Front Range real estate lures wave of buyers

Early in the film "Gone With the Wind," Scarlett O˜Hara˜s father, Gerald, admonishes her for not feeling the same love as he does for the family plantation, Tara."Land is the only thing that matters," he tells her, "because it˜s the only thing that lasts."
Investors in Northern Colorado seem to share that sentiment, as the torrid pace of commercial real-estate activity continued throughout 1997 and into this year.
"Our supply of land is definitely dwindling," said Steve Pfister, a partner at Realtec Commercial Real Estate Services Inc., the area˜s largest commercial brokerage by volume.
Longtime Colorado residents remember all those office, retail and apartment buildings that lay unoccupied and inexpensive during the region˜s infamous period of overbuilding during the 1980s.
Well, that oversupply has since been gobbled up by eager investors faster than you can say supply and demand.
"The greatest demand I have right now is from the investor," said Andy Miscio, broker/partner with Miscio and Stroud Inc., the second-largest local commercial real estate brokerage. "I have lists of people looking to buy properties to create equity or build cash flow. I just don˜t have the properties for them."
Commercial real estate falls into several different categories. There is office, retail, industrial, residential and all others. The hottest commercial properties right now are in the residential category and include apartments, apartment-building sites and multi-unit residential buildings such as duplexes.
"In the 1980s, we created a lot of apartment sites that were not used," Pfister explained. "In the 1990s, we˜ve used up all that are available. I had a list of 16 or 17 apartment sites in 1991. All those sites are gone now, and only four or five have been created since."
The engine driving the strong demand for commercial real estate is the region˜s potent economy. Job growth indicates that there will be a continued healthy absorption of apartments.
"Just in Fort Collins, there is an annual demand for about 400 apartment units over and above what exists," Pfister said. "We˜re not building that many."
In recent months, some economists expressed concern about the future growth of the local economy and its prospects for continued strong job growth.
Home builders who caught some of that wariness began to exercise caution in creating home inventory by building unsold properties. A leveling off of sales resulted briefly, though overall growth remained stable.
But the decision by Hewlett-Packard Co. to build two complexes in Fort Collins — as well as expansions by Symbios Inc. and Celestica Colorado in Fort Collins, and HP in Loveland — has revived the region˜s prospects for long-term job growth.
Over the next four years, HP will continue its building boom, including a 350,000-square-foot, $220 million building in Fort Collins that might accommodate as many as 2,000 employees.
Chris Wells, a broker associate at Veldman Morgan, said the addition of jobs like those being brought in by Hewlett-Packard represents actual job growth of about 500 percent for the employment base.
Construction, retail and service-sector jobs will also be created to accommodate demand for goods and services from all those new area residents.
"I don˜t see a lot of change in commercial real-estate demand," Wells said. "I just think there will be solid growth for the next five or six years."
Growth of the region˜s economic prospects and its dwindling supply of desirable commercial real estate has heated up both the selling price and the rate of appreciation in value of the commercial real estate that is available. That is true of the residential real estate market as well,
"Five years ago, the price of an average land site for a single-family home in Fort Collins was $12,000 to $14,000 per acre," Pfister recalled. "Now, it˜s about $25,000 an acre."
Pfister says the rate of appreciation in the value of commercial real estate such as office and industrial buildings has increased in value a healthy average of 8 percent or so annually for each of the last five years.
Commercial land sites have fared even better, averaging a 15 percent appreciation rate annually over the same five-year period.
That generous rate of appreciation is only one reason why commercial real estate is so attractive to buyers.
"You have different categories of buyers," Miscio said. "The investor is interested in income, appreciation, tax benefits or a combination of the three. A user wants the property to house a business. A speculator holds it until something happens or goes out and gets a user,"
Miscio said that present demand from investors may be "because they are looking for a better deal" than relatively low bank interest rates or a stock market recently seen as somewhat risky. That˜s especially true in light of recent market volatility and the much-talked-about ÔAsian meltdown.˜
"Every investment requires a disinvestment," Miscio said. "In real estate today, you have people with a lot of money who have it either in the bank or somewhere else, and it˜s not getting them what they want."
And increasingly, it appears what they want is a tangible piece of Northern Colorado˜s land or buildings.
Of course, this brings concern about the management of urban growth. In March 1997, the City of Fort Collins began to address those concerns by adopting CityPlan. One result was a new zoning map that rezoned many of the city˜s land parcels, much to the chagrin of area developers.
That˜s just one instance of what is coming to be perceived as a new hostile-to-growth attitude on the part of Northern Colorado˜s cities, especially Fort Collins.
"Some developers claim the city˜s demands for authorizing some projects are so many and so difficult to meet," Pfister said, "that Fort Collins˜ unstated message is Ôgo away, we do not want you here.˜"
But the region˜s burgeoning population and increasing size is giving way to nostalgia among many longtime residents, even pro-growth development professionals themselves.
"From the standpoint of the quality of life and work," Wells said, "I˜d almost like to see the growth slow down."