2012 Commercial Real Estate Overview
Transcription
2012 Commercial Real Estate Overview
2012 Commercial Real Estate Overview Metro Denver and Northern Colorado An Annual Report on Commercial Real Estate in Metro Denver and the Northern Front Range. 2 / Cassidy Turley Colorado 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado Table of Contents Table of Contents Letter to Clients 4 Corporate Overview 5 Office Overview 6 Industrial/Flex Overview 8 Retail Overview 10 Multifamily Overview 12 Investment Overview 14 Land Overview 16 Northern Colorado Overview 18 Denver County Overview 22 Arapahoe County Overview 24 Jefferson County Overview 26 Boulder/Broomfield County Overview 28 Adams County Overview 30 Douglas County Overview 32 Professionals, Sources & Methodology 34 Cassidy Turley Colorado / 3 Corporate Overview To Our Valued Clients Things Feel a lot Better as We Enter 2013! Thankfully, the drama of the Presidential election, as well as the fiscal cliff, are behind us and we can now focus all of our attention on the improving economy and a surprisingly resilient commercial real estate market. I have the occasion to be on multiple national phone calls each month with my peers within Cassidy Turley and there is no question in my mind that Denver is one of the healthier markets and rebounded faster than most. I think we will look back at 2012 as being a real turning point for the commercial real estate market along the Front Range. In addition to declining vacancies and increasing rents, we saw a number of build-to-suits, which is a healthy sign. From energy to aerospace, to bioscience, information technology/software and financial services, Colorado has developed a diversified economy of viable industries that support a more predictable economy. Our transition from Fuller Real Estate to now Cassidy Turley has been incredibly beneficial for our employees and clients. The services and resources we now have access to are second to none and we are well positioned as we enter the New Year. I personally wanted to reach out and thank all of the people that have been so important to us over the years. It is gratifying to not only be able to provide a high level of service, but also to enjoy the very close relationships we have with so many. From all of us at Cassidy Turley, I want to wish you a happy New Year, and we look forward to the continued momentum we’re enjoying in Colorado. Happy New Year, Gregory W. Morris President & CEO, Colorado 303.312.4285 [email protected] 4 / Cassidy Turley Colorado 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado A Leader In Commercial Real Estate Services Cassidy Turley is a national team of commercial real estate professionals with a proven track record of delivering superior results for our clients. We are dedicated to consistently providing solutions that are creative, cost-effective and responsive to our clients’ specific real estate needs, while supporting overall business performance. We are a trusted partner and advocate, supporting our clients’ long-term success by leveraging industry insight, world-class expertise and local market knowledge to provide commercial real estate investors and occupiers with comprehensive services around the globe. Local Market Leaders, Nationwide • Our in-depth, local market knowledge provides a comprehensive understanding of market dynamics and enables us to effectively forecast market trends – providing insight to all real estate decisions. • Our leadership position is recognized in the communities we serve. We are often rated in local business journals as a “Best Place to Work” and are honored for our many local philanthropic efforts. Industry Leadership National publications and objective third-parties have already recognized Cassidy Turley for its position in the industry: • Real Estate Alert ranked Cassidy Turley #3 in office sales of at least $25 Million during the first half of 2011. • Real Capital Analytics ranked Cassidy Turley in the Top Five in Office and Industrial Sales in Q1 2011. • Cassidy Turley was named to the Leaders List of the International Association of Outsourcing Professionals® 2011 Global Outsourcing 100®. • The Lipsey Company’s Commercial Real Estate Top Brands Survey ranks Cassidy Turley in the Top 10. World-Class Expertise • Many of our associates have honed their skills in their respective markets for years – even decades – gaining an understanding of industry best practices. • Cassidy Turley has served clients’ needs outside of the United States since 1985. • In order to better serve our clients in Europe and Asia-Pacific, Cassidy Turley is proud to partner with GVA, the founder and majority shareholder of GVA Worldwide, which serves key markets in over 25 countries. Key Statistics Corporate Overview • Our professionals have deep ties to our communities and our industry, and a thorough understanding of local business leaders and practices, giving Cassidy Turley and our clients an edge. • More than 60 U.S. offices • 65 international offices • More than 3,700 professionals • More than 900 brokers • 2011 transactions - Gross transaction volume $22 Billion - Gross capital markets volume $10.3 Billion • 455 Million SF management portfolio on behalf of institutional, corporate and private clients • More than 28,000 Corporate Services locations served Get to know us better! Please visit our website: cassidyturley.com/colorado Cassidy Turley Colorado / 5 Office Overview Market Summary Central Business District Overview Overview Following a strong year in 2011, Denver’s office market continued to perform well in 2012, with users, investors and developers all active in the market. Despite CenturyLink vacating nearly 800,000 SF at 1801 California in Downtown, the Denver Metro market still managed to record 1.4 Million SF of positive absorption, just below what was recorded in 2011. Vacancy is at its lowest since 2002, at 12.5%, marking the third consecutive year-over-year decrease. The Downtown office market continued to strengthen in 2012 and looks poised for further growth in the foreseeable future. The lone statistical blemish was 1801 California, which recorded over 900,000 SF of negative absorption due to CenturyLink and other tenants vacating the property in the third quarter. However, Downtown still managed to record 100,000 SF of positive absorption, maintaining stable market vacancy, which finished the fourth quarter at 12.2%. Average asking rents pushed higher for the first time since the recession, averaging $27.05/SF full service in the fourth quarter, a 6.7% increase year-over-year. Leasing activity was led by a number of deals over 100,000 SF, focused mostly in the Downtown and Southeast submarkets. The two largest transactions were extensions of existing leases, signed by DIRECTV and MarkWest Energy Partners. DIRECTV currently occupies 256,000 SF at 161 Inverness while MarkWest doubled in size to 215,000 SF at Bridgepoint Plaza. As demand heats up for office space, quality blocks of space have become scarce, allowing landlords “As demand heats up for office space, to begin increasing asking rents. Average asking rents jumped 5.0% from 2011, finishing the year at an average of $20.83/SF full service. quality blocks of space have become scarce, allowing landlords to begin With the lack of large blocks of space, many companies planning on relocating to Denver increasing asking rents.” or needing to expand have found that the only viable options available to them now are build-to-suit developments or proposed speculative buildings. This was the case with DaVita HealthCare Partners, The TriZetto Group and Trimble, all of whom decided to build new facilities for their corporate headquarters. In total, seven properties delivered during the year, totaling 820,000 SF, with only one speculative development. There are another nine office properties under construction totaling 900,000 SF, all of which are build-to-suit or pre-leased projects. 2012 was a big year for office investments as well, with a large number of core properties trading hands in the Downtown and Southeast submarkets. The year recorded $1.9 Billion in sales, the highest total since 2007. The largest sale was Beacon Capital’s purchase of the Wells Fargo Center. The 1.2 Million SF property sold for $387.5 Million or $321.82/SF. Forecast Rental rates will continue to increase with consistent tenant demand and fewer space options, likely by up to 5.0% during 2013. Expect to see more speculative developments break ground in 2013 and 2014. Investment activity increased for the third year in a row, a trend that should continue as the market shifts further towards the landlord’s advantage. Denver remains one of the top investment markets in the country. The expected trend of a further rise in rental rates has definitely led to increased investment activity, which reached over $700 Million in volume for the second year in a row. Twenty-four properties were sold during 2012, totaling $775 Million, just shy of the levels recorded in 2006 and 2007. Beacon Capital Partners is certainly an example of investor’s positive outlook of the Denver CBD market, accounting for the two largest sales of the year, purchasing 1700 Lincoln and the portfolio of 410 17th, 600 17th and 1560 Broadway. Several significant developments are underway, namely the Union Station North and South Wing office properties. The two properties total over 220,000 SF and will be anchored by IMA Financial Group and Antero Resources. There are currently multiple parcels of land in the Union Station Neighborhood and surrounding LoDo area which are ready to break ground once a proportion of the properties are pre-leased. DaVita Healthcare Partners also moved into to its recently developed build-to-suit headquarters adjacent to Union Station in July. Forecast Rents will continue to be pushed up by confident landlord and limited relocation option for large tenants. Expect over 500,000 SF of positive absorption in 2013. Both investors and developers will remain highly active over the next two to three years with rising rental rates in a market with limited new supply coming online. Metro Office Vacancy & Rates CBD Office Vacancy & Rates Metro Office Absorption & New Construction Rates CBD Office Absorption & New Construction Rates 6 / Cassidy Turley Colorado 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado Southeast Northwest Overview Overview The 44 Million SF of office space in the Southeast submarket makes it the largest segment of the Denver Metro office market. The market continued to experience high activity in 2012, reaching its lowest vacancy rate in the past decade, and seeing a high amount of investment sales of core office properties. The Northwest submarket was another high activity segment of the metro region during 2012. Vacancy in the Northwest dropped to 10.1% in the fourth quarter after 500,000 SF of positive absorption throughout the year. Like the Southeast submarket, this is the lowest vacancy