July 12, 2009

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Tim Leigh’s Weekend Market Report
Hoff & Leigh, Inc.
Leasing; Sales; Management; Buyer or Tenant Representation
4445 Northpark Drive, Suite 200
Colorado Springs, CO 80907
July 12, 2009

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 = $113.76 (UP from $112.11 last week.)
We are currently tracking 143 office buildings for sale.
This is 1,483,397 square feet, which represents a total market value of $168,746,448.

All Market Average Industrial Building Sale Price PSF = $83.94 (UP from $83.41 last week.)
We are currently tracking 127 industrial buildings for sale.
This is 1,589,797 square feet, which represents a total market value of $133,441,656.

To view our most recent Colorado Springs Business Journal Ad please click below
http://hoffleigh.com/Doc/7.10.09.pdf


We currently track 143 office buildings & 127 industrial buildings for sale. One of the ways we evaluate our market is based on price per square foot. Hopefully, looking at prices and buildings in bands will allow you to see how your property stacks-up against the competition:

Band
Price Per Square Foot :: Office buildings for sale :: Industrial Buildings for sale:
$ 00.00 - $ 50.00 :: 3 :: 7
$ 50.00 - $ 75.00 :: 15 :: 31
$ 75.00 - $100.00 :: 34 :: 47
$100.00 - $125.00 :: 33 :: 20
$125.00 - $150.00 :: 23 :: 6
$150.00 - $175.00 :: 15 :: 3
$175.00 - $200.00 :: 12 :: 4
$200.00 - $225.00 :: 5 :: 3
Over $225.00 :: 3 :: 6

The average asking sale price for office buildings is $113.76 and the average asking sale price for industrial buildings is $83.94. If you’re selling and you’re significantly over the average asking price, there’s a good change you’ll experience a disappointing outcome. If you’re buying and paying significantly over the average asking price, there better be an intrinsic-value reason (I need the location or I need to complete the purchase so I own the entire project) or you’ll be buying into future-loss.

Last week, I had a guy tell me he wanted to buy a building for nearly $175.00 per square foot with the intention of re-selling in 5 years for a profit. While you can buy & sell for a profit, you can’t overpay and sell for a profit. Use the charts; be knowledgeable; make good decisions based on fact, not salesmanship.

Tim’s Market Notes:

We’re living through the aftermath of the speculative real estate market bubble that burst.

The Turner Book is the alleged bible that knows all & tells all about commercial real estate in Colorado Springs. I just read the latest copy. According to Turner, we’re not having any fun yet.

He says the mid-year-numbers-point present us with “an unprecedented absorption loss of 1 million square feet.” (Shoot, even I know that that can’t be good!) Then he wisely states, “The loss in occupied space must be dealt with before any meaningful recovery forecasts can be made”. All 3 commercial markets (office, industrial, retail) lost Tenants (mostly because they shut-down their business). He continues, “The square-foot-vacancy jumped another 1.6 million square feet to an overall total of 9.8 million square feet.” (Yikes!) Finally, he reports, “This continues to be the highest amount of empty space ever recorded in the Colorado Springs Metropolitan area.”

OK, I get it. Bad news. But, realize, it’s not the end of the earth. There is always a market. There are always people and businesses doing business. Deals are being made. I’d rather think about turning lemons into lemonade. Business runs in cycles. We’re now at a low-ebb. We won’t be there forever. Now’s a great time to be a Buyer in our market! As the cliché teacher’s say, “Buy on the dips”; “Buy when there is panic”; “Buy when everybody is selling”; “Buy as a contrarian; buy a bus; buy a car; buy a building and travel far!”

To add insult to injury, Turner’s numbers don’t include “for sale” only listings; they don’t include the 1.4 million square-foot Intel Facility, and they don’t include 540,000 square feet of sub-lease space, because technically, those square feet are still leased. When read by themselves, these numbers stop your heart. But, there’s good news!

The good new is that real estate is micro-market-centric; that is, you can have 2 identical buildings next door to each other and with the right pricing & marketing Number 1 can be fully-leased while the other sits in the grey-abyss of vacancy. The trick is to be Number 1.

Turner reports that over 1,000,000 square feet were leased in the 2nd quarter. I guarantee those deals were done at prices significantly below the advertised rates. Turner continues to paint an abysmal picture, saying, “Positive indicators are few & far between.” (Recognizing that positive indicators are defined as increased employment opportunities.) However, the dawn is cracking on the eastern horizon. The EDC announced a new call center opening with a potential for 600 new jobs. (Unfortunately, current figures indicate we’ve lost 10,500 other jobs since last June). Our unemployment rate is 7.8%, which is not as bad as nationally, where it’s 9.5%, and where I’ve read it could reach 11% by the end of the summer.

