August 1, 2008

Tim Leigh’s Weekend Market Report
Hoff & Leigh, Inc.
4445 Northpark Drive, Suite 200
Colorado Springs, CO 80907
August 1, 2008

Attached is our complete listing of all properties for sale in Colorado Springs, based on property type - office, industrial and condo. This is the most complete listing that we are aware of. It’s our goal to provide this information, updated weekly. We develop these lists by basic research and cross-checking data points from the PPCIE, local broker's individual web sites, The Turner Book and any other public information domain we can find.

You are receiving this information because, at some point, you asked or a friend referred your name to be included in our e-mail Insider’s List. If you no longer wish to receive this information, send an e-mail reply to me (tim@hoffleigh.com) and ask to be removed. Alternatively, if you know someone who could benefit from the receipt of this information, forward this e-mail to them, and suggest they contact us, so we can consider adding them to our exclusive list.

All Market Average Office Building Sale Price PSF = $109.06
There are currently 131 office buildings for sale.
This is 1,316,823 square feet, which represents a total market value of $143,616,593

All Market Average Warehouse Building Sale Price PSF = $69.30
There are currently 91 industrial buildings for sale.
This is 1,674,257 square feet, which represents a total market value of $116,031,925.

All Market Average Office Condo Sale Price PSF = $160.33
There are currently 92 office condos for sale.
This is 195,722 square feet, which represents a total market value of $31,379,313.
Interior build-outs for shell space ranges between $50 to $100 psf.

All Market Average Industrial Condo Sale Price PSF = $83.01
There are currently 31 industrial condos for sale.
This is 106,962 square feet, which represents a total market value of $8,878,523.

I got great news this week. Shannon called. She told me that when she gets discharged from the Air Force next July, she and Bryan are moving home. (Shannon’s currently stationed in the San Francisco area, serving at Travis Air Force Base as a RN. While Lise and I are delighted to have them home, I’m really looking forward to Shannon’s regular nutritional counseling. It has already started and I like it. She told me my current breakfast diet, toast & cereal, is the equivalent of drinking a cold coke for breakfast. She went on to tell me about the chemistry of digestion, explaining enzymes, protons and other stuff too deep for my small Realtor mind. At the end of the day, she gave me really good news. She said, rather than my normal diet, I would be better-off eating a bowl of ice cream with strawberries. I like the sound of this diet already! Welcome home Shannon!

According to the numbers from last week’s column, the entire commercial Property for Sale market looked like this:

The total market value was $289,943,819; office properties were 47%, industrial properties were 39%; office condos were 11% and industrial condos were 3%. Hopefully, just these statistics help put our market in some context. Drilling down, you can see, for example, that the industrial condo market is only 3% of the total. The industrial condo sub-market is clearly outside the bell curve, and therefore, since it’s on the margin, it seems riskier than the purchase or development of an office building, which is within the meat of the bell curve.

Listings are becoming more plentiful, and if you watch the numbers, you’ll see that the only part of the market to remain listed at the same rate and with the same count as last week is the warehouse condo sector. All other sectors have increased listings, and generally, those increased listing numbers have driven the average price per square foot (of all buildings) down.

Leasing activity is robust. Holly, with her red dress and cowboy boots is loved by everybody, and it shows. She will have 5 leases out for signature this week! Steve tells me that he is seeing a mixed market, where some tenants say they want to be north, because “the downtown is dead” and some tenants want to be downtown, “because the downtown is where the action is. Who can ever figure-out rationality? We are working with several professional practices to negotiate lower rents in their current space, because of reduced income.

Where is the opportunity? Based on my experience with our Northgate Office project, the average cost to construct a new office building is about $125 per square foot “to-the-shell”. After the shell, there is the added cost of interior improvements, which can run from about $50 - $100 per square foot. At the end of the day, the total cost to construct a reasonably priced new office building is about $175 - $225 per square foot. This would include land acquisition and all the attendant money, manpower & materials (euphemistically known in the trades as The 3 M’s.). These costs do not account for the brain damage of having to deal with the city or your contractor, who you trust when you start, but hate by the time the process is completed.

By the way, if you want to know more about the brain damage of dealing with the city, call my friend Doug Abbotts at Morningstar Coachworks (719-633-9800). Doug told me that while building his new facility, the city told him that he needed a Handi-Cap ramp to comply with current building codes. On its face, that doesn’t seem like an unreasonable request. However, a problem arose for Doug, because, while he is a pretty smart guy, he could not figure out how to make a ramp where the entry was already flat to the grade. The building department’s solution? Paint a fake ramp. I’m not kidding. By the way, what’s Doug’s business? Retro-fitting vehicles for handi-cap use. Handi-cap access is something Doug knows something about. The irony of life is never ceasing. Doug told me that it took him 2 months and hundreds of dollars to fight this with Regional.