the Northwest has recorded in “The market continued to experience the past decade. Average asking rental high activity in 2012, reaching its lowest rates rose accordingly, up to $21.98/SF full service in the fourth quarter, a 5.6% vacancy rate in the past decade, and increase year-over-year. seeing a high amount of investment sales The Southeast submarket finished the year with nearly 900,000 SF of positive absorption, marking the fourth consecutive year of positive absorption. This helped drop vacancy in the market by 200 basis points from the end of 2011, to 13.2% in the fourth quarter. Average asking rents increased significantly from 2011, up to $19.62/SF full service from $18.68/SF the prior year, a 5.0% increase. With vacancy at record low levels, rates should continue to hold firm or increase over the next two years until several projected larger vacancies become available in 2015 and beyond. Currently, office development has been limited mostly to build-to-suit development for companies unable to find viable existing space on the market. TriZetto is under construction on its new 180,000 SF headquarters facility in Englewood, expected to deliver in April 2013, and after extensively evaluating the market, Charles Schwab has announced it will relocate its 2,000 employee Colorado workforce into one consolidated campus in Lone Tree. The company will invest $230 Million to build the campus in the RidgeGate development, with construction likely beginning in early 2013 and completing by Fall 2014. Office property sales in 2012 came close to doubling sales during 2011, recording over $520 Million in volume. The largest transaction was that of Plaza Tower One. The 468,885 SF Class A property was purchased for $82.5 Million or $175.95/SF by Granite Properties at a recorded cap rate of 6.3%. Other notable sales included Village Center Station ($265/SF), Peakview Tower ($204/SF), Terrace Tower ($156/SF) and Waterview 4 ($177/SF). Forecast Investment activity increased relative to 2011, with 88 properties trading hands totaling $320 Million, a $70 Million increase from the prior year. The largest transaction was the portfolio sale of four properties in Mountain View Corporate Center. The Class A properties totaled 461,000 SF and were purchased by Westfield Company for $92 Million or $199.38/ SF at a recorded cap rate of 6.4%. The first speculative development in the metro region was completed in Broomfield in September, totaling 186,000 SF. The property was developed by Hines and is LEED Platinum certified and will provide a good barometer of how strong demand for spec space is along the US 36 corridor, determining how soon other developers may follow suit. Forecast One or two build-to-suits are likely to break ground here by the end of 2013 with few readily available large blocks of space. The emergence of further speculative development over the next two years will hinge on the success and ultimate rents achieved in Hines recently constructed property “EOS”. Investment activity will remain steady, if not grow slightly, as investors look to take advantage of the growing demographics in these markets. If Class A lease rates rise by 10-20%, expect to see some developers strongly consider breaking ground on partially speculative developments. Southeast Office Vacancy & Rates Northwest Office Vacancy & Rates Southeast Office Absorption & New Construction Rates Northwest Office Absorption & New Construction Rates Cassidy Turley Colorado / 7 Office Overview Based on the volume of sales recorded in 2012, investors are clearly focused on the Southeast market, particularly for Class A product, which is still trading at a 25% discount or more to replacement cost. Expect volume to remain steady as investors look to take advantage of higher lease rates. of core office properties.” Industrial/Flex Overview Market Summary Northeast Overview Overview The Denver industrial market experienced strong leasing activity during 2012, particularly in terms of new construction, with numerous build-to-suits coming to market. Vacancy in the 260 Million SF market dropped significantly during the year, down 100 basis points to 6.4% at the end of 2012. This decrease came as a result of 3.3 Million SF of positive absorption. As in years past, the Northeast submarket continued to be the most active segment of the Denver industrial market in 2012. The submarket finished the year with an average vacancy rate of 6.6%, nearly two full percentage points lower than at the end of 2011. This drop in vacancy was caused by over 2 Million SF of positive absorption, accounting for over 60% of the total absorption across the metro market. Average asking rents throughout the metro area improved slightly for both warehouse and flex space, finishing the year at $4.67/SF NNN and $8.70/SF NNN respectively. The two largest transactions of the year were United Natural Foods’ lease of distribution space totaling 550,000 SF currently under construction on I-70, and Rocky Mountain Bottle Company’s renewal of 230,000 SF in the Coors Technology Center. Development activity has been the story of 2012 for the industrial market, with over 850,000 SF of new space deliveries and an additional 1.1 Million SF currently under construction. Each of these developments is a build-to-suit or pre-leased project. The two largest projects are food and beverage facilities, one being the United Natural Foods property, the other being Niagara Water’s 320,000 SF facility in Prologis Park, expected to deliver in the second quarter of 2013. Volume for total industrial sales during 2012 was slightly higher than 2011, yet still well short of the average annual totals recorded between 2004-2008, when volume reached as high as $1.1 Billion dollars. Over 300 properties traded hands during 2012 totaling $425 Million in volume, with average prices decreasing down to $48.60/SF from $58.60/SF in 2011. Industrial investment activity remained flat for the year as a result of few quality investment offerings hitting the market. Several investment sales were completed in the 6.5% to 7% cap range for core assets, as pent up demand and low interest rates increased investor motivation and drove cap rates to the lowest point in the last 15 years. Average asking rents increased significantly in 2012, up to $3.94/SF NNN for warehouse space and $8.94/SF NNN for flex space, a 6.5% and 7.0% increase year-over-year, respectively. The majority of activity was focused along the I-70 corridor, with nearly all of the major leases signed during the year located along the interstate. These include United Natural Foods 550,000 SF distribution facility that is currently under construction as well as Goodwill Industries move into 220,000 SF at 4355 Kearney Street and FedEx Smartpost’s move into 200,000 SF at the Majestic Commercenter. With the increase in activity, the number of large available blocks of space in the Northeast has diminished, leading to numerous new build-to-suit developments over the past year. Four properties delivered in 2012, totaling 350,000 SF, with another four properties currently under construction totaling 930,000 SF, including the two large food and beverage facilities for United Natural Foods and Niagara Water. Forecast Sales activity was modest in the Northeast with 61 properties trading hands totaling $89 Million in volume, slightly less than during 2011. The largest transaction was the sale of two Class B properties in Aurora totaling 236,700 SF. The properties were sold to St. Paul Fire and Marine Insurance Company for $17 Million and included over 17 acres of land. Another notable sale was that of 2780 Tower Road. The 386,000 SF property formerly served as Albertson’s distribution center and was purchased by Steven Roberts Original Desserts for $11 Million, who will occupy 205,000 SF and lease the remainder. With vacancy falling below 7.0% for the first time in 10 years, asking rents are expected to continue increasing in a tight market. This increase is expected to total $0.25 - $0.75/SF by the end of 2013. Forecast The first signs of speculative development are on the horizon, with a large project totaling over 600,000 SF planned to break ground in 2013 near I-70 and Havana. Other developers may follow suit. If confidence in the economy continues to improve, look for more user-buyers entering the market, which should increase user sale pricing as well as activity. Decreasing vacancy will continue to fuel developer’s confidence for new construction along I-70. The first significant speculative project is slated for construction in Q3, totally over 600,000 SF near Havana and I-70. Look for lease rates in this submarket to increase $0.25 to $0.75/SF over the next 12 months for Class A and B product. Metro Industrial Vacancy & Rates Northeast Industrial Vacancy & Rates Metro Industrial Absorption & New Construction Rates Northeast Industrial Absorption & New Construction Rates 8 / Cassidy Turley Colorado 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado Central Southeast Overview Overview The Central industrial submarket had a strong year in 2012 with decreasing vacancy and increasing asking rents for both warehouse and flex space. Vacancy finished the year at 5.8%, the lowest it has been since 2003. Average asking rents finished the year at $5.03/SF NNN for warehouse space and $8.70/SF NNN for flex space, a 6.0% and 13.0% increase year-over-year, respectively. The Southeast market consists of 19 Million SF of industrial space, and roughly half of that is made up of flex properties. Vacancy in the Southeast market improved during 2012, falling 80 basis points to 8.4% on a year-over-year basis, with 300,000 SF of positive absorption. Approximately 20% of all Denver Metro industrial sales during 2012 took place in the Central market, with $86 Million in volume trading during the year. Sales volume has increased every year since 2009, a trend that is likely to continue as rental rates continue to increase. Forecast This helped to stabilize asking rents, particularly for flex space, which was experiencing a consistent downward trend in rates over the past four years. Asking rents finished the year at an average of $7.40/SF NNN for warehouse space and $8.36/SF NNN for flex space. The Southeast market also saw its first significant construction activity in two years, the most notable being Polystrand’s build-tosuit manufacturing facility which finished construction in July. Polystrand relocated its headquarters from Montrose, CA, adding 240 new jobs to the market in the process. Average rates should continue to increase slightly in 2013 which may influence developers to begin looking at potential opportunities, though it is unlikely any projects will begin prior to 2014. However, with very few land parcels to build on, some users may choose to redevelop existing properties. The lack of quality inventory remains a common theme in the central market. Thus, sale values should continue to rise for user (“owner