Vacant buildings sit quiet on commercial landscape

Colorado is known for wide-open spaces. But wide-open industrial and office buildings on the landscape are less than desirable.

Recent corporate downsizing has left a series of empty or near-empty buildings in the inventory of commercial real estate in Larimer and Weld counties.

Most notably, Hewlett-Packard Co.’s decision to move out of its Greeley campus put 355,200 square feet into the commercial market. Other large holes in the market include: the 230,558-square-foot State Farm campus in Evans, which the insurance company vacated for new offices in west Greeley, and the 128,422-square-foot building at Del Camino once occupied by Flextronics International.

Numerous industrial buildings are on the market in which half or more of the building is available, often in chunks of 50,000 square feet or more.

These vacancies in the market have left significant impressions on commercial vacancy rates in Northern Colorado, particularly in the office sector.

According to the latest vacancy report from Realtec Commercial Real Estate Services, office vacancies range from 12 percent to 15.5 percent in Northern Colorado’s three cities: Fort Collins, Greeley and Loveland.

Industrial and retail vacancies seem much more healthy. Industrial openings across the region range from 4.75 percent to 7.97 percent, while retail vacancies range from 4 percent to 9.07 percent.

What the figures — and the above-mentioned vacancies — mean is a little dicey. Peter Kast, a partner with Realtec in Fort Collins, says it doesn’t mean much of anything as far as the local economy goes. “The vacancies are a secondary fallout from companies downsizing,” he said. “The vacancy rate is not that high compared to Denver.”

And according to the numbers, he’s right. Jim Mokler, also of Realtec in Fort Collins, puts the nationwide vacancy rate and the rate in Denver around 10 percent.

Bernie Blach, a commercial broker for Realtec Commercial Real Estate Services in Greeley, said HP’s move, coupled with the decision of State Farm Insurance to move from its regional headquarters from Evans to Promontory in west Greeley, have skewed the market.

Jason Addlesperger, the senior director of Frederick Ross and Co., a commercial brokerage in Denver handing the former State Farm building, said that if you take away big buildings, the total available square footage in Northern Colorado is actually pretty lean. “You throw those big square-footage buildings into the mix and you make it look like the vacancy rate is really high,” he said.

Large vacancies are reflective of a sluggish national economy, more than local issues, said Mark Bradley, a broker for Realtec.

“Because those are the kinds of tenants who are comparing Greeley to Wichita (Kan.) or to St. Louis,” he said. “They are making more of a national decision.”

Blach said that rather than being a white elephant, a vacant building with large square-footage is a big opportunity for a large company to move into a town. The problem comes in persuading another company to move in.

Addlesperger has been trying to do that for some time, but he is peddling a building in Evans that covers 230,558 square feet, just above a size for which competition is fierce. Many companies want about 120,000 square feet, especially for office space.

Banking company Washington Mutual recently looked at the old State Farm site to establish a customer support center. The main sticking point was that it was too big and the company couldn’t figure out a way to divide it.

Right now, the reaction of almost everyone to the economy is the same reaction on someone’s face when they glance at a half-completed jigsaw puzzle on a table and start reflexively looking for patterns. The industry is moribund. Kast says there is some activity in office space, but not anything to indicate a jump in activity; there is some growth in retail, but not much. The industrial market is standing pat.

The large vacant buildings are the newest wrinkle in Northern Colorado, Mokler said. What that means, no one is really sure.

“We are able to lease buildings, but not as fast as last year,” Mokler said. “The local economy is obviously slower that last year. “

Fort Collins-based regional economist John Green believes the vacant retail buildings in Northern Colorado are going to act as an overhang that will work to stop commercial construction in the area as long as they are available. He thinks it’s partly because the national economy is weak and because the economy in Northern Colorado is changing.

“The structure of the high-tech economy in Northern Colorado is changing,´ said Green. “We’re becoming more of a retirement community. That means you’ll see more condos and service industries.”

Addlesperger said the high-tech industry, particularly in Longmont, took a huge hit when the national economy took a dive in 2001.

Green said he thinks development in Colorado will exist, but it will be spotty, with location being a prime factor. Locations Green thinks will develop should be along the interchanges on Interstate 25 and on U.S. 85 near Brighton because of its proximity to Denver International Airport.

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