Real Estate & Construction  November 16, 2015

Generation Y fuels rapid change in Fort Collins

Millennials, or the demographic cohort ranging in age from 18 to 35 otherwise referred to as “Generation Y”, are pushing for higher density and urban redevelopment. Right here in Fort Collins, the impact of their generational desire for mixed-use, live/work/play concepts with easy access to mass transit and a variety of amenities has fueled significant development.

According to an Urban Land Institute survey, a large majority of Millennials prefer city living to the suburbs, putting upward pressure on urban property values and lease rates across the country. More and more, mixed-use developments are appearing in the place of functionally obsolete real estate. This is especially evident in Fort Collins, where, according to the city of Fort Collins website, the median age is 29.3 years old.

The previous 10 years have seen no less than 15 new mixed-use apartment projects delivered in or around the Old Town city core and in and around the CSU campus.  These new projects have been driven by record-setting low vacancy rates and associated spikes in rental rates, as well as readily available debt and equity in the marketplace.  In our six-property, Northern Colorado multifamily portfolio alone, we have experienced 100 percent occupancy for the past three years.

The trend continues with the recently announced 22 units on North Mason Street, 36 new townhomes at College Avenue and Horsetooth Drive, six new brownstone-style townhomes on Howes Street and more than 400 apartment units associated with the redevelopment of the Foothills Mall. These projects exemplify the urban, compact-style development sought out by Generation Y.

Colorado State University’s expansion plans also play a significant role in increasing this population density not only on campus, but also in the neighboring parts of the community. In addition to adding more than 2,000 student beds with the delivery of projects such as Aspen Heights, The Summit on College and The Grove, there are still more than 2,100 additional student housing beds slated to hit the market by 2018. 

Recent development has seen some of the largest employers in the community embracing this live/work/play Millennial ideal.  Otter Products LLC and New Belgium Brewing Co. continue to expand within the city’s core, as well as Woodward Inc., with their 300,000-square-foot, $250 million campus located less than a mile from Old Town Square. Years ago, these companies would have been enticed to operate from more cost-effective, greenfield sites sprawled out in the open space surrounding the community. Thanks to the strong Millennial influence in Northern Colorado, Fort Collins continues to revitalize itsurban space.

As the old adage goes, retail (and office) follows rooftops. According to CoStar data, the office and retail combined vacancy in the Fort Collins/Loveland market is currently 4 percent and has been steadily decreasing for the past four years. If one draws a box encompassing the city space from Shields Street to Lemay Avenue east/west and Vine Drive to Mulberry Avenue north/south, the combined office and retail vacancy goes down to an astonishing 2.1 percent. This number is sure to put upward pressure on commercial lease rates, leading to additional investment and further development and redevelopment of the downtown area.

The previous four years have seen average commercial asking rents within the same area boundary increase from approximately $12 per square foot triple net to just more than $18 per square foot NNN.  Additionally, there are a number of case studies where land values within these boundaries have appreciated nearly 300% over the past four years. Due to the increased density, higher prices can be paid by investors and developers, thanks to the ability to spread costs over a higher number of units. In 2013, a 1.5 acre parcel of multifamily development land located at 300 N. Mason St. traded for a sale price of $16 per square foot. Two years later, the adjacent 1.5 acres at 331 N. College Ave. traded for just under $55 per square foot. Both sites are prime locations for mixed-use, high-density developments. The former Perkins Restaurant site on South College Avenue, one of the highest land sales to date, sold to a student housing developer out of Chicago for $96 per square foot. 

The U.S. Census Bureau released data earlier this year stating that the Fort Collins-Loveland metro area is the 12th fastest-growing metro in the nation. Furthermore, the Millennial generation is forecasted to surpass the outsized Baby Boom generation as the nation’s largest living generation according to population projections (75.3 million people). Under these circumstances, Millennials are sure to see that Fort Collins continues to grow up, rather than out.

Jake Arnold is a broker with Brinkman Partners. Contact him at jake.arnold@brinkmanpartners.com or 970-237-5728.

Millennials, or the demographic cohort ranging in age from 18 to 35 otherwise referred to as “Generation Y”, are pushing for higher density and urban redevelopment. Right here in Fort Collins, the impact of their generational desire for mixed-use, live/work/play concepts with easy access to mass transit and a variety of amenities has fueled significant development.

According to an Urban Land Institute survey, a large majority of Millennials prefer city living to the suburbs, putting upward pressure on urban property values and lease rates across the country. More and more, mixed-use developments are appearing in the…

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