Turner’s understatement says, “Competition for new and retention tenants will be fierce”. (That’s great news if you’re a tenant.) Turner predicts we’ll see higher vacancy rates & falling sale prices (to historic lows) where banks will become “reluctant landlords”. Turner’s advice is to wait & remain fiercely competitive for the few deals available. And while I agree with much of what he writes, I disagree with his assessment that the end of the world is coming. I predict we’re closer to the bottom than he believes.

I was here in the 1980’s when Colorado Springs was “The Foreclosure Capital of America”. I remember buying office buildings for $10.00 per square foot. There’s no way I’d forecast prices that low in this downturn. Our economy’s not that far into the tank. Want anecdotal evidence? Yesterday, I received 3 separate phone calls from troops moving here from Ft Hood. They were looking for decent rental housing; said they couldn’t find any. Hello! Is there a message there? Virgil McCormack used to say, “Figures lie & liars figure.” When I read the statistics only and don’t listen to contrary, anecdotal evidence, I’d think it’s the end of the earth. But it’s not.

Banks have to start lending money. Until they do, our vicious downward spiral will continue - where they call their borrowers for capital and because they don’t have it, they’ll foreclose; the repossessed property will be remarketed at a discount & rents will continue to fall. But, banks will start to lend, and according to Alan Greenspan’s recent article in Financial Times – “I see inflation as the greater future challenge. If political pressures prevent central banks from reining in their inflated balance sheets in a timely manner, statistical analysis suggests the emergence of inflation by 2012.”

Locally, our fix is simple. We need fresh-blood; we need new business & we need to help our existing-business-base expand. And, this has got to be a community effort where the politicians, the educational establishment & the business community band together, collaboratively-sharing information and (possibly) sharing budgets (Oh, Behave!) for the common good. Radical idea? Maybe, but economic realities call for them. It’s called being a realist in a modern economy.

Since Turner’s book is a report card of sorts, I had to check how we stack up against our competitor-brethren. It seems like smart, hard-work still pays-off in America. According to Turner’s numbers, so far this year, Hoff & Leigh has sales amounting to approximately 44% of the total market of “number-of-transactions-done” and 66% of the total dollar volume. That’s not bad for a pack of Norwegians from North Dakota. What’s the trick? The trick is – “there is no trick.” We just work hard & apply the lessons learned from living in the cold, white north and attending a University that allows admittance with a valid driver’s license. Mostly, it’s called brow sweat & elbow grease.

As there’s an ebb & flow to life, there’s an ebb & flow to business. So you don’t read Turner’s report and feel like it’s the end of the earth, let me comfort you, saying we’re merely on the bottom of a business cycle where, statistically, it looks black, black, black. When Rockefeller was taking over the world, he preached about keeping cash (dry-powder) at the ready for opportunity in dark times. The lesson for most of us is, next time, don’t be over-leveraged & keep cash. I think we’re 18 – 24 months from the upturn in the cycle.

And if you think we’re in tough times, read this very interesting history lesson on land speculation about Pithole, PA.

Nothing reveals the feverish pitch of speculation better than the strange story of Pithole, PA, which is about 15 miles from Titusville. (Titusville, you’ll recall is the original site of mass- produced kerosene).

A well was struck in the dense forest in January 1865; by June there were 4 flowing wells and people were so excised, they literary fought-their-way-in on clogged roads. The land speculation knew no bounds. According to public records, one farm that had been virtually worthless that winter was sold for $1.3 million (July 1865). Then it resold for $2 million dollars in September! (That’s in 1865 when that was “real money”!) After the speculative bubble burst that same farm sold again - 3 years later (1868) for $4.37 (total price!).

Greed causes speculation; from the Pithole paper at the time, “It embraces all classes and conditions of men. They neither talk, nor look, nor act as they did 6 months ago. Land, leases. . . . contracts, agreements, interests and all that sort of talk is all they can comprehend. Strange faces meet us at every turn and half our inhabitants can be more readily found in New York or Philadelphia than home. The court is at a standstill; the bar is demoralized; the social circle is broken; the sanctuary is forsaken; and all our habits and notions and associations for half a century are turned topsy-turvy in the headlong rush for riches. Some poor men become rich; some rich men become richer; some poor men and some rich men lose all they invest.”

Sound familiar?

Want to know more? Give me a buzz at 719-337-9551.

I hope you have a profitable 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