Rebound in commercial real estate to continue
Rents will keep rising. Vacancy rates will keep dropping. And new and redeveloped projects will keep springing up at a rapid rate. Those are the general feelings of many in the industry as the New Year begins.
“We’re not projecting any big slides in 2014 or 2015,” Lynda Gibbons of Gibbons-White Inc. told the crowd at a real estate conference in November, noting that she expects the real estate gains to come across the board for office, retail, flex and industrial spaces.
Gibbons said recently that a number of factors are playing into the area’s continued surge. The University of Colorado continues to be a major contributor, she said. Boulder’s ever-growing reputation as a technology hub is also factoring in, attracting high-level employees from around the country to the quality of life enjoyed in Boulder County.
With office vacancy rates down 5 percent in downtown and central Boulder, Dean Callan and Co. president Becky Callan Gamble said lease rates can’t help but increase.
“Any time you’re sub-five on a vacancy rate, that’s going to drive lease rates and reduce landlord incentives,” Gamble said.
But as rates continue to push upward in Boulder, Gamble noted, that will continue to create opportunities for Boulder’s other submarkets like Louisville, Lafayette and Longmont.
Developers are doing their best to capitalize on the demand in Boulder and create more space for companies to stay as they grow. Rally Software Development Corp.’s headquarters at 3333 Walnut St. will more than double in size in the coming months, with the Michigan-based owners of the building planning an 89,000-square-foot addition. Rally signed a lease in June to occupy the expanded building rather than move elsewhere.
“To see a company like that be able to stay in Boulder and double its size, I think that’s a great statement,” Gamble said.
The most intriguing Boulder project expected to break ground in 2014 and bring new office space by 2015 is the mixed-use redevelopment of the former Daily Camera building at 11th and Pearl streets. Dubbed Pearl West, it will include 160,000 square feet of retail, restaurant and office space along with parking and other amenities.
But downtown won’t be the only focal point in Boulder in 2014. Boulder Junction, at the area of 30th and Pearl streets, continues to boom with development as the 3100 Solana apartments continue to progress and the Depot Square mixed-use development is built.
Outside of Boulder, one of the largest-scale developments in the area in years is breaking ground as the 157-acre, $700 million Superior Town Center finally starts to come to fruition after years of planning. Work is also underway on multiple infill developments in Louisville like Center Court Village, a $31 million mixed-use project expected to be completed this year that will include an Alfalfa’s Market, three apartment buildings and retail space. Longmont, meanwhile, should see work begin on the long-anticipated Twin Peaks Mall redevelopment, with work to finish sometime in 2015.
Scott Pedersen, owner of Pederson Development Co. in Boulder and the man behind the Depot Square development, said he believes the commercial boom will continue through 2014.
“There’s a fair amount of money that appears to be available to development,” Pedersen said.
One thing Pedersen, who specializes mostly in mixed-use infill projects, believes it will be interesting to keep an eye on is the multi-family housing component. With apartment vacancies below three percent in some parts of the county, developers have rushed to meet demand.
“When all the new product comes online, it will be interesting to see what happens to rental rates and to vacancy rates,” Pedersen said. “As vacancy starts to increase, rental rates would naturally start to decrease, and we’ll just have to see where it settles out.”
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