occupied”) facilities in the coming year. Forecast Central Industrial Vacancy & Rates Southeast Industrial Vacancy & Rates Northwest Southwest-West Overview Overview The Northwest submarket consists of 57 Million SF of industrial and flex space dominated by high tech manufacturing, outdoor recreation products and natural food companies. The Southwest and West submarkets consist of 32 Million SF of warehouse and flex space stretching from Golden down south to Ken Caryl and north along the South Santa Fe Drive corridor. These submarkets recorded exceptionally high positive absorption during 2012, totaling 560,000 SF, bringing vacancy down 160 basis points year-over-year to 4.2%. Activity for both sales and leases should pick up in the submarket. Look for lease rates and sale prices for quality product to increase. Average asking rents finished the year at $6.11/SF NNN for warehouse space and $8.62/SF NNN for flex space, slightly higher than at the end of 2011. The Southwest market is one of the few submarkets to have had stable rental rates over the past four years, actually seeing a slight increase from 2007. Forecast Forecast There was one build-to-suit property delivered during 2012 after three years of minimal construction activity. Expect to see further build-to-suit developments as the US 36 corridor has become a highly desired location for technology companies. Average rents are likely to continue to increase in 2013 at a modest pace as the availability of quality space remains tight. Buyers and tenants looking to locate in this submarket will continue to be frustrated with the lack of quality offerings, putting upward pressure on sale prices and lease rates. Northwest Industrial Vacancy & Rates Southwest-West Industrial Vacancy & Rates Cassidy Turley Colorado / 9 Industrial/Flex Overview Vacancy for the Northwest submarket finished the year at 7.4%, 40 basis points lower than at the end of 2011. This is the lowest rate that the Northwest submarket has recorded in 10 years and it continues to trend downward. Despite the continued downward trend in vacancy rates, asking rents did not see a significant increase over the year. Asking rents actually fell slightly for warehouse space, down 6.0% year-over-year to $4.95/SF NNN, while rates for flex space remained stable, finishing 2012 at $9.52/SF NNN. Retail Overview Market Summary Downtown Overview Overview Denver appears to be the exception rather than the rule in terms of retail performance when compared to the rest of the nation. Over the past year, the national retail market has struggled. The U.S. Consumer Confidence Index remains low, finishing December at 65.1, and the population continues to save their money rather than spend it. Holiday sales in 2012 fell short of the National Retail Federation’s forecast of a 4.1% increase from 2011, recording only a 3.0% gain. However, when observing the Denver market, the major retail communities are as active as ever, with new restaurants and shops opening monthly and development activity re-emerging. The retail market in Downtown Denver consists of over 5 Million SF of space and boasts the lowest vacancy in all of Denver, a meager 2.2% at year end. Average asking rents remained stable at $21.43/SF NNN in the fourth quarter. Downtown is seeing several infill office and multifamily developments coming to market, particularly in the Ballpark District and the Highlands, which will help bolster nearby retail locations once completed. Union Station remains the main topic of discussion in the Downtown submarket. The redevelopment of the station and surrounding areas made notable progress over the course of the year. Union Station Alliance won the bid for the right to redevelop the Historic Union Station building, which will Denver notched its seventh consecutive year of positive absorption “After minimal retail property be converted into an upscale 130 room hotel on the upper floors and totaling 550,000 SF during 2012, lowering the vacancy rate to sales from 2009 to 2011, sales a retail center on the main floor, which will open to a large landscaped 6.9%, a 120 basis point decrease year-over-year. After decreasing activity increased dramatically in public plaza. Redevelopment of the interior of the station is expected to each of the past five years, average asking rents stabilized finishing 2012, with $1 Billion in recorded be completed by 2014, while development of the transit portion is already 2012 at $14.76/SF NNN, slightly higher than at the end of 2011. volume.” underway, approximately 65% complete. Construction of the two mixedThis was due in large part to significant rental rate increases in use properties adjacent to the station’s main plaza, developed by private Denver’s tightest markets, including LoDo, Cherry Creek and companies East West Partners and Continuum Partners, are also underway Colorado Boulevard. In addition to increased leasing activity, there and are expected to deliver by early 2014. was a boost in retail development, with 585,000 SF of deliveries in 2012, and 760,000 SF currently under construction, consisting of numerous big box spaces. After minimal retail property sales from 2009 to 2011, sales activity increased dramatically in 2012, with $1 Billion in recorded volume. The largest transaction was The Macerich Company’s purchase of the Flatiron Crossing Shopping Center in Broomfield. The company purchased the 1.5 Million SF center for $323 Million, or $286.69/SF, at a recorded cap rate of 5.95%. Other notable sales included the Southlands, Harvest Junction and The Shoppes at Castle Rock, which all traded at sub 7.5% cap rates. The number of large centers purchased and the price investors were willing to pay is a prelude to the expected success of Denver’s retail market in the coming years. Colorado Boulevard / Cherry Creek Similar to the Downtown submarket, the Cherry Creek and Colorado Boulevard retail submarket boasts a sub 3.0% vacancy rate, finishing 2012 at 2.8%. Asking rents averaged $22.45/SF NNN in 2012, a $0.70/SF increase from 2011. This is the highest average rental rate across all Denver Metro submarkets, with rates in this submarket reaching as high as $40/SF NNN in high quality, well placed properties. This submarket has several significant development projects on the horizon. The most notable of these are two redevelopment projects, that of the former University of Colorado Hospital on 9th Avenue and Colorado Boulevard and the former Century 21 Theater on Colorado Boulevard just north of I-25. Fuqua Development will be converting the 28.5 acre University of Colorado site into a large mixed-use community with shops, offices, restaurants, and over 300 apartment units. Reliable Investment Company is the developer of the Century 21 project, which will be redeveloped into a 32,000 SF plaza featuring an array of restaurants and retailers. Denver Metro Retail Market 10 / Cassidy Turley Colorado 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado West / Southwest Overview Overview The South and Southeast submarkets consist of 31 Million SF of retail space with major shopping centers including Streets at Southglenn, Park Meadows Mall and Arapahoe Crossings. Vacancy in this submarket is in line with the metro average and remained stable compared to 2011, finishing 2012 at 6.3%. Asking rents increased 3.5% year-over-year, to an average of $18.49/SF NNN in the fourth quarter. Retail development has been active in this submarket, with the delivery of the 400,000 SF IKEA in 2011 and an additional 376,000 SF currently under construction, consisting of two auto dealerships, Kuni Lexus in Englewood and Nissan in Highlands Ranch, as well as a Cabela’s located on I-25. The Kent Place redevelopment is nearing completion. King Soopers opened its upscale 30,000 SF Fresh Fare market in December, emphasizing fresh and organic products catering to the location’s consumer base. Three stores opened along with King Soopers, with two scheduled to open in early 2013, and construction is underway on a 300 unit apartment community that will border the retail center. The project’s developer, Continuum Partners, originally had to delay development due to the economic downturn. However, after partnering with Regency Centers and Forum Real Estate group, was able to revive the project, highlighting a major success story in this submarket. The West and Southwest retail submarkets recorded high leasing activity in 2012, with 176,000 SF of positive absorption, bringing vacancy down to 7.4% in the fourth quarter, a 30 basis points drop year-over-year. Average asking rents improved moderately, averaging $13.26/SF NNN in 2012 compared to $13.18/SF in 2011. Sales activity increased from 2011 as well, with $106 Million in volume, up from $78 Million. The largest transaction was Tabani Group’s purchase of Conifer Town Center. The 115,000 SF Safeway anchored shopping center “Union Station Alliance won the bid was bank-owned at the time of sale, and traded for $13.1 Million, for the right to redevelop the Historic or $114.30/SF. Union Station building, which will be converted into an upscale 130 room hotel on the upper floors and a retail center on the main floor, which will open to a large landscaped public plaza.” Aurora Overview Aurora’s retail submarket performed well in 2012, with 170,000 SF of positive absorption, helping to decrease vacancy to 7.7% in the fourth quarter, a 140 basis point drop yearover-year. However, retail vacancy in Aurora still remains above the metro average, with an oversupply of big box and shop space throughout the submarket. Dated centers will most likely need to be demolished because of their functional obsolescence and lack of curb appeal. Average asking rents decreased for the fourth consecutive year, albeit at a slower rate in 2012, down to $11.44/SF NNN, $0.20/SF lower than at the end of 2011. Further highlighting the difficulty the Aurora market is facing is the delay of the original Gaylord Entertainment project. The project was proposed as an $824 Million, 1,500 room conference hotel located near DIA, which would receive $300 Million in funding from the city, plus an additional $82 Million incentive package from the state in an attempt to increase tourism. However, Gaylord Entertainment was purchased by Marriot International in May, and was converted into the REIT Ryman Hospitality Properties. Ryman has since stated that is has been unable to locate a developer willing to take on the project at its current proposed scale. It is unlikely that the project will be completed unless it is restructured, if it gets done at all, marking a significant blow to the economic development council in Aurora. Denver Metro Retail Vacancy & Rates In Lakewood, further progress was made on the redevelopment of the Federal Center located along the 6th Avenue corridor. The redevelopment is focused on a mix of transit oriented development centered around a “Federal Quad” and is slated to complete in steps along a 20 year