Industrial vacancy rates are taking a plunge across northern Colorado, and while land in existing and coming industrial parks doesn’t seem lacking, some experts believe that there is a severe lack of spec building to accommodate small- to mid-sized companies.
“Overall we think a part of the reason you are not seeing spec building is the restraints from lenders,” said Dan Leuschen, a senior advisor with SVN/Denver Commercial. “They don’t want to lend unless you have signed leases when you walk in the door, and tenants don’t want to sign a lease for a building that’s not there yet.”
The lack of industrial space — which largely reflects the rebound of the oil and gas industry, and perhaps growth in the cannabis industry — is making itself known in some interesting places, especially in Weld County, where the vacancy rate is at 1 percent and the asking price has risen to $10.38 per square foot, Leuschen said. In Greeley a 2.2 percent vacancy rate has taken the asking price to $11.16.
The Greeley/Weld County numbers compare favorably with Longmont, with an $8.35 asking price on 3.7 percent vacancy; Fort Collins, $9.17 asking on 1.6 percent vacancy; and Loveland $8.47 asking on 5.6 percent vacancy, Leuschen said. In fact, only the City of Boulder — a $12.65 lease rate on 2.2 percent vacancy — ranked higher in asking price.
Jim Neufeld, a broker with Re/Max Alliance Commercial Division in Greeley, said there is a dearth of spec building in town. Additionally, he said that some asking prices are above and beyond those figures, in both Greeley and the nearby unincorporated county.
Not all of Weld County is without spec building, however, including in Frederick, where the 20-acre expansion of Agilent Technologies is taking place. The expansion will enable the company to more than double its commercial manufacturing capacity of its Boulder plant for nucleic acid active pharmaceutical ingredients.
With a 107-acre, large lot, industrial park adjacent to Agilent’s Frederick property, McDonald Development has already started building on the heavy industrial lots with yard space — the Frederick Public works facility and the northern operations center for Saunders Construction will use the space. While owner Curtis McDonald said the property is ready for more buildings, it will have to wait on drilling operations for 12 oil and gas wells to be completed.
But McDonald is also hoping to make a splash in another Frederick business park, as well — the 37-acre small-lot Meadowlark Business Park, which is more of a industrial/flex park. The area got tax-increment funding for the 16 lots as part of the town’s urban renewal area.
“It’s a tough road to hoe to get your infrastructure in without some kind of assistance,” said McDonald, perhaps intending the idiomatic pun. “Costs are just skyrocketing.”
In Meadowlark two buildings in the 8,000- to 10,000-square-foot range have already been completed, one as a spec building.
“I’ve just finished one building, and I’m starting another,” McDonald said. “There is zero inventory of this kind of 10,000-square-foot building, and there’s a lot of people who need this kind of space.
“The one thing that happens to most industrial users is they are happy plugging along in their existing facility, when suddenly they get a batch of orders and the need for increased space drops upon them,” he said. “So instead of them having to wait a year or two, I can get them in there in two months.”
One company that’s having absolutely no problem securing financing for its spec buildings apparently is McWhinney, developer of the Centerra Industrial Park near the Fort Collins-Loveland Airport. The company finished the first, 84,000-square-foot building last year and began building another this year.
“The first building is already 100 percent leased,” said Ashley Stiles, vice president of development for McWhinney. “We have letters of intent for more than 50 percent of the space in the new building, as well.”
Stiles said the company isn’t seeing any hesitation from its lenders, and her company was finding that the banking industry is actually looking at industrial development as a “sweetheart space.” That may well be evidenced by the fact that McWhinney also broke ground on a 150,000-square-foot industrial building at Highway 7 and Interstate 25, in Broomfield, this year.
“Our overall investment strategy is we’re going to hold these (properties) for a long period — maybe forever,” she said. That strategy seems to be working with both equity investors and debt holders.
“Our strategy is to stay ahead of the market demand,” Stiles said, noting she already is planning two new 120,000-square-foot buildings.
Denver-based Etkin Johnson Real Estate Partners is also planning a three-building, 400,000-square-foot office/industrial/flex campus — dubbed the Louisville Corporate Campus at CTC — for the fourth quarter. The privately owned commercial real estate investment and development company already owns nearly 1.2 million square feet of space in the Colorado Tech Center and nearly 5 million square feet total in Colorado.
The site is one of the last remaining pieces of land in or around CTC that can accommodate 24-foot clear flex buildings, a staple feature of Etkin Johnson’s buildings, said the company in a press release about the project.
“We’ve been active in CTC for more than 20 years,” said Derek Conn, executive vice president and partner at Etkin Johnson. “This parcel provides another strategic site that offers maximum visibility, flexibility and convenience for tenants looking to attract top talent from all the markets along the Northwest Corridor.”
An Arizona real estate development company, Scottsdale-based Caliber, is also planning a 100-acre industrial park in Johnstown, together with partner John Rosso of Westar Development. The park would be part of a 256-acre mixed use project that had been stalled with the 2008 recession, but probably won’t see any ground moved until well into 2018, said spokeswoman Ruth Seigel.
The project will be led by Caliber executive vice president and fund manager Roy Bade.
“We’re thrilled to move forward with the Villages of Johnstown and collaborate with city officials to create a plan that will deliver an iconic community development,” Bade said in a prepared statement.
The multi-stage development will begin with construction of the industrial park, timed to coincide with a Colorado Department of Transportation expansion of the interstate from two to three lanes in each direction. Caliber will begin work on the commercial and retail component once the interstate expansion is complete, with residential taking place in the final phase.