Industrial vacancies, lease rates stabilize in region

After a period of overbuilding early in the decade, signs of equilibrium have surfaced in the industrial real estate market in Northern Colorado.
As with other commercial real estate markets, the industrial market is experiencing slightly less demand as lower interest rates transform prospective tenants into owners. Still, the market is steady in Loveland, said Joe Palieri, a broker with Loveland Commercial LLC. ?You see some new warehouse condos being built,? he said.
Loveland doesn?t see much speculative building in the industrial sector, Palieri noted. ?If they?ve got a user, they?ll do a build-to-suit, but they aren?t just going to throw up a building.?
Larger users are likely to head toward Fort Collins where there is more to choose from, Palieri said. Dock-high space, meanwhile, is tough to find in Loveland, he said. ?Nobody builds it unless it?s a build-to-suit.?
Vacancy rates for industrial space remain low. ?The last time I looked, they were somewhere around 6 percent to 7 percent,? he said.
Loveland is recuperating from a glut of industrial space in the early 2000s, ?when everybody and their mother was building warehouse condos. I think we had 50 percent vacancy in that market in 2001, and it has taken a few years to absorb that,? Palieri said.
Lease rates have adjusted downward from $7.50 per square foot triple net. ?That?s just more than the market will bear,? he said. ?Industrial users just aren?t going to pay that much unless they need clean rooms or something special.?
Rents between $5.50 and $6.50 per square foot triple net are more realistic right now. Larger spaces will command less per square foot ? probably closer to $4.50 to $5.50 per square foot.
Balance the equation of business activity and new construction and the vacancy rate for industrial space in Greeley is likely to remain steady, said Mark Bradley, broker for Realtec Commercial Real Estate Services Inc. in Greeley.
Industrial space is comparatively cheaper, running from $2 to $5 per square foot triple net. End-of-year vacancy rates stand about 8 percent, Bradley said, unchanged from Realtec?s third-quarter market conditions report.
In Fort Collins, vacancy rates for industrial space are about 4 percent. ?That?s pretty low,? said Linda Perry, broker associate with Re/Max First Commercial in Fort Collins. ?The market has remained steady.?
Lease rates depend on location.
?It?s more a function of where you are in town,? Perry said. ?Anything along Harmony runs about $9.50 to $13.50 triple net.? Industrial space in the Fort Collins Airpark leases for about $6 to $9 per square foot gross. In Longview Business Park, between Loveland and Fort Collins, ?that?s all new construction. It leases for $9.50 triple net pretty much across the board,? Perry said.
The inventory of larger industrial spaces is low, she said. ?We don?t really have that many larger ones available. The smaller spaces ? 5,000 square feet and less ? that?s what most of the product is.?
In general, real estate experts in the region voice enthusiasm about the year ahead, particularly as confidence in the region builds. ?It?s going to be exceptional,? Perry said. ?I anticipate tripling my sales.?
A stronger economy and the burgeoning growth at Centerra in east Loveland are helping boost interest in the area, Palieri said.
?The work that the McWhinneys are doing at Centerra ? bringing in a half-million square feet in a new hospital and almost a million square feet of retail ? is making our market much more vibrant and active,? he said. ?And also, the work that the Northern Colorado Economic Development Corp. is doing. There?s a lot more going on. We?re on the map as far as companies looking at wanting to locate here.?