cycle. Once the west RTD FasTracks line is constructed, currently slated to open in April 2013, development of the project’s surrounding area should begin in full. Northwest Overview The Northwest submarket finished 2012 with a vacancy rate of 9.2%. This represented a significant decrease from 2011, despite minimal absorption during the year, due to Westminster Mall getting demolished, removing 1.3 Million SF of vacant space from the market. Asking rents increased slightly during the year, up to an average $13.71/SF NNN in the fourth quarter. This is primarily because of high rates in Boulder, which increased $0.40/ SF on average during 2012. Westminster Mall was demolished in order to redevelop the 108 acre site into a downtown shopping location. The city purchased the mall and surrounding sites for $22 Million and plans develop up to 5 Million SF of shops, restaurants, offices, and residences. The city hopes the redevelopment will revitalize the community and plans have the first phases of the project completed by 2015. Westminster and the rest of the Northwest submarket will also benefit from the addition of RTD’s Northwest rail line. The line is currently planned as a 41-mile high capacity project from Union Station to Boulder and then to Longmont. However, only the segment from Union Station to Westminster is funded and scheduled for construction, which is expected to be complete by 2016. Denver Metro Retail Historical Sales Cassidy Turley Colorado / 11 Retail Overview South / Southeast Multifamily Overview Market Summary Sold Apartments Metro Denver: 4-49 Units Overview Metro Denver Multifamily real estate remains the hot topic in Denver, with exceptional activity over the course of 2012. With home sales down significantly from peak levels and a continued net migration into the Denver-AuroraBroomfield Metropolitan area (over 60,000 people in since 2010,) Multifamily continues to be in high demand. Vacancy fell 40 basis points in 2012 to 4.9% in the fourth quarter without a single submarket registering higher than a 7.0% vacancy rate. Boulder, supported by a large college community, registered the lowest vacancy rate, at a mere 2.7%. With demand at an all-time high, landlords continued to increase asking rents during 2012, which coupled with the delivery of numerous highly priced upscale communities, pushed rental rates to an average of $1.14/ SF in the metro market. This represents a 5.6% increase from 2011 and the third consecutive year of rent growth. Rents are expected to continue increasing over the next two to three years until the influx of new deliveries expected to come to market helps to stabilize vacancy and increase competition among landlords. Sales Volume 2008 2009 2010 $95,676,859 $133,373,284 $215,245,328 $231,502,991 232 172 186 224 233 2,957 1,829 2,233 3,017 3,510 2,176,576 1,341,033 1,692,143 2,405,765 2,697,232 $62,078 $59,091 $64,525 $76,382 $72,074 Price per SF $84.34 $80.48 $83.40 $96.85 $95.92 Cap Rate 6.94% 7.35% 7.36% 6.91% 6.89% # of Transactions Total Units Total SF Price per Unit and nearly 13,000 units currently under construction.” Multifamily Historical Sales / Cassidy Turley Colorado 2012 $183,564,696 Development activity has skyrocketed, with approximately 3,000 new units delivered in 2012 and nearly 13,000 units currently under construction. A high percentage of this activity is focused in Denver’s CBD and Interlocken submarkets, with 3,150 and 2,300 units under construction respectively. Given the lack of multifamily construction in the past few years and high tenant demand, developers are unlikely to have any issue filling the units that are currently under construction. However, with an additional 18,000 units planned to break ground by 2015, the market will eventually “Development activity has reach a state of oversupply which will hinder skyrocketed, with approximately further rent growth and push vacancy back 3,000 new units delivered in 2012 towards its historical average, around 7.0%. 12 2011 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado Sold Apartments Metro Denver: 50+ Units Metro Denver Sales Volume 2008 2009 2010 2011 2012 $622,627,572 $282,938,900 $572,704,250 $1,489,596,175 $1,993,259,548 47 20 33 65 80 8,458 3,867 7,930 15,672 20,262 7,438,528 3,195,938 6,990,780 14,731,434 17,895,322 $77,538 $73,168 $72,220 $97,480 $103,832 Price per SF $92.68 $90.16 $82.07 $107.93 $117.25 Cap Rate 6.05% 7.12% 5.91% 5.75% 5.91% # of Transactions Total Units Total SF Price per Unit Multifamily Overview Forecast Investor demand for multifamily properties remained strong in 2012 with record sales volume recorded over the year. Over 300 properties were sold, totaling $2.2 Billion, more than $300 Million greater than the previous annual high recorded in 2007. The largest transaction was the sale of The Metro apartment community at 2121 Delgany Street. The property sold for $90.8 Million at a recorded cap rate of 5.4%, an exorbitant price given that the same property sold for only $55 Million in 2009. This sale perfectly reflects the resiliency of the multifamily market and the measured upside in the post-recession era. Average cap rates have fallen over 250 basis points from 2009, and have averaged below 6.0% over the past two years. Prices are expected to remain high in 2013, with multifamily properties remaining the most sought after property class by Denver real estate investors. 2012 Notable Multifamily Sales Champions Park The Metro Windrock & Stone Canyon Champions Park The Metro Windrock & Stone Canyon 2525 E 104th Avenue / Thornton, Colorado 2121 Delgany Street / Denver, Colorado 19255 East Cottonwood Drive / Parker, Colorado Size: 480 Units Size: 415 Units Size: 660 Units Leased: 94.6% Built: 2002 Built: 2002 Built: 2000 Leased: 95.0% Leased: 95.0% Sale Price: $68,256,400 Sale Price: $90,750,000 Sale Price: $82,750,000 Price/Unit: $142,201 Price/Unit: $218,675 Price/Unit: $125,379 Buyer: Eaton Vance Investment Managers Buyer: MEPT Buyer: Thompson Michie Associates, Inc. Seller: Archstone Seller: CBRE Global Investors Seller: JPMorgan Asset Management Cap Rate: 5.79% Cap Rate: 5.00% Cap Rate: 5.60% Cassidy Turley Colorado / 13 Investment Overview Market Summary Overview Continued improvement of fundamentals kept Denver as a market of major interest for institutional and private equity investors in 2012. Institutions have accounted for the majority of activity, with a number of well-located, core assets trading since the recession. Denver commercial real estate, specifically office and multifamily, has been trading at historical pricing levels ever since the nation began its recovery from the recent recession. Identified as a growth market, Denver has been making news with its burgeoning public transit system, educated work force and diversified economy. The office sector continued to be the darling asset class for investors in 2012. Sales volume increased by nearly $330 Million over 2011 levels, ending at approximately $1.7 Billion. A number of high profile assets traded in 2012 with the majority of activity focused in the Central Business District and LoDo submarkets. One transaction, the sale of the 52-story, 1.2 Million SF Wells Fargo Center, represented the majority of the first quarter dollar volume at $387.5 Million or $321.82/SF. Beacon Capital Partners purchased the property in an off-market transaction from Los Angeles-based Maguire Properties. Metro-wide vacancy rates have dropped nearly 3% since 2009 and asking rents have grown by $1/SF in the last year. Replacement cost is becoming more relevant as development is underway in high barrierto-entry, urban locations and speculative construction looms on the horizon in suburban markets. Activity in the retail market picked up in 2012 ending at approximately $800 Million in total consideration which represents a 267% increase from 2011. The largest transaction of the year was the sale of Flatirons Crossing, a super-regional mall outside of Boulder, Colorado, for approximately $323 Million. This transaction involved Macerich – a REIT – buying out its operating partner at a market cap rate of approximately 5.95% as reported by CoStar. Another major retail transaction in the Denver market was Southlands, an 860,651 SF regional, outdoor lifestyle center. The property traded for $102.5 Million at a reported 6.5% cap rate in an off-market transaction. “Denver commercial real estate, specifically office and multifamily, has been trading at historical pricing levels ever since the nation began its recovery from the recent recession.” As vacancies shrink in the Class A office market, we can expect to see increased net absorption in Class B properties with increased investor demand in smaller, suburban buildings. The most significant suburban office building sale of 2012 was Plaza Tower One, a 22-story, 468,885 SF trophy office tower located in Greenwood Village. The property sold for $82.5 Million or $175.95/SF on a reported 6.27% cap rate. Industrial and flex investment sales remained slow in 2012 with few significant sales. The largest deal of the year was the sale of the National Archived Record Administration building in Broomfield for $19.5 Million. This was a long-term leased asset for the Government Services Administration and was purchased for a 7% cap rate by a local buyer. Industrial transactions have been few and far between as the product type lends itself to a long term hold strategy. Fundamentals did not erode in this sector as much as office and retail and as a result, few properties went through foreclosure and few offerings have hit the market in light of the high demand for industrial product. Metro Denver Investment Overview 2011 Dollar Volume Properties Units (M.F.) Total SF (Excl. M.F.) Cap Rate Investment Sales Volume 14 / Cassidy Turley Colorado Investment Sales Cap Rates $1,982,347,716 497 9,791 10,846,870 7.19% Change 2012 $2,696,655,910 493 12,898 13,180,328 6.53% 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado Forecast 2013 will see continued momentum in the Denver investment market as commercial real estate continues to be a favored investment vehicle. More transactions are anticipated as investor risk tolerance for Class B properties eases as vacancy rates shrink in Class A buildings, creating drastic rent growth for premium space. The amount of foreclosures has slowed through 2012, but there is still a dramatic amount of toxic CMBS debt that will come due through 2015 that will be a challenge to refinance. Office will continue to be a be a favored asset class with investors seeking immediate value-add opportunities with the quickly improving market. Retail will start to make a comeback as consumer spending improves and retailers continue to expand and post positive earnings. Banks, life insurance companies and conduits continue to provide cheap debt which will make the next 12-24 months a favorable time to purchase real estate. 