Condo concept extends to office, retail, industrial

FORT COLLINS – Condominiums may comprise only a small percentage of the overall commercial market, but they are providing very attractive solutions to that special segment of business owners who are ready to expand, want to escape escalating lease prices and own their own premises.The condo concept – common in the residential arena – has emerged here in the form of warehouse space, office space and, most recently, retail space.
The first retail condos in Fort Collins are being built by Wheeler Commercial Property Services at the Poudre Valley Plaza development at Horsetooth Road and South Shields Street. Completion is scheduled for summer 1998.
“It’s a dual condominium with retail condos on the street level and residential on the second story,´ said Linda Jackson, Wheeler broker associate.
“A person can feasibly buy a condo with business space below. People love the idea of living above where they work,” Jackson said.
The retail space will encompass 8,000 square feet and can be sold in units as small as 1,000 square feet. Wheeler has not yet priced the retail space, but, as an example, Jackson said new retail buildings in Fort Collins are selling for $150 to $180 per square foot.
She said each residential space will have 1,300 to 1,600 square feet with a two-car garage and will sell for about $190,000.
Commercial condominiums first appeared in this area two or three years ago, “partly out of necessity and partly because commercial money became more available then,” Jackson explained.
Most start at 1,500 square feet, which Jackson said is typically the “move-up” stage for a business owner who got started three to five years ago leasing 800 to 1,000 square feet.
But “industrial rates were getting up to $6 per foot, and the break point is about $5.50 to $5.75 per foot where it becomes more feasible to own vs. rent, especially where there are escalations built into a lease,” Jackson explained.
An owner seeking to expand must either pay higher rent or buy land and erect a building, which is usually larger than initially needed, so the excess space must be leased out.
But obtaining “good” financing for an owner-occupied/leased building is more difficult – and costly – than securing financing for a condo, Jackson said.
It also requires more cash outlay because commercial condos can usually obtain 75 percent to 90 percent financing, leaving only 10 percent to 25 percent as “up-front” cash, Jackson said.
On the other hand, lenders typically finance land at 60 percent and commercial construction at 70 percent of total value. This option requires considerably more cash up front, she said, a deterrent to some business owners.
In the warehouse condo market, Jackson is marketing a seven-unit warehouse condo complex at 315 Hickory, off North College Avenue, that is being built specifically as a “move-up” product. The condos will sell at $55 per square foot and will have 2,100-square-foot bays with an overhead door, a finished office with a pedestrian door and one restroom.
“This project is unusual because we can sell or lease them, but we’re marketing them to sell,” Jackson said,
Office condos haven’t been seen in Fort Collins until recently, but Chuck Bowling, broker partner with The Group Inc.’s commercial division, said they probably will come to make up the highest percentage of commercial condo ownership because escalating rents are showing many business owners that they really can afford to buy a condo.
Julia Crawmer and Larry Stroud of Miscio & Stroud Inc. recently pre-sold four office condos in one project and are negotiating on a fifth in a second project the team is marketing.
The two projects are The Landings Office Park at 300 E. Boardwalk and Fossil Creek, which is off U.S. Highway 287 and Coronado Court.
“These projects are almost a townhouse concept if you look at the definition for ownership. The buyers are actually buying the building and the land it sits on and a portion of the common area of the park,” Crawmer said.
Like condominiums, this concept allows the buyer to bypass time-consuming development processes as well as the expense of installing infrastructures because the developer assumes both, Crawmer said.
Buyers at The Landings or Fossil Creek may purchase a full building with 6,110 square feet, or half a building with 3,055 square feet and a common wall. A full building at The Landings sells for $575,000 and at Fossil Creek, $500,000.
Crawmer said The Landings will have six buildings when completed and Fossil Creek will have 10 buildings.
Bowling said that The Group “still has some commercial condominiums on East Lincoln Avenue and on Racquette Drive. We are also working with a group of owners analyzing an office-condominium project on JFK Parkway,” but because of the city’s new land-use plan, Bowling “couldn’t say” when any decision might be made on this project.
Bowling described commercial condominiums as “a different type of market, because these people who are buying (condos) are basically the people who are paying the higher rent categories – the more affluent businesses, the growing businesses, the ones who do have the capital resources to put the money upfront to buy.
“They haven’t occurred in the Greeley market yet because it’s a smaller market, fewer people, less demand. But they will, because it’s a concept – depending upon the scale that one goes into – that is acceptable in most major markets,” he said.
“It’s not a fad,” Bowling added, “It’ll be around forever, but you have to keep in mind that it’s a small percentage of the overall market, and that’s one of the things that turns people off from (developing) it.”

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