July 18, 2008

Tim Leigh’s Friday Market Report
Hoff & Leigh, Inc.
4445 Northpark Drive, Suite 200
Colorado Springs, CO 80907
July 18, 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 is 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.

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All Market Average Office Building Sale Price PSF = $11.96
There are currently 125 office buildings for sale.

All Market Average Warehouse Building Sale Price PSF = $68.02
There are currently 88 industrial buildings for sale.

All Market Average Office Condo Sale Price PSF = $167.56
There are currently 90 office condos for sale.

All Market Average Industrial Condo Sale Price PSF = $83.01
There are currently 31 industrial condos for sale.

You can learn a lot from 4:00 AM radio - Planet X, alien implants, crop circles, cattle mutilations, prehistoric alien visitations, Area 51, conspiracies of every kind – from Kennedy, to oil. What does it all mean? I’ve found that the trick is finding sanity in the chaos. How do we gin truth from hype? Who can we believe? What can we believe? Is it the end of the world?

This week’s headlines in the Gazette are bleak.

“A turn for the worse”,

“Highest inflation since 80’s”;

“US leaders running out of economic options”.

And brilliance from President Bush, “The President doesn’t have a magic wand.”

Chairman Bernanke warned, “The US economy faces numerous difficulties”. He went on to say, “The outlook for inflation is unclear and the financial markets and institutions remain under considerable stress”. And then there is the bank failure. Surely by now you’ve heard of the Indy Mac Bank failure. Indy Mac is a spin-off of Countrywide Financial and is the largest American bank failure in the last 20 years. There was an actual run-on-the bank where depositors demanded their money. Tim Long, head of supervision for midsize & community banks at the office of the comptroller, said, “The last time we went through something like this, most loan officers were in junior high.”

Besides death & taxes, are there any sure bets? Is it the end of the world?

One of my partners told me to quite being so negative. Mike, I’m not negative. I’m merely reporting what’s happening and how it relates to our commercial real estate market. I could paint a rosy picture, but then you would be a one-armed-man, pitifully armed with a limited bouquet of knowledge, and therefore not fully able to make informed decisions based on good information.

It’s been a wild week. I have made several interesting offers to purchase property this week. I offered $25,000 for one house; $65,000 for a 2nd house; $100,000 for a 3rd house and $275,000 for an office building. The scary news is that I think most of the offers will be accepted at or near their offer. That is an indication of the local real estate market.

On a macro-map, I have been in several conversations where people wondered out loud, “Is my bank is next?” To find out, I called my friend Steve Helbing, the Southern Colorado Regional President of Wells Fargo Bank. Steve told me that deposit insurance protects most depositors. It’s paid-out based on social security account numbers. For every $100,000 on deposit, the FDIC will guarantee the repayment in the event of default. However, the guarantee is only one incremental payment of $100,000 per social security number. If your account has more than $100,000 you are at risk. If you want to know more, call Steve directly at 719-577-5550 or shoot him an e-mail at Steve.Helbing@wellsfargo.com Steve suggested that the real safety net having your deposits held by a financially viable institution. Obviously, his claim is that Wells Fargo is the stronger than dirt!

I’m only aware of 1 local bank that could be at risk. The Colorado Federal Savings Bank, based Greenwood Village is upside down. With its “Texas-Ratio” of 244.8, (A ratio in excess of 100 is really bad – the ratio says have more bad loans than equity to cover the debt), it is likely that in the event of failure, they would need an FDIC insurance bailout and deposits in excess of $100,000 would be at risk of loss. The FDIC has $53,000,000,000 (fifty-three thousand million dollars – which by government standards is merely “approaching a lot of money”) set aside to reimburse consumers for lost deposits. In context, Indy Mac will need $4 - $8 billion of those deposits. If you throw the newly announced problems of Freddie Mac & Fannie Mae into the mix, and you have good reason to say “ugh!” Mac & Mae own $1.3 trillion of debt and have been the primary lender for home loans. If the proposed government bailout does not rescuing them, we will all say more than ugh.

Is there any good news? Of course. Nothing happens in a vacuum. It’s not the end of the world. There are a lot of success stories across the city. For example, we just leased 13,000 square feet to a precision manufacturer last week. His business is “on the upswing”.

Steve received a letter from one of our recently placed tenants who said, “Business has been booming. Since I’ve moved in, I’ve landed a couple of big consulting contracts. One for a local company and a 2nd with a Seattle-based wireless company. I brought-on a UCCS professor on contract to help with the second one. I have other shorter-term projects as well. I’m having to turn-down work. Things ain’t so bad even with $150/barrel oil and all the rest”.

RD is working with several local businesses who are expanding. Holly recently took a listing that had been vacant for over 2 years, and with her internet marketing savvy, she found prospects that will relocate to the downtown and fill the property to 100%.

I’m working with 2 specialty invention and manufacturing companies. One has a patent for several personal mobility devices and carrying containers who has grown to become a publicly traded company and is enjoying a rapid increase in sale and success. The other is in the light-bulb and illumination business. He hopes to have his “glow in the dark” paint applied to the space station – really!

I keep telling the kids, that in spite of all the doom-and-gloom, there’s always an economy. Recall Ali Jafari’s statement to me a couple of weeks ago, where he said it is “business as usual” in the war-torn parts of the Middle East. We adjust. People buy and sell and conduct business in spite of circumstances. People always need buildings and space.

Leasing activity to date is about on par with last year. According to the 2nd quarter Turner Report, 1,202,773 square feet have been leased through the end of the 2nd quarter. That is about ½ of last year’s total. Therefore, you can make an educated guess, that if we stay on-track, we should match the total leasing output for last year. That is not great news, but its OK news. That means that we are on par, which, in this case might be better than a bogie.

Turner’s report went on to say, there have been 35 office buildings & 34 industrial buildings sold so far this year. According to Turner, the average “user” office building sold for $180.40 psf. unfortunately, his report is misleading. The problem with Turner’s presentation is, his report includes small office condo sales, which inflate the average office building sale price. According to our statistics, the average office building should sell for around $114.96 psf and the average office condo should sell for range between $140 - $257 psf. When lumped together, as in Turner’s book, your view of the market is somewhat obfuscated.

According to Turner, the average industrial building, (sold to someone who wishes to use the property for his business), sold for $60.47 per square foot. That’s 23.6% lower than the $79.21 they paid last year. Normally, users will pay a premium for their building. However, in this case, so far this year, investors have been paying more than users. That’s an odd statistic, and I’m not sure I can put my finger on why that is so. Through the 2nd quarter, investors have paid an average of $68.10 psf for investment grade industrial buildings. Statistically, that’s 14% less than they paid last year.

I would be happy to hear from you. You can always reach me at 719-337-9551 or by e-mail at Tim@HoffLeigh.com. My crass commercial message is to visit our web site, www.hoffleigh.com and look at our listings.

Here’s to a prosperous week!

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