1031 exchange activity should increase with the reversion of capital gains taxes to the pre-Bush era tax laws. Investment Purchaser Profile 2012 Investment Sales Volume by Product Type Sales Volume Multifamily $1,130,733,258 Office $1,017,788,335 Industrial $268,064,250 Retail $280,070,067 Investment Overview Product Type Investment Sales By Product Type Cassidy Turley Colorado / 15 Land Overview Market Summary Overview Denver has proven to be a resilient city, emerging from the recent economic downturn units estimated to come online by 2013. If all projects in the pipeline prove out, over 25,000 with strong employment and economic momentum. 2012 was the first year that all 18 multifamily units are likely to deliver in the metro area before 2016. indicators the Denver EDC uses to track economic progress in Denver were positive since Other notable land sales included a number of infill sites in the Central Business District. the EDC began the initiative in 2001. Denver added 34,000 new jobs in 2012, bringing the Parking lots are being sold at record pace to make room for vertical office and multifamily unemployment rate down to 7.4%, 30 basis points below the national developments. Within the past two years, 44 lots accounting for average. The high growth that Denver is currently experiencing, coupled approximately 4,700 downtown parking spaces have either been with low interest rates and falling vacancy for commercial and residential developed or purchased for future development. Prices for many properties, has fueled demand from developers seeking well-positioned “2012 was the first year that all 18 of these sites have become exorbitant. Examples include The land sites throughout the metro area. indicators the Denver EDC uses to Avis Lot at 1900 Broadway, which sold for $11.7 Million or $4.3 track economic progress in Denver Land sales remained stable in 2012, recording over $390 Million in Million per acre and Block 54 on Park Avenue and 24th Street, were positive since the EDC began the volume, slightly less than 2011. Volume was led by sales of commercial which sold for $8.3 Million or $3.6 Million per acre. As this fixed initiative in 2001.” and residential sites, which accounted for $120 Million and $240 supply of surface parking lots remaining downtown continue to Million respectively. Industrial sites recorded only $26 Million in volume. be developed, it is likely that pricing for these sites will increase, Construction for detached single family housing has been surprisingly especially for well located parcels. active, with 1,647 housing starts in the third quarter, a 40% increase from the third quarter in 2011 and the highest quarterly total since 2007. Entry level and move Forecast up homes continued to account for a greater percentage of starts, with houses priced over The demand for land parcels is expected to remain stable in 2013. With the boom and bust $250,000 accounting for over 82% of all starts in 2012, compared to 64% in 2011 and 47% cycle Denver experienced, many developers who had purchased sites for future development in 2010. Multifamily development enjoyed a significant boost as rental rates continued to were forced to place projects on hold during the economic recession. Now that the market climb and metro wide vacancies decreased, down to 4.9% at the end of 2012. Notable sales has recovered, developers are again looking to restart these projects. Once this cycle of of multifamily or apartment ground include BMC Investments purchase of a redevelopment development is complete, land sales are expected to gain ground on 2007-2008 levels as site in Cherry Creek for $15.8 Million for 250 units and ReyLenn Properties’ purchase of developers again start to identify new purchase opportunities. Given the influx in population 801 South Cherry Street in the same submarket for just under $11 Million for their proposed and improving employment numbers, Denver is positioned for sustainable growth over the 341 unit project. In the metro market over 3,100 units were delivered in 2012 with 5,100 next decade, which bodes well for the land market. 2012 Major Land Sales Address Buyer Size (Acres) Type Price Price/AC 6363 E. Hampden Ave. D.H. Friedman Properties 10.5 Commercial $10,525,000 $1,002,381 3100 Pearl St. ReyLenn Properties 5.3 Residential $6,650,000 $1,254,717 Ridge Rd. Embrey Partners 16.4 Residential $5,700,000 $347,561 25 International Ct. AMLI Residential 11.9 Residential $5,330,000 $447,523 14949 Lowell Blvd. Taylor Morrison, Inc. 30.1 Residential $5,000,000 $165,893 4545 S. Monaco St. Richmond American Homes 7.6 Residential $5,000,000 $657,895 Land Sales Volume 2012 Annual Housing Starts Source: Metrostudy 16 / Cassidy Turley Colorado 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado Land Overview Cassidy Cassidy Turley Turley Colorado Colorado // 17 17 Northern Colorado Northern Colorado The two major counties located to the north of the Denver Metro area are Larimer and Weld Counties, which constitute what is known as Northern Colorado. Northern Colorado includes the major cities of Greeley, Loveland and Fort Collins. This area has outpaced the national average for population growth for the last ten years and is viewed as a very desirable place to live. With its growing population and an incentive laden business environment, national and international companies have flocked to Northern Colorado. The most prevalent industries are Agriculture, Energy, Bioscience, Information Technology and Manufacturing and Water Innovation. The largest employers in Weld County include the following: Larimer County has become a stimulating economy for business development with over $1 Billion in new capital construction projects being completed over the past 5 years. Currently, the county contains 12 major business parks with over 2,700 acres that have been developed or are currently in the process. In 2011, Forbes magazine ranked the county as number five on its list of the “Best Places for Business and Careers.” The county is also home to one of the state’s top universities, Colorado State University, which has become a leading research institution in the nation, securing over $340 Million in research funding in 2012. • JBS Swift & Company • Banner Health • Vestas • State Farm Insurance Companies • Carestream Health, Inc. Northern Colorado Demographics Population 554,907 Employment 205,313 Labor Force 300,919 Average Wage $41,532 Median Age 35 Northern Colorado consists of over 15 Million SF of office space. The office market experienced healthy leasing activity in 2012, with vacancy falling 127 basis points year-over-year to 7.5% as of the fourth quarter. This marks the 2012 Northern Colorado Major Sales The largest employers in Larimer County include the following: Address Size (SF) Type Price • Poudre Valley Health System 4432-4503 S. College Ave. 350,593 Retail $58,000,000 • Hewlett Packard Technology 215-225 E. Foothills Pky. 1,002,001 Retail $39,688,400 • Center Partners 900-901 Constitution Ave. 356 Units Multifamily $31,100,000 • Woodward Governor Company 1720 Kirkwood Dr. 259 Units Multifamily $29,925,000 • McKee Medical Center 5295 Hahns Peak Dr. 168 Units Multifamily $23,550,000 4711-4759 W. 29th St. 138,818 Retail $23,400,000 2208-2236 E. Harmony Rd. 85,354 Retail $18,000,000 2201 S. College Ave. 68,334 Retail $17,875,000 5890 W. 13th St. 58,000 Office $13,200,000 1538 E. Harmony Rd. 70,692 Retail $10,800,000 Weld County, located to the east of Larimer, was ranked the second fastest growing area in the nation by the United States Census Bureau, with indications that the population will likely double by 2030. Since 2006, new and expanding companies have created more than 7,000 new jobs in the county and over $2.3 Billion in new capital investment. The county’s top industries include energy production, manufacturing, healthcare and business services. 18 / Cassidy Turley Colorado 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado Northern Colorado’s industrial market displayed strong fundamentals in 2012, marking first year-over-year decline in vacancy since 2008. Overall net absorption ended the year with a positive 287,000 SF compared to 2011 when it stood at negative 89,000. Sales activity was also up for the year with 76 properties trading hands, an increase from 69 in 2011; the largest transaction consisting of the $6 Million sale of 1201 Cornerstone Drive in Windsor. Development activity is currently limited to four properties, the largest of which is the 500,000 SF Leprino Foods facility, opening in phases and scheduled for final completion at the end of 2014. Berken Energy announced that it plans to relocate its headquarters from Roswell, New Mexico to Fort Collins in 2013. The company, which manufactures thermovoltaic technology, will hire an additional 50 employees to work at the facility. DCP Midstream also made progress on construction of its build-to-suit plant, which will deliver in mid-2013. The planned $270 Million facility will allow the company to process 110 Million cubic feet of natural gas per day. In comparison, the seven processing plants it currently operates in the Denver Metro area have a combined processing capacity of 400 Million cubic feet per day. Northern Colorado lowest vacancy rate since the end of 2007 when vacancy stood at 7.3%. There was roughly $65 Million in office sales during the year, $30 Million more than last year and 210,000 SF in deliveries, nearly double that of 2011. Two major call centers were opened in Northern Colorado, both in Greeley. TeleTech hired over 500 employees to relocate to a new 50,000 SF customer support center that was formerly occupied by Kmart while Xerox opened a new call center space which will create 700 jobs by the end of 2013. The retail market showed strong performance in 2012 as well, with nearly 290,000 SF of positive absorption. Vacancy ended the year at a mere 6.4%, marking the lowest rate since the second quarter of 2008 when it stood at 5.8%. Retail property sales skyrocketed in 2012, recording the highest annual volume total in the past decade at $295 Million. The largest transaction was the investment sale of Harmony Marketplace in Fort Collins. Chandelle Development sold the 350,500 SF shopping center to AmCap for $58 Million or $165.43/SF at a recorded cap rate of 6.21%. Other notable shopping centers that sold in 2012 include Foothills Mall, Greeley Commons and Harmony School Shops. Despite the rise in leasing and sale activity, new retail construction deliveries remained minimal during 2012, with eight projects totaling 57,000 SF delivering and no new projects currently under construction. Multifamily activity was vigorous throughout 2012, with vacancy falling 130 basis points year-over-year to 3.8% in the fourth quarter, the lowest vacancy has reach in the past seven years. The market recorded 140 units of positive absorption during the fourth quarter, bring the annual total to 499 units, considerably higher than 2011, when only 40 units 2012 Northern Colorado Leasing Summary Building Base Direct Vacant Sublease Vacant Total Vacant 2012 Vacancy 2011 Vacancy Average Asking Rents Office 15,183,633 1,088,736 41,188 1,129,924 7.44% 8.73% $17.66 Industrial 42,809,321 4,424,282 45,302 4,469,584 10.44% 11.20% $6.54 Retail 29,112,631 1,881,638 2,414 1,884,052 6.47% 7.22% $12.76 Total 87,105,585 7,394,656 88,904 7,483,560 8.59% Property Type All rates NNN except for office (full service) larimer weld I N T E R STAT E 25 Fort Collins loveland greeley 257 85 34 34 287 6 Cassidy Turley Colorado 40 36 / 19 Northern Colorado were absorbed. The high level of activity led to an annual increase in average rents, which finished the year at $1.09/SF, an increase of 7.6% from last year. Sales activity increased slightly, with 36 properties trading hands, totaling $104 Million in volume, nearly double that of 2011. Multifamily property sales have consistently recorded the lowest cap rates across all property types over the past five years, typically trading at sub 7.0% rates. Given the continued decrease in vacancy, cap rates could decrease further over the next two to three years. The decreased vacancy has also spurred a boost in development activity. 