real estate, with new companies picking up where others left off.
“What the construction industry left behind during the recession has been almost entirely backfilled by oil and gas,” Kawulok said.
For developers, building new is an option, Kawulok said, but finding financing for speculative properties is difficult. Because no one is sure how long the Niobrara will continue to produce oil, or at what rate, potential tenants are interested in shorter leases, something that makes financiers uneasy.
In addition, because of the irregular size specifications required by oil industry-related companies interested in the area, lenders are unlikely to support construction without a tenant ready to occupy the property.
Two of the biggest priorities for companies moving into industrial space in Weld are outside storage and easy access to the highway, according to Mark Bradley, managing broker of the Greeley location of Realtec Commercial Real Estate.
While the Niobrara has played a big role in influencing this trend, so have Weld’s other industries.
For example, Guy Metals, headquartered in Hammond, Wis., moved into 30,000 square feet of industrial space at 401 17th St. in Greeley last year.
The company, a stainless-steel distributor, chose Greeley for its expansion because of the presence of companies such as meat-packing plant JBS and the Leprino cheese plant, and, of course, the Niobrara.
“There’s a lot going on in Northern Colorado,´ said Scott Ficcara, general manager of the Greeley location. “We’re looking forward to the increase in herd count that’s coming to Weld County.”
A combination of Leprino’s operations in Greeley and an ordinance passed by Weld County Commissioners in August will mean an influx of tens of thousands of dairy cows in the next few years.
Kawulok and Bradley said the need for industrial space will eventually make its way into Larimer County, and that other sectors of commercial real estate are likely to see an uptick, too.
Case in point, according to Kawulok, is the construction of Noble Energy’s new office in the Highpointe Business Park just outside of Greeley. The 66,520-square-foot office will eventually hold 300 employees and is just one example of the kind of space needed to house administrative staffs associated with drilling operations.
Residential real estate has already begun to pick up in Weld County, Bradley said, and as more employees move into the region to take jobs that afford them disposable income, more retail and other industries far removed from oil and gas will get a jolt as well, in turn creating more jobs.
“Industrial real estate is the base of the pyramid as far as job-creation,” Bradley said.
It’s also a good time to be a landlord, with industrial rents at $6.08 in Weld at the end of 2011, according to CoStar. That is an increase of about 20 percent over the previous year, Bradley said.