August 24, 2008

Tim Leigh’s Friday Market Report
Hoff & Leigh, Inc.
4445 Northpark Drive, Suite 200
Colorado Springs, CO 80907
August 24, 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 = $111.67
There are currently 135 office buildings for sale (3 more than last week – 7 new listings in last 2 weeks).
This is 1,381,851 square feet, which represents a total market value of $154,309,593.

All Market Average Industrial Building Sale Price PSF = $70.46
There are currently 96 industrial buildings for sale (3 more than last week – 6 new listings in last 2 weeks).
This is 1,741,524 square feet, which represents a total market value of $122,707,925.

All Market Average Office Condo Sale Price PSF = $160.02
There are currently 93 office condos for sale. (This represents no change from last week).
This is 190,122 square feet, which represents a total market value of $30,422,617.
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 (The represents no change from last week).
This is 106,962 square feet, which represents a total market value of $8,878,523.

Our new list - Buildings that have closed – which is still under construction
Our new list, “Buildings that have closed” now has 40 entries. Our current listing has run dates from November, 2007 to the most recently recorded closing, August 5, 2008. Our goal is to maintain this list 36 months in arrears. If you have any sales data that you can share, please become an active member of our community and share the information so we can share it with other decision makers. Please note that our current list is “under construction”.

The most recently recorded and interesting closing was 8570 Criterium Drive. It’s enumerated as Number 1 on the list. It’s interesting because it sold for $1,220,000 less than the assessor’s market value. Aside from the Buyer “making-a-deal”, the obvious other impact of the sale is a reduction in tax collection by the assessor’s office and the resultant need to collect that revenue from other sources. That is one of the reason’s the political guys are pushing for a 1% sale tax increase.

Another interesting sale was Number 40 on the list. Number 40 was the sale of the Heidelburg Deli building for $226.00 per square foot. That’s the highest price per-square-foot sale we’ve recorded. As with everything, there’s a story, and in this case, the story is, this property is the lynch-pin and key to an assemblage. Furthermore, it’s located on the hard corner. Being located on the corner drives significant value as compared to being just one lot off-the-corner.
We’ll add 2210 East LaSalle to the closed sale list on Monday. This property has been on & off the market for years. It finally sold to a user whose business is not driven by the local economy or any specific location. The property is approximately 13,500. It had an appraisal of $1,350,000 and sold for $685,000. Because of its long-term vacancy, prior to the sale, we successfully argued with the assessor’s office for a 50% reduction in the property tax. The taxes went from $24,000 to $12,500 per year. This sale will create more lost tax collection to fund government services.

Property taxes on office buildings in School District 11 normally run about $1.00 psf. I think it’s terribly interesting to note is how much more the property tax assessment in School District 20 is. When compared to District 11, the portion of the tax collected allocated just to schools in district 20 is equal to the entire assessment for all purposes, in District 11. One must presume that that is a reflection that District 20 voters trust their elected officials, where District 11 voters do not.

The rest of our sold-data proves average sale prices reported by category. The average price of office and industrial buildings are creeping up slowly. The office condo market continues to languish and we have seen NO movement in the industrial condo market.

As we head into the fall and early winter, I expect to see more listings and lower prices. Aside from normal market conditions, I expect this trend to be pushed by more bank-problem-properties and the need for banks to rid REO’s from their balance sheets.

We have listed several new properties this past week. These include a very clean development parcel just north of New Life Church on Voyager. If you’re like me, you normally gravitate to a small area around your home or place of business. If you’re a West-sider, you don’t normally travel east of Union. People in Briargate normally don’t go downtown. However, if you haven’t done so, get motivated and get in your guzzler, drive north on Voyager and study the growth. It’s amazing. In spite of what you read, there are pockets of new development where guys are constructing homes & commercial property. Our new listing is well suited for a small medical or general office. The views are amazing. The listing price is only $295,000. And it’s in the path of growth. There still is opportunity in Colorado Springs!

I have been in several interesting meetings over the past week. Around city hall, the buzz has been the decrease in city income vis-à-vis last year. The Gazette wrote a story claiming the deficit to be around $23,500,000. The real number will be around $25,000,000. Furthermore, I was told that the county is essentially bankrupt! Let that sink in for a minute. OK, now you can say ugh!

Here’s a quick example of immediate impact. Patrol cars need fuel. Because we don’t have the money, we can’t buy as much fuel and therefore we can’t patrol as often. If you live in a remote area of El Paso County, how safe do you feel now?

I was in a meeting with the Economic Development guys. Their story, and I agree is, that if we don’t spend money recruiting new primary job providers, our community income will drop, and over-time, our quality of life will decrease. If we don’t attract fresh blood, there’ll be no reason for our kids to stay or return because there won’t be anything for them to do. I’m convinced that the average guy doesn’t understand the connection between the new park system and the new job. Jobs provide wages. Wages are taxable income. Taxable income pays for cool stuff.

