Tim Leigh’s Weekend Market Report
Hoff & Leigh, Inc.
4445 Northpark Drive, Suite 200
Colorado Springs, CO 80907
June 13, 2008
Attached are our weekly listings of all office, industrial and office condo property for sale in Colorado Springs. These lists are compiled by our research team. If there is a property that is incorrectly listed or if you are aware of a property that should be added to or deleted from our list, please let us know. You are receiving this information because of your previous request. If you wish to be removed from this list, simply send me a reply with that request. Alternatively, if you know anybody who should receive this information, please give me a head's up.
I have had the chance to visit with several interesting people oer the past week. Chief among them was Dan Korleski, Sr. V.P. and chief investment officer in the Wealth Management Divion at American National Bank. I was concerned when one of my good friends, who is one of my personal advisers, and who is a a long-standing, respected
CPA in the community, warned me of what he feels is a a pending "significant inflation". I wanted some perspective and I sought Dan's spin. I wanted to know what we should be concerned about. Dan told me, "For the 1st time in my nearly 25 years of wealth management, I'm concerned". I love wealth managers. I asked what the heck that meant, and he told me that he is advising his investors to retain 10% of their investment in cash, vis-a-vis his normal advisement of 2%. I'm thinking, "big deal!" Most of the small building owners I would like to be in a position to have 10% of their investment in cash anytime! Most small building owners I know have most of their net worth in buildings.
Dan did go on to explain the current situation with the Fed and the inverse relationship between the value of the dollar and the price of a barrel of oil. He believes that interest rates will increase, slowly at first, then maybe less slowly over the next 5 years. The increase in interest rates will increase the value of the dollar, and in theory, reduce the price of oil and attendant other prices that have caused inflationary pressures. He is not that worried about the "significant inflation" my CPA friend predicts. So, who the heck do you believe? To the end that I believe them both, that we are in a rising interest rate economy, last week I completed the renegotiation and roll-over of 4 commercial loans that I have, (all in the $500K range). I was able to get new fix-rates at 6% for 5 years. I believe that rates will rise and now is a good time to lock and load before the increase begins.
I mentioned that I spoke with a couple of interesting people - Dan was one; the other was a school teacher that works in Rush - that's a small town 90 miles straight east of the Springs. I met her at the filling station. She told me that the price of gas is making her commute a killer. She formed a car pool, and when they fill the tank, it is "one credit card after another". She is living hand-to-mouth, made worse by her increased cost of living. Not that Rush was ever a thriving metropolis, she reported that its school enrollment has dropped from 487 - 237 over the past 12 months. It was this lady's contention that the price of the commute is causing an exodus from the eastern plains to the city and when the families move, the enrollment drops. This, to me is another leading, troubling indicator of what we can expect to see more often. How would you like to be Fred or Betty, living in Rush, Yoder or Falcon and have to drive to your job in downtown? What do you suppose this scenario bodes for the value of those newly constructed homes on the eastern plains?
Last week I mentioned some lease rate and sale-price reductions and the immediate effect we experienced with those reductions. I was merely reporting what's going-on in our space, in the commercial property market as it relates to building's value & lease rates. After that writing, I felt like a dentist who hit a raw nerve. Many of you e-mailed or called and asked when I became a pessimist. I'm not. I'm an optimist. But, I like to know facts so I can make good business decisions. I will be my continued goal to spread those facts to you, so you, too can make good business decisions, dentist drill in hand or not!
So with an eye for better news, let me share a couple of positive stories:
1) One of my friends owns a small strip center, near the corner of Academy & Austin Bluffs. We had been asking nearly $14 NNN for rent. The center has 8 (,1400 sf) units. 6 were vacant and we were getting no play. We dropped the price to reflect the current market rates (around $12 NNN) and we have since completely filled the property with 3 different tenants.
2) Another friend, who always likes to lease-up his own property, (and who lives by the theory that the cobbler's kids do have shoes!) and who had 2 large holes in separate buildings called out of desperation. I think his kid's feet were getting cold! (You know how it goes - never hire a Realtor until the rudders are coming off the boat!) One of the units had been empty for over 2 years. Because of our network and out-of-the-box thinking, we were able to obtain a new 3 year lease with Whirlpool. The vacant space was 7,500 sf. We leased the back 2,500 sf to Whirlpool, a national credit tenant, for more than he was previously obtaining in rent for the entire space. My friend will have to construct a demising wall, but at the end of the day, he'll have income and he'll still have 5,000 sf to lease for additional profit.
The point is, any space is leasable. Any building is saleable. But to get there, you need to be creative in your method and real with your expectations.
As for the figures, they have not changed much from last week.
The average office building still sells for around $112..91 per square foot and there are currently 120 office buildings less than 40,000 square feet available for sale.
The average warehouse building sells for around $69.77, which is a nominal increase from previous weeks. Currently there are 84 warehouse buildings for sale.
The average office condo, which includes 2nd generation and new construction, sells for $164.40 per square foot.
Sincerely,
TJL
Tim Leigh
719-337-9551
Tim@HoffLeigh.com
To view our Office Building Matrix List please click below
http://hoffleigh.com/OfficeInsider.aspx
To veiw our Industrial Building Matrix List please click below
http://hoffleigh.com/IndustrialInsider.aspx
To veiw our Office Condo Matrix List please click below
http://hoffleigh.com/HLIOfficeCondos.aspx