The average cost to purchase a 2nd generation office building, according to last week’s numbers is $112.52, unless you toss-out the 2 unrealistically priced office buildings on Campus Drive. When they are taken off the list, the average price for an office building is $109.05.

Should you purchase 2nd generation or build new? The answer is, “It depends”, but financially, if you are investing in commercial property, the most likely answer, if your major concern is purchasing at a discount to the current market, is to purchase the 2nd generation property. Your pricing would be at a huge discount to new construction costs. That decision is made easier if the 2nd generation property generates cash flow.

I received a newsletter from a residential Realtor this week. She was crowing about how wonderful Colorado Springs is. My morning commute takes me along Mesa Road, where, with windows down, I soak up the cool, crisp morning air, looking west across the Garden of the Gods. Normally each day is a blue-bird day, and normally, my view of the Peak is unrestricted. It’s hard to argue with her.

Her letter stated, “Colorado Springs ranked in the top 10 in the nation for growth for 2006 - 2007 and projections keep the Springs population growth 2nd to Denver for the next few years. Colorado Springs is home to 15% of the state’s population. Most of the growth between now and 2011 will be due to natural birth increase and migration from military, large corporations and others looking for opportunities”. Of course I continue to wait for the fabled 25,000 new troops to be stationed at Ft Carson. That will be real impact.

We are being attacked! I don’t know if any of you have experienced a problem like this, but over the course of the past week, our web site has become a target for hackers. This is very frustrating because of site has been down, inoperative, time consuming and the repairs costly. From our web hosting company, “Despite all the additional security changes we made today, the hackers kept changing their approach to find a different way to disrupt your site. The attack has been targeted to your site only on this server. The user is coming in from a publicly available Internet connection provided by Brasil Telecom in the Netherlands Antilles. We are not able to get any more info than that.”

Help the soldier’s wives & kids: My friend Mike Resty, the newly retired Commandant at Fort Carson, is asking for help. Mike has been asked to find the following scavenger-hunt items for the Family Readiness Center. The FRC is the facility that assists the wives & children of men who are serving in the Sand Box. If you have any items that you can donate to this worthy cause, please contact Mike at restymike@gmail.com or feel free to contact our office, ask for Julie or me, (719-630-2277), and we can arrange pick-up and delivery to Ft Carson. With a little community spirit, we should be able to gather most of this stuff without any out-of-pocket cost. Here is the list from the Commanding General’s personal request:

Tim:

Here is the list of items I discussed with you. I certainly wouldn't ask you to fill all of them, but whatever you can do would be appreciated. Thanks a bunch.

Mike
---------- Forwarded message ----------From: Graham, Mark A MG MIL USA <mark.graham@us.army.mil>Date: Jul 30, 2008 10:26 PMSubject: Family Readiness Center (FRC)To: restymike@gmail.com

Mike -- you kindly asked what the FRC needs. Below is a list. Anything you do is greatly appreciated.

Artificial Plants
Table lines to fit 2’ X 6’ tables (100)
Rug Runners – 60' X 4 ', (4 each)
Table skirts (50)
Hanging wall sound baffles for large meeting room
Heavy Duty Paper Cutters
Video Games for Teen Room (Wii brand)
Heavy Duty Paper Hole Punch
DVD's for Teen Room (G or PG rated)
Flip Chart Easels (8)
Computer Web Cameras (10)
Flip Chart PaperFloor buffing machine
ScannerFax Machine
Portable Microphone Sets (2)
Chafing Dishes
Basic Kitchenware Items
Commercial Coffee Maker
Paper Goods; Plates, cups, utensils
Window Treatment Hardware
Computer workstation tables p
rivacy dividers (10)
Bottled water for events/meetings
Grocery store gift cards to purchase cakes, coffee supplies, and food for events, meetings, etc

MAGMG Mark Graham CG, Division West (First Army). & Ft Carson

”Land of the Free . . . Because of the Brave!”

And a final post script - Another wild & wooly week in the market. I was advised by one of our bank clients that they own a property they dislike so much, that at the foreclosure auction next week, they are planning to bid-in less than their debt. This is where the opportunity lays.

I hope you had a profitable week and next week is better!

Sincerely,

TJL
Tim Leigh
719-337-9551
Tim@HoffLeigh.com


To view our Office Matrix List please click below
http://hoffleigh.com/OfficeInsider.aspx

To view our Industrial Matrix List please click below
http://hoffleigh.com/IndustrialInsider.aspx

To view our Office Condo Matrix please click below
http://hoffleigh.com/HLIOfficeCondos.aspx