284 units were added to the Northern Colorado market in 2012, while another 687 are currently under construction and an additional 1,400 are planned to break ground within the next two years. The largest of these is the 221 unit student housing community being developed by Capstone Development Partners in Fort Collins, which is expected to open in Fall 2013. Office Vacancy vs. Average Asking Rent Industrial Vacancy vs. Average Asking Rent Retail Vacancy vs. Average Asking Rent 20 / Cassidy Turley Colorado Nearly $92 Million in land sales were recorded in 2012, compared to $60 million in 2011. 2012 recorded its highest number of land transactions since 2008, the last year prior to the economic recession. Residential land sites experienced the strongest activity with over $46 Million in sales throughout the year, up significantly from 2011, when sales totaled only $12 million. While land sales increased in 2012, the annual volume remained well below the levels recorded between 2004 and 2007, which peaked at $342 Million in 2007. Because of the recession many housing and commercial developers were forced to place projects on hold. This also meant they were no longer pursuing new land purchase opportunities for future developments. Developers are now beginning to restart these projects and should begin identifying new land sites for future development in the next two to three years, assuming the market remains stabilized. 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado Northern Colorado Multifamily Historical Data Larimer & Weld County Historical Cap Rates Northern Colorado Residential Building Permits Northern Colorado Larimer & Weld County Historical Sales Volume Cassidy Turley Colorado / 21 Denver County Denver County stable despite CenturyLink vacating 1801 California, leading to over 800,000 SF of negative absorption in that building alone. Large blocks of existing space have become increasingly difficult to find for companies wishing to move or expand in Downtown, which has spurred continued development activity, particularly for build-to-suit and pre-leased projects. Trammel Crow’s development of DaVita’s new headquarter facility near Union Station delivered in August, along with another eight properties during the year, totaling 520,000 total SF in deliveries. The two North and South Wing office properties “Denver’s economic development alongside Union Station are also currently under construction, with IMA Financial council and government leaders Group and Antero Resources slated to be the primary tenants for each property. Denver, or “The Mile High City” as it is commonly known, is the epicenter of trade, commerce and business in the State of Colorado. The county of Denver includes Downtown, Stapleton, the I-70 East Corridor, Denver International Airport, and extends southeast to the Denver Tech Center. Denver County’s population is approximately 620,000 and attributes a steady increase in population over the last decade to its diverse business climate, outstanding weather and overall quality of life. Denver continues to grow its image, both nationally and internationally, voted as one of the top destinations to travel to in the world by numerous sources, including Huffington Post (#6 in the world), Fodor’s (Top 10 in US), Hotwire (#7 in US) and Business Traveler (#1 Airport in North America), among others. Denver’s economic development council and government leaders have done an excellent job of promoting the city’s friendly business environment and at ease lifestyle, helping attract multiple Fortune 500 companies to the city. Companies to recently expand their presence in Denver include DaVita Healthcare Partners, Arrow Electronics, Xcel Energy and Kaiser Permanente. have done an excellent job of promoting the city’s friendly business environment and at ease lifestyle, helping attract multiple Fortune 500 companies to the city.” Denver County includes approximately 66 Million SF of office space, focused primarily in the Central Business District and Lower Downtown. In 2012, the office market continued to ride the positive momentum it has experienced over the past two years. Vacancy remained A number of core office properties Downtown sold in 2012, helping Denver County record its highest sales volume since 2007. In total, 88 office properties were sold totaling $870 Million. Beacon Capital Partners, looking to add to its portfolio in Denver, accounted for the two largest sales, that of the Wells Fargo Center and the portfolio sale of 410 17th, 600 17th, and 1560 Broadway. Wells Fargo traded for $387.5 Million or $321.82/SF while the portfolio properties were purchased for $268 Million or $171.55/SF. In addition to high-rise office, Denver’s skyline continues to add more residential and apartment comminutes as the multifamily market heats up. Ten apartment communities delivered in Denver Country during 2012, totaling 1.4 Million SF and another 18 properties are currently under construction totaling 2.8 Million SF. That adds up to an astounding 3.2 Million SF, also broken down to 4,650 units, of new apartment space over the span of 3-4 2012 Denver County Leasing Summary Property Type Building Base Direct Vacant Sublease Vacant Total Vacant 2012 Vacancy 2011 Vacancy Average Asking Rents Office 66,340,866 7,683,006 153,743 7,836,749 11.81% 11.64% $23.22 Industrial 94,986,023 5,406,601 83,671 5,490,272 5.78% 7.32% $4.31 Retail 33,717,455 1,347,621 139,938 1,487,559 4.41% 4.82% $17.25 Total 195,044,344 14,437,228 377,352 14,814,580 7.60% 22 / Cassidy Turley Colorado All rates NNN except for office (full service) 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado 2012 Denver County Major Sales Denver County Demographics Population 605,722 Employment 420,592 Labor Force 322,078 Average Wage $59,409 Median Age 34 years, with many more projects still in the planning stages. While expected that this would provide for excessive supply, the market should have no problem filling the new units, with demand at an all time high, as evidenced by an average vacancy of less than 5.0% in Denver County neighborhoods, the lowest vacancy rate recorded over the past decade. The retail market in Denver County also performed well over the past year, finishing 2012 with a vacancy rate of 4.4%, down 110 basis points from the previous year. Asking rental rates averaged $17.72/SF NNN at year end, a slight increase from the end of 2011. The restaurant sector has performed exceptionally well, particularly in Denver’s Downtown and Highlands neighborhoods, where a number of popular new restaurants have opened within the past two years, including Linger, Tag Raw Bar, Trillium and Pinche Taqeuria to name a few. The continued development of many infill sites for office and multifamily properties, along with the redevelopment of Union Station will only further boost the success of Denver County’s retail market in the future. Size (SF) Type Price 1700 Lincoln St. 1,204,089 Office $387,500,000 410 17th, 600 17th and 1560 Broadway 1,594,135 Office $268,000,000 1420 Stout St. 209,420 Hotel $134,000,000 2121 Delgany St. 415 Units Multifamily $90,750,000 1401 17th St. 191,151 Office $53,600,000 2570 Dayton and 10050 E. Harvard 644 Units Multifamily $48,500,000 3310 S. Kenton St. 212 Units Multifamily $28,750,000 6165 E. Iliff Ave. 426 Units Multifamily $28,000,000 1660 Wynkoop St. 65,716 Office $26,600,000 3481 S. Fenton St. 240 Units Multifamily $21,000,000 6301 W. Hampden Ave. 230 Units Multifamily $17,650,000 1090 S. Parker Rd. 345 Units Multifamily $16,307,500 Cassidy Turley Colorado Denver County Behind the office and multifamily markets, Denver County’s industrial market quietly had its strongest year since the economic recession in terms of leasing activity. The county recorded nearly 1.3 Million SF of positive absorption, helping drop average market vacancy to 5.7%, a 130 basis point decrease from the end of 2011. This was led by multiple companies moving into significant sized spaces, the largest being Goodwill Industries move into 220,000 SF at 4355 Kearney Street off of I-70. Address / 23 Arapahoe County Arapahoe County is one of the most populous counties in Colorado and features a range of characteristics, from the densely populated business and lifestyle-centric south I-25 corridor, to the rolling plains extending into the east. Arapahoe County also features some of the most affluent suburbs of Denver, including Cherry Hills, Greenwood Village and Littleton. • HealthSouth Corp: Started construction on a 49,000 SF rehabilitation hospital in Littleton. The hospital is expected to be operational by September 2013. Arapahoe County is a major location of business and commerce in the State of Colorado. The Interstate 25 corridor in the southeast suburbs of Denver includes approximately 7,000 acres spread out over twenty business parks. The Southeast submarket has the largest concentration of office buildings in metro Denver with 44 Million SF, 28 Million of which is located in Arapahoe County. The County is also home to many prominent retail and shopping outlets, including Park Meadows Mall, the Streets at Southglenn and the new 400,000 SF Ikea situated on I-25. Arapahoe County contains 42 Million SF of office space, the majority of which is focused along the I-25 corridor in Greenwood Village. The county recorded its highest absorption totals for office space within the past five years, at 643,000 SF of positive absorption, helping bring vacancy down 200 basis points from the beginning of the year to 14.8%. Demand for office space in this market has increased dramatically over the past two years, with many companies relocating or expanding in the Southeast market. Because of this, large blocks of space have become harder to attain, especially for high quality space, which has allowed landlords the