Downtown vacancies hover at 3%-4%

Throughout Larimer and Weld counties, commercial construction projects are booming. The reason, industry experts say, is simple: Vacancy rates in office, retail and industrial spaces are very low.

Mix that with the increasing attractiveness of Northern Colorado to many businesses, and tenants may find that some lease rates also are on the rise.

Realtec Commercial Real Estate Services Inc. of Fort Collins tracks vacancy and lease rate on a monthly basis. According to its latest figures, dated Sept. 14, the retail vacancy rate at 39 major Fort Collins mall and strip centers larger than 10,000 square feet and hosting anchor businesses was 2.42 percent. In centers without anchors, the rate was 4.24 percent.

Approximately 3 million square feet of retail space exists in Fort Collins.

In downtown Fort Collins, lease rates are mixed. Chuck Bowling, broker/associate partner of The Group Inc., said 3 percent to 4 percent of retail space there is vacant, with some lease rates in the $8 to $12 net range.

Larry Stroud, broker associate/partner of Miscio and Stroud Inc., sees existing downtown leases in the $7 to $12 triple-net range, “but $14 triple net is coming,” he said.

Triple net does not include costs over and above the lease price, such as janitorial, utilities and insurance costs. Those operating expenses can run anywhere from 70 cents a square foot to $3.89, according to Realtec.

New retail space elsewhere in town can cost $14 to $17 triple net, Stroud said.

Existing retail property, such as that on College Avenue and Harmony Road, swings between $11 and $12.50, said Realtec’s Steve Pfister. Off the College and Harmony strips, leases may drop slightly to $10 to $11 triple net.

The office market in Fort Collins is slightly different. According to Realtec figures, it posted a citywide vacancy rate of 8.22 percent as of mid-September. In July, it was 6.69 percent. Some new inventory added to the market helps explain the increase.

Lease rates for new office space are “quite expensive,´ said David Sitzman, president of Sitzman-Mitchell & Co. He noted that rates can start at $14 triple net for new space and that tenants have not quite adjusted to that level of cost.

Steve Stansfield, president of Realtec, noted that office space in Fort Collins indeed has been tight and that rents did escalate for awhile. He sees that trend beginning to flatten somewhat.

He agreed that there is some resistance to the new office rates, especially those in the $20 to $21 range.

Demand for industrial space in Fort Collins has tightened that market over the last 18 months, said Ron Kresl, Miscio and Stroud broker associate.

In the northern part of the city, vacancy rates hover around 5 percent, while leases range from $5.95 to $6.25.

In the south, the vacancy rate is about zero, and rental rates are up to $9.25 triple net.

Greeley contains about 3 million square feet of retail inventory, with a vacancy rate of less than 2 percent in new space, according to Michael Ehler, broker/owner of Realtec Greeley. Overall, the retail vacancy is about 5 percent.

Lease rates in newer space are $12 to $14 triple net and $8 to $10 for older inventory.

As in Fort Collins, vacancy in Greeley’s office inventory is higher than retail. Ehler said that approximately 7 percent of the city’s 2 million square feet of office space is empty. Lease rates for Class A space are $10 to $13 full-service and $7 to $10 full-service for Class B space.

The industrial market in Greeley contains approximately 3 million square feet, much of it older space. Rental rates are $3 to $5 net, with a vacancy rate of 5 percent to 7 percent in the better space, Ehler said.

Loveland’s commercial market is tight as well. Vacancy rates for retail, office and industrial inventory are 5 percent or less, said Larry Melton, Realtec Loveland sales associate.

“Depending on where you’re at,” he said, “you can get retail space for $7 to $9 triple net.”

The office market, he said, is “very, very tight” and costs tenants $8 to $10 modified gross for average space and $12 gross for nicer inventory.

Industrial rates in Loveland run from $3.50 triple net to $5 modified gross.