Here’s how we’re all connected. How can the EDC salesmen travel the country proclaiming how wonderful we are when we run a $25,000,000 city budget deficit and our county government is bankrupt? Even a master salesman would have a hard with that pitch. And, at the end of the day, how many times can we sell a view of Pikes Peak?

Another meeting was with the Chamber of Commerce. Their claim is they need funding to support local businesses. I hear their story and I agree. My soapbox has been that if we don’t realize that the competition is not the guy named Joe down the street, but the guy named Gupta in New Deli, we are doomed to a dark future. All boats rise with a rising tide! And, as true as this is in our individual businesses, this is particularly true with our city. We need to support local business.

The city is preparing to ask for a 1% sale tax increase. I’m somewhat prone to support the request, but realize that this is going to be an uphill battle, and one I suspect, the city will lose. Here is an excerpt from a letter I received from a highly respected CPA last week on the matter:

“Regarding the City sales tax, I am reluctant to support any new tax until I see that the city has used the past tax responsibly. When I see the city redo major intersections multiple times, i.e., Academy & Austin Bluffs; Union & Austin Bluffs; Fillmore & Union; Chelton & Platte, etc., and not connect the vacant I-25 & Fontanero intersection with a four lane, major east-west route, say Constitution, why give them more money until they do their job and quit trying to do social engineering?

Do we need new light poles that replace perfectly good, old poles? The old ones are gray instead of black. Do we need to pay a person to quit the hospital so we can replace him with a new person and pay him more? Since when does a monopoly utility need to advertise on billboards, TV, and golf events? Why does the hospital need to be funded by the city? My rant doesn’t even consider Dist 11 issues.

Government has two basic purposes: 1) Protect the public; 2) Provide the infrastructure for sound roads and transportation. Right now, our city officials are not doing their job well enough to warrant any tax increase! “


General Comments: I feel asleep last night watching some old video clips of previous year’s democratic presidential nominee’s speeches. I was particularly interested in Truman’s 1948 speech, where recovery from the terrible budget created in the after-math of the war, and housing were the two main points of focus. It sounds like dejavu all over again.

As we’ve learned, “If we don’t study the past and learn from it, we will be doomed to repeat it.” In fact, in order to learn about economic cycles and bubbles, I’ve been reading about infamous economic bubbles this week. Of particular interest have been the Tulip Bubble, the South Seas Bubble and the Mississippi Bubble. All were economic bubbles the shook the roots of their entire economies. I’ll provide links below in case you’re interested:

Tulip Bubble – Dutch 1637
http://en.wikipedia.org/wiki/Tulip_bubble

South Sea Bubble – English 1720
http://www.library.hbs.edu/hc/historicalreturns/fb/movie.html
http://en.wikipedia.org/wiki/South_seas_bubble

Mississippi Bubble – French 1720
http://en.wikipedia.org/wiki/Mississippi_bubble

Digging deeper: If you wanted, at its height, you could buy a Tulip Bulb in Holland for over 20 X’s a skilled craftsman’s annual wage! The South Seas Bubble involved intrigue including the monopolistic slave trade, where even then, the government was imposing quotas to drive prices and profits for the select. The deal was that only 4,800 slaves per year could be purchased in West Africa to be sold in the Americas and only 2 ships could haul them.

And if you note the coincidental dates of the Mississippi and South Seas Bubbles, you’ll see that the rat-provocateur of the Mississippi Bubble had been run out of Britain, (he was likely a contemporary of the South Seas Bubble boys) settled in France and reinvented himself until he was run out of France into exile. An easy lesson would be that a rat is a rat and leopards don’t change the color of their spots!

If the city would get their fiscal house in order, they would obtain the tax increase they seek. If the county would get their fiscal house in order, they would be well funded. All our women would be beautiful, the men would be strong & prosperous and the kids would have no piercing!

Classified Ad: From Gisela & Don Stiles, the owners of Precious Source Furnishings, who are downsizing because of the economy, Gisela writes: “Hi Tim: Here is the information concerning Precious Source Design’s pre-sale, especially for your clients & friends. We are discounting our entire inventory 40%-70%. The sale for the general public starts the 2nd week of September, so if your clients and friends are interested in a good deal on furniture, have them call us at 719-598-0576 and get them to beat the normal street-traffic. We will take good care of them.” (I have personally inspected their inventory and recommend their stuff. If you’re looking for furniture or antiques, check them out at 2870 Janitell Road. Their building is for sale. It is 31,000 square feet for $100 per square foot.

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