flexibility to increase asking rental rates. Rates increased to $18.51/SF full service in the fourth quarter, a 5.7% increase year-over-year. The increased demand has also led to a surge in investment activity, with close to $600 Million in total sales volume during 2012, double the volume recorded in 2011 and the highest total recorded since 2006. Significant property sales included those of the Southeast Corporate Center, Plaza Tower One, Village Center Station and Peakview Tower, among others. There were a number of significant headlines in Arapahoe County during 2012, including the following: • Kaiser Permanente: Announced that it will hire up to 500 IT professionals at a new campus in Greenwood Village by 2015. • Connextions: In August, the health care technology company opened a 550 employee solutions center in Centennial. • Great-West Financial: Having already added over 100 new jobs to its headquarter location in Greenwood Village, the company announced that it plans to add an additional 100 jobs to the location in 2013. • DaVita Healthcare Providers: Added 100 jobs in its recently opened guest services contact center in Centennial. “Arapahoe County is a major location of business and commerce in the State of Colorado. The Interstate 25 corridor in the Southeast Suburbs of Denver includes approximately 7,000 acres spread out over twenty business parks.” The retail market was also a strong performer in Arapahoe County, with over 260,000 SF of positive absorption, bringing vacancy down 80 basis points year-over-year to 7.4% in the fourth quarter. Average asking rents increased 3.1% from the end of 2011, finishing 2012 at $14.98/SF NNN. The most significant retail project currently underway in the county is 2012 Arapahoe County Leasing Summary Property Type Building Base Direct Vacant Sublease Vacant Total Vacant 2012 Vacancy 2011 Vacancy Average Asking Rents Office 41,847,629 6,102,352 40,505 6,142,857 14.68% 16.38% $18.48 Industrial 33,515,066 2,553,266 33,186 2,586,452 7.72% 7.88% $7.10 Retail 36,186,691 2,608,426 44,450 2,652,876 7.33% 8.14% $15.06 Total 111,549,386 11,264,044 118,141 11,382,185 10.20% 24 / Cassidy Turley Colorado All rates NNN except for office (full service) 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado Arapahoe County Demographics Population 575,022 Employment 270,342 Labor Force 319,084 Average Wage $56,498 Median Age 36 the redevelopment of Kent Place. The 11.5 acre site is currently owned by a partnership of Forum Real Estate Group, Continuum Partners and Regency Centers, and is being constructed as a mixed-use center with a grocery-anchor shopping center along with a 300 unit Multifamily community. Arapahoe County has approximately 32 Million SF of industrial/flex product. The Santa Fe corridor is the most robust industrial submarket in the county serving the southwest Denver suburbs. This submarket includes over 12 Million SF of industrial/flex space and was 5.3% vacant as of the fourth quarter of 2012. Asking rents remained stable, finishing the year at an average rate of $7.09/SF NNN for both warehouse and flex space. 2012 Arapahoe County Major Sales Size (SF) Type Price 23901 E. Orchard Rd. 860,651 Retail $102,500,000 11900 E. Cornell Ave. 286,000 Office $90,846,892 6400 S. Fiddlers Green Cir. 468,885 Office $82,500,000 6380 S. Fiddlers Green Cir. 233,958 Office $62,000,000 5151 S. Rio Grande St. 350 Units Multifamily $60,000,000 6565 S. Greenwood Plaza Blvd. 264,149 Office $54,000,000 688 Units Multifamily $49,500,000 2234 S. Trenton Wy. 384 Units Multifamily $47,000,000 22959 E. Smokey Hill Rd. 320 Units Multifamily $45,250,000 24750 E. Applewood Cir. 340 Units Multifamily $42,750,000 342 Units Multifamily $39,250,000 2134 S. Richfield Wy. 7 36 15849 E. Jamison Dr. I N T E R STAT E r Arapahoe County LL Address I N T E R STAT E 25 225 INTERSTATE 85 70 AURORA arapahoe englewood Littleton 85 Centennial greenwood village Cassidy Turley Colorado / 25 Jefferson County Jefferson County Jefferson County Demographics over 340 of the company’s employees. The company Jefferson County has long been known as the “Gateway to the Rocky Mountains” and built the expansion because it has experienced rapid includes much of the western side of Metro Denver as well as portions within the foothills of growth and the expansion will provide it with additional the nearby mountains. Interstate 70 transverses westward through Jefferson County, passing storage and manufacturing space. some of Colorado’s most famous ski resorts before continuing on into the neighboring state of Utah. Major employers within Jefferson County include Jefferson County’s retail market also Lockheed Martin (Aerospace/Defense), MillerCoors Brewing performed well in 2012. Vacancy Company (Food & Beverage), Exempla Lutheran Medical Center “The expansion line, expected to dropped over 400 basis points during (Healthcare) and Terumo BCT Inc. (Medical Technology). complete in April 2013, along with the the year to 8.1%, due to 220,000 Federal Center initiative in Lakewood, should spur a number of transit-oriented developments along the U.S. 6 corridor in coming years.” Jefferson County is served by major highways I-70, I-76 and C-470, and will also benefit from one of the major expansion lines of Denver’s RTD Light Rail. The West 12 mile light rail expansion line which will provide an important connection between Golden, Lakewood and Downtown Denver made significant progress in 2012. The expansion line, expected to complete in April 2013, along with the Federal Center initiative in Lakewood, should spur a number of transit-oriented developments along the U.S. 6 corridor in coming years. The $435 Million St. Anthony Medical Campus was completed on 6th and Union in 2011 and the Federal Center is currently in the planning stages of redeveloping the center and surrounding area. The office market in Jefferson County contains approximately 21.8 Million SF. Vacancy in the county increased slightly due to 40,000 SF of negative absorption, up to 15.3% in the fourth quarter. Despite increased vacancy, asking rental rates increased over the course of the year, up to an average of $18.18/SF full service, a 2.0% increase year-over-year. The largest lease signing was New West Physicians, who moved into 32,000 SF of space at the Cole Center at Denver West in Golden. After a tough year in 2011, Jefferson County’s industrial market had a positive 2012, with nearly 600,000 SF of positive absorption, dropping vacancy by 200 basis points to 4.3% in the fourth quarter. Rental rates increased slightly, up 2.0% year-over-year to $7.25/SF NNN at year end. There was one significant development completed in the county. Sundyne Corporation, manufacturer of engineered pumps and compressors, finished construction on an expansion at its 180,000 SF headquarter facility in Arvada, which currently accounts for 26 / Cassidy Turley Colorado Population 535,533 Employment 202,559 Labor Force 304,791 Average Wage $48,952 Median Age 41 SF of absorption and construction beginning on the previously vacant site of the Lakeside Redevelopment. Walmart will anchor the site, just finishing construction in November on a 150,000 SF super center store. Asking rental rates for retail space in the county increased slightly, up 1.9% year-over-year to an average of $12.68/ SF NNN. The multifamily market in Jefferson County saw a significant increase in investment activity during 2012, with sales more than doubling the county’s previous annual high with $480 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado 2012 Jefferson County Major Sales Address Size (SF) Type Price 8507 W. Hampden Ave. 600 Units Multifamily $66,700,000 8153 W. Eastman Pl. 352 Units Multifamily $65,475,000 1724 Robb St. 360 Units Multifamily $40,100,000 7846 W. Mansfield Pky. 300 Units Multifamily $39,000,000 9100 Vance St. 276 Units Multifamily $37,750,000 770 S. Vance St. 208 Units Multifamily $34,800,000 71,000 Health Care $33,100,000 301 Jackson Dr. 196 Units Multifamily $31,250,000 6792 W. 19th Pl. 192 Units Multifamily $17,000,000 7865 Allison Way 168 Units Multifamily $16,831,900 5344 S. Kipling Pky. Million in total volume. Eight transactions in excess of $20 Million were recorded, with the sale of The Hamptons and The Huntington Apartments in Lakewood being the largest, totaling $66.7 Million or $111,167 per unit. Multifamily development remained steady as well, with one significant project currently under construction, the 450,000 SF Arvada Station community in Wheat Ridge, which will feature 160 luxury apartment units with a resort style pool and spa. Development is expected to pick up over the next two years in the county, with over 2,600 units currently in the early to late planning stages of development. Jefferson County 2012 Jefferson County Leasing Summary Property Type Building Base Direct Vacant Sublease Vacant Total Vacant 2012 Vacancy 2011 Vacancy Average Asking Rents Office 21,916,246 3,262,147 98,866 3,361,013 15.34% 14.40% $18.14 Industrial 29,166,850 1,268,336 6,406 1,274,742 4.37% 6.43% $7.28 Retail 33,153,133 2,618,010 165,708 2,783,718 8.40% 8.49% $12.51 Total 84,236,229 7,148,493 270,980 7,419,473 8.81% All rates NNN except for office (full service) Cassidy Turley Colorado / 27 Boulder/Broomfield County Boulder County Boulder County Demographics Boulder County, located along the foothills of the Rocky Mountains in Northwest Denver, is a unique location with a diverse business climate. The sixth most populous county in the state, Boulder has a high concentration of employment in the information technology, bioscience and aerospace industries. The quality of life and appeal of Boulder, along with one of the top research institutions in the country in the University of Colorado, have helped draw many companies to the area, particularly start-up technology companies. Below is a list of some of the many accolades that Boulder received during 2012: • Cities Where Startups are Thriving (#1) CNN Money • Top Cities for Technology Start-ups (#9) USA Today • 10 Incredible and Underrated Cities to Live In (#6) BuzzFeed • Top 10 College Towns (#1) Livability.com • Most Well-Read Cities for Affordable Vacations (#7) Amazon.com 2012 Boulder County Major Sales Address Size (SF) Type Price 205-225 Ken Pratt Blvd. 329,905 Retail $72,000,000 2310 9th Ave. 100,000 Health Care $28,000,000 919-951 Pearl St. 42,000 Office $16,100,000 3333 Walnut St. 65,545 Office $13,780,200 2870 28th St. 14,820 Retail $7,389,392 38.38 Acres Land $7,381,760 1900 9th St. 18,335 Office $7,012,700 1625 & 1751 S. Fordham St. 124,179 R&D $6,875,000 371 Centennial Pky. 73,485 Office $5,865,000 108 Units Multifamily $5,400,000 Clover Basin Dr. 600 Martin St. 28 / Cassidy Turley Colorado During 2012, there were a few significant companies Population 295,487 to relocate or expand their presence in Boulder County. NeoMedia Technologies, a leader in mobile Employment 152,116 barcode scanning solutions, announced in January that it planned to