NoCo real estate, construction sectors resilient amidst market uncertainty

FORT COLLINS — Certain real estate and construction activity has slowed in recent months amid rising interest rates, worries over a looming recession and nagging labor-market and supply-chain issues, but the sectors remain fairly resilient in the face of headwinds. 

“There’s still a lot of activity happening, it’s just (happening) in pockets,” Pinnacle Consulting Group CEO Chad Walker said Tuesday during BizWest’s Northern Colorado Real Estate and Construction CEO Roundtable held the offices of Elevations Credit Union in Old Town Fort Collins.
While some economists might see storm clouds on the horizon, the Northern Colorado’s market’s “underlying fundamentals are still pretty good,” Waypoint Real Estate managing partner Josh Guernsey said. 

Some real estate and construction professionals have been “scratching our heads” that major deals are still getting done amid a chorus of “doom and gloom,” The Neenan Co. director of real estate development Shawn Sullivan said.

The industrial and distribution facility subsectors have remained particularly strong through the COVID-19 pandemic and its aftermath, according to NAI Affinity president Jake Hallauer.

Office space, on the other hand, is more challenging as many tenants, still grappling with the post-COVID work-from-home environment, continue downsizing, Realtec Commercial Real Estate Services Inc. broker and partner Jamie Globelnik said. “They want to consolidate to their most strategic locations.”

SVN/Denver Commercial Real Estate managing director Steve Kawulok said “the heroes in the office market” are the brokers who are able to re-sign tenants and keep them in place.

While builders are ready and willing to take on challenging projects, bankers and investors have begun tightening their belts.

In the current macroeconomic environment, with uncertainty rampant, “risk is really hard to manage and hard to mitigate,” Hartford Homes CEO Landon Hoover said. 

As a result of increasing conservatism from development partners, projects are taking longer to get across the finish line.

“I’ve never had a project teed up and then hit the brakes like this before,” Hillside Commercial Group CEO Jon Turner said, recalling a recent project that was shelved after a “knee-jerk” reaction from bankers to changes in market conditions.

Opportunity zone investment is “one place where people are still seeing equity dollars,” Richmark Cos. president of real estate development Adam Frazier said.

Still, doing projects in opportunity zones is no guarantee of smooth sailing. Dohn Construction Inc. president Doug Dohn said a finance partner in such a project recently had to delay payment as a result of the Silicon Valley Bank collapse. 

Access to water is an ongoing challenge for local developers, especially residential builders, who, as a result, will increasingly gravitate toward municipalities with coherent water strategies, Hoover said.

Because Northern Colorado’s housing market has some built in governors such as water, there is less risk the region will be overbuilt, thus tanking home values, The Group Inc. president Brandon Wells said.

Regardless of the type of construction project, industry professionals stressed the need for close collaboration among developers, contractors, bankers, suppliers and investors.

“We got to hang together or we’ll all hang separately,” Turner said, paraphrasing a Benjamin Franklin quote.

BizWest’s CEO roundtables in Northern Colorado are sponsored by accounting firm Plante Moran, law firm Berg Hill Greenleaf Ruscitti LLP and Elevations Credit Union. Josh Billiard represented Plante Moran at Tuesday’s event, Darin Atteberry represented Elevations, and Ashley Cawthorn represented Berg Hill Greenleaf Ruscitti.

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