August 9, 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
08.09.09

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 = $112.63 (DOWN from $112.82 last week.)
We are currently tracking 148 office buildings for sale.
This is 1,534,772 square feet, which represents a total market value of $172,856,213.

All Market Average Industrial Building Sale Price PSF = $83.27 (UP from $83.26 last week.)
We are currently tracking 131 industrial buildings for sale.
This is 1,633,504 square feet, which represents a total market value of $136,029,656.

To view our most recent Colorado Springs Business Journal Ad please click below
http://hoffleigh.com/Doc/8-5-09.pdf

Tim’s Market Notes:

I’m a natural optimist. I mean, come-on; how can you live in Colorado Springs and not be? Blue-bird skies; warm sunny weather; clear mountain streams; people riding bikes; running trails; drinking beer (“Oh, behave!” - Manitou!) And last week, we (Hoff & Leigh) contracted to sell 2 office buildings, wrote a small-handful of leases and bought a building.

And more good news is “the article” in Outside Magazine that ranked Colorado Springs the best outdoor city in America to live. They said, “Healthy. That’s the word we kept coming back to. And we don’t mean a fit or skinny population; we’re talking about a city’s cultural vibrancy, economic well-being & overall quality of life.” SFC. Safe; fun; clean. SFC. Hmmm.

From the article, “Regardless of your political bent, Colorado Springs scored extremely high in our educational category; has the best weather of any city on our list, and, most importantly, blew away the competition when we compared average income to cost-of-living.

The city is experiencing something of a cultural renaissance, too. Colorado College’s performing arts center has begun drawing national, classical-music and dance groups; and this year the city launched its own roots & blues festival. But you don’t come to the Front Range just for the music. You come for the 14,117 foot Pikes Peak (and Incline); the Arkansas River’s Class IV rapids; world-class athletic facilities and 260 miles of multi-sport trails (and bike trails) available within a 10 mile radius. Sure there are a few other towns with this many outdoor options, but they generally cost twice as much, or like Boulder, they require you to shave your legs!” (And the rankings are: #1; Colorado Springs; #2 Seattle; #3; Atlanta; #4; Austin; #5; Boston; #6; Albuquerque; #7; Portland; #8; Minneapolis; #9; Cincinnati; #10; Charlotte.)

And while our city may be in an economic slough-of-despond (don’t tell Outdoor Magazine), and while overall CRE market prices need to correct “to equilibrium”, selective sun-is-shining and selective CRE purchases can be wisely made today. And while the market may not be at the absolute bottom (yet), it’s my opinion that now’s a good time to find distressed commercial real estate DCRE deals which, in many cases, could come-with lender-provided financing.

For example, here’s some math on a deal we just did: We bought a 13,818 square foot office building with 2 acres along I-25. The former price had been $1,150,000. Our price was $750,000; the average price for office buildings in our space (less than 40,000 sf) is $112.63. The Assessor says the average price should be $73.74. We bought at $54.28 with bank terms. When the market turns (2 – 5 years), it’s our expectation that the property will sell for $100 - $125 psf ($1,381,800 - $1,727,250), which is clearly less than replacement value - even in today’s market.

I continue to preach working hard & smart and staying on-task in spite of market conditions. Our solution’s been to realize market realities and adjust our “what & how” to stay in the game. When Mr. Market does the same, we’ll quickly see an up-tick in CRE leasing & sale activity. According to the Assessor, we’re still $38.89 psf overpriced in the office building market and $29.00 overpriced in the industrial building market. “Smart people, when given the same information ultimately reach the same conclusions”. Market pricing is no exception. As “a market”, we’re overpriced. However, selectively, there are deals.

Here’s another example; I’m working on a DCRE opportunity where, “coming-out-of-the-box”, it could be purchased for $20.00 psf; another is the sale we made in 3 hours last week. We had somewhat of a feeding frenzy when the property was finally priced “at-the-market”. Assets clear quickly in rational markets. I predict that as we head into fall and winter, we’ll see more & more CRE discounts. People & businesses will change seats like we did when we played musical chairs in Mrs. Vedesas’ 4th grade glass at Belmont Elementary; people with money will get seats when the music stops; people without money will left standing and ushered into the hall. For them, it will be “Game Over!” Folks – I’m sorry to say, that in spite of the myriad political pronouncements and magazine articles, it’s not better (yet).

My belief’s reiterated in the letter I received from my friend, Lee Sundin. Lee’s a former military analyst who lives & comments from the land Down Under. He says, “After reading the headlines & analysis by the pundits & policy wonks, (and the head buffoon), one would think that the USA is out of the woods; the economy is recovering and we can see light at the end of the tunnel.” He continues, “I hate to disappoint you, but the US economy continues to get worse, not better. All it takes is a little intelligence and time to go through the numbers.

So what’s the problem? “First of all, the economy’s not getting better if 240,000 some-odd people lost their jobs. Second of all, ask yourself: “Why did the unemployment rate go down?” It wasn’t because more jobs were created and it wasn’t because people stopped losing their jobs; it was because the government lopped-off people out-of-the-workforce because they gave up looking for work.” (That number’s an increase of over 300,000 people in the last year.) In other words, they couldn’t find work; so they gave up looking. If you take them out of the picture, unemployment numbers don’t look so bad! Even Cool Hand Luke would be proud of that slight of hand.

Lee says, “I’ve got a great idea: Just change the way the government defines “unemployed” and soon we’ll have no unemployment; the economy will be back in-the-black and everything will be OK!” (Here’s a flash – the BLS did that back in the 80’s!) This all sounds Orwellian. If you aren’t working and if you aren’t looking, you’re not unemployed. If you’re not working and you’re looking, you are unemployed. Geeez! What about Realtors? Most of us are not really working (nobody wants to buy or sell) but, we’re not really looking. So I guess we’re not unemployed but most of us would like a job. (I know!)

From the Bureau of Labor & Statistics July 2009 report, “About 2.3 million persons were “marginally attached” (you gotta love nomenclature) to the labor force in July. That’s 709,000 more than a year earlier. These are unemployed people not counted as unemployed. These individuals, who were not in the labor force, wanted & were available for work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the government’s employment survey. As they say, figures lie and liars figure. We’re not out of the woods, yet.

And, anecdotally, a friend of mine, who owns an excavation company, told me that he’s not aware of any new commercial construction projects in-process in El Paso County for him to bid-on. He and his crew have been unemployed since the 1st of the year and like many small businesses, they’re eating-their-young just to keep going. We talked about unemployment. In his case, it’s 100%. The statistics don’t mean much to him.

Alas & alak, it’s not the end of the world and I actually feel some optimism in the air. As I’ve said, however, my feelings may be the result of warm sunshine, fresh air or dinner at El Taco Rey. We may be heading in the right direction, but before I make a pronouncement, I want to see what happens after the Christmas shopping season (which now starts November 1st just after the Halloween selling-season, which starts just after labor day – in 3 weeks!), and which (Christmas) is only 4 ½ months away! Now there’s a cold-spritzer for our lazy summer sun!

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