relocate its corporate headquarters Labor Force 175,874 from Atlanta to Boulder, citing Boulder’s growth as a hub for the high tech and mobile community as Average Wage $55,358 the reasoning behind its decision. SEFE Inc., a Median Age 36 company focused on power generated from static electricity, also announced it would be relocating its headquarters to Boulder in April, moving from Arizona to consolidate its business as it had recently opened a Science and Technology Research Center in the county. Other notable stories include Covidien PLC, a manufacturer of medical devices, which opened a new 65,000 SF R&D center in March creating 160 new jobs, and Albeo Technologies, manufacturer of LED fixtures, which announced in July that it planned to expand its Boulder manufacturing space by 15,000 SF and increase staff at the facility by 30%. Because of this increased activity, Boulder’s office market recorded a remarkably strong year, with nearly 400,000 SF of positive absorption in 2012. Vacancy dropped 270 basis points from the end of 2011, down to 7.3%, the lowest vacancy has reached in the past decade. Along with the decreased vacancy came an increase in rental rates, which bumped up 3.2% year-over-year to an average of $20.57/SF full service in the fourth quarter. Boulder County’s industrial and flex market consists of nearly 28 Million SF of space. Vacancy for the county fell 70 basis points during 2012 to 7.3% in the fourth quarter with positive absorption close to 200,000 on the year. Average asking rents increased slightly to $8.40/SF NNN in the fourth quarter, up from $8.15/SF in 2011. The retail market in Boulder County had a positive year with decreasing vacancy and high absorption. As of the fourth quarter, the retail market posted a vacancy rate of 7.0%, down 90 basis points from the end of 2011. There was also a spike in the sale of retail properties, with over $120 Million in volume sold during the year, nearly triple 2011. This was due mostly to the sale of Harvest Junction Shopping Center in Longmont. Panattoni Development Company sold the 330,000 SF center sold for $72 Million or $218.25/SF, at a recorded cap rate of 6.75%. 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado Broomfield County Broomfield County falls between Denver and Boulder Counties, and is the smallest in the metro area with a population of 56,000 people. Broomfield is strategically located in a major growth area and has served as a hub for hightech employment for the past 50 years. Like Boulder, Broomfield County Demographics Broomfield County offers a friendly business environment Population 56,135 which has allowed it to grow substantially. Broomfield also has a significant amount of developable land which Employment 29,919 provides the opportunity for continued growth in the future. Business parks including Broomfield Business Center, Labor Force 30,912 Great Western Business Park, Interlocken, Interpark, and North Park are all in the early stages of development, and Average Wage $65,673 offer a combined 2,340 acres for new construction. Median Age 37 The office market in Broomfield is approximately 6 Million SF. Average asking rents reached their highest point in over a decade during 2012, at $27.31/SF full service as of the fourth quarter, over $2.00/ SF higher than during 2011. The 185,000 Class A office property named “EOS” finished construction in Broomfield in October and is currently seeking tenants to lease space within the property. The property was the first speculative development in the metro market in over four years and any further development in 2013 will likely hinge on EOS’s ability to secure tenants quickly. Address Size (SF) Type Price 1 W. Flatiron Cir. 1,502,215 Retail $323,000,000 12002-12303 Airport Wy. 461,438 Office $92,000,000 10901-11101 W. 120th Ave. 326,628 Office $42,400,000 17101 Huron St. 162,000 Industrial $19,500,000 1100-1170 Hwy. 287 114,870 Retail $15,750,000 1302-1318 W. 4th Ave. 90 Units Multifamily $6,400,000 910 Acres Land $5,546,000 7005-7035 W. 120th Ave. 82 Units Multifamily $5,400,000 340 E. 1st Ave. 28,066 Office $4,430,200 12555 Sheridan Blvd. 50 Units Multifamily $3,000,000 16583 Las Brisas Dr. Boulder/Broomfield County 2012 Broomfield County Major Sales Broomfield’s retail market consists of 5 Million SF of space, with Flatiron Crossing Shopping Center being the only major retail center in the county. While the office market performed exceptionally well in 2012, the retail market did not fare as well with over 240,000 SF of negative absorption. This helped push vacancy up to 12.2%, a 200 basis points increase during the course of the year. Broomfield’s industrial market, with just over 4.5 Million SF, recorded 270,000 SF of positive absorption, decreasing vacancy by 240 basis points in 2012 to 8.8% in the fourth quarter. The most significant news in Broomfield County during 2012 was SCL Health System’s announcement that it would be relocating its corporate headquarters to the Denver Metro area, creating approximately 750 new jobs in total, 550 of which would be located in its Broomfield office. It is likely that many more companies will consider relocating to Broomfield during 2013 given the county’s relaxed business policies and potential for future growth. Cassidy Turley Colorado / 29 Adams County Adams County Adams County Demographics Adams County is located in the northeastern portion of the Denver Metro region. Most of the county is situated to the north of Interstate 70 and to the east of Interstate 25 and features a diverse mix of industrial and residential neighborhoods. Agricultural activities account for the largest use of land in the county, using approximately three quarters of the land area. The rest of the county is primarily attributed to industrial uses, with 34 business parks ranging in size from 100 to 5,400 acres providing for a large contingent of distribution, warehouse, and manufacturing properties. Major industries in Adams County include Healthcare, Bioscience, Construction, Logistics, Aviation, Energy and Technology. Adams County is likely to be one of the fastest-growing counties in the state over the next two decades in population and employment. Forbes ranked Adams County as the thirdbest place in the nation to weather the economic recession in 2008. The county is the direct benefactor of four major local projects, each with an excess of $1 Billion in capital investment: “Adams County is home to the largest concentration of industrial properties in the seven-county region.” • Anschutz Medical Campus Adams County is home to the largest concentration Population 443,715 of industrial properties in the seven-county region. With over 64 Million SF of existing space distributed Employment 147,987 across major business parks such as Adams Crossing, Majestic Commercenter, ProLogis Park 70 Labor Force 231,640 and Eastgate Business Center, the industrial market Average Wage $43,467 benefits from immediate access to the I-70 corridor and other major interstates as well as proximity to Median Age 33 Denver International Airport. The Industrial market recorded a year of high activity in 2012, with over 670,000 SF of positive absorption, dropping vacancy down to 7.5% from 8.6% to start the year. Average asking rents increased slightly from 2011 to $4.63/ SF NNN for both warehouse and flex space. Development activity re-emerged in full strength during 2012, with over 350,000 SF in deliveries, and nearly one Million SF currently under construction. The following developments are either finished or are currently under construction. • 17901 E. 40th Avenue: 550,000 SF build-to-suit property currently under construction. Will serve as distribution / food storage space for United Natural Foods. Construction planned to complete by April 2013. • E-470 • FasTracks • ProLogis Park 70: Construction underway on 320,000 SF build-to-suit space for Niagara Bottling Co. Construction planned to complete by April 2013. • Denver International Airport 2012 Adams County Leasing Summary Building Base Direct Vacant Sublease Vacant Total Vacant 2012 Vacancy 2011 Vacancy Average Asking Rents Office 7,509,949 909,493 29,605 939,098 12.50% 13.14% $16.90 Industrial 64,434,417 4,857,939 205,260 5,063,199 7.86% 8.08% $4.63 Retail 19,894,494 1,673,114 5,654 1,678,768 8.44% 8.45% $12.08 Total 91,838,860 7,440,546 240,519 7,681,065 8.36% Property Type 30 / Cassidy Turley Colorado All rates NNN except for office (full service) 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado 2012 Adams County Major Sales Size (SF) Type Price 2525 E. 104th Ave. 480 Units Multifamily $68,256,400 2700 W. 103rd Ave. 384 Units Multifamily $42,500,000 2710 Bruchez Pky. 232 Units Multifamily $28,600,000 1900 W. 85th Ave. 492 Units Multifamily $28,250,000 8451 Pearl St. 131,210 Health Care $18,733,000 3471 & 3511 Salida Ct. 98,306 Retail $17,025,000 9081 Federal Blvd. 228 Units Multifamily $16,614,000 4703 W. 52nd Ave. 127 Units Multifamily $16,250,000 95,791 Retail $11,550,000 200 Units Multifamily $8,000,000 12900-12910 Zuni St. 10370 Brendon Wy. • ProLogis Park 70: A 220,000 SF build-to-suit property delivered in November 2012. Interline Brands will occupy entirety of the space. • 9461 Willow Ct.: Construction completed in November on 90,000 SF manufacturing facility for UE Compression. Adams County’s office market is minimal compared to the industrial market, totaling approximately 7.5 Million SF. Vacancy rates decreased slightly during 2012, down to 12.5% in the fourth quarter, 70 basis points below the average rate at the end of 2011. Over 1.1 Million SF of the market is medical office space, which has benefited from the addition of Anschutz Medical Campus & Fitzsimons Life Science District. Rental rates for the Adams county office market have remained stable with average asking rents between $16-17/SF full service over the past five years. Rates finished 2012 at an average of $16.88/SF. Like the office market, Adams County’s retail market is small, totaling 19 Million SF, with only two significant shopping centers, Westminster Plaza Shopping Center and Thornton Town Center. Vacancy for the retail market remained stable in 2012, finishing the year at 8.4%. Average rental rates have decreased significantly since 2008 and continued to fall over the past year, albeit at a slower rate. Rates dropped 4.1% year-over-year to $12.09/SF NNN in the fourth quarter. Cassidy Turley Colorado / 31 Adams County Address Douglas County Douglas County Douglas County Demographics Douglas County, to the south of the City of Denver, is home to 290,000 residents. The county is located midway between Colorado’s two largest cities, Denver and Colorado Springs, and is home to numerous residential neighborhoods and business parks including Highlands Ranch, Meridian, Parker, Castle Rock and Castle Pines. The county also contains a large contingent of open space and national parks, with over 71 square miles of permanently protected land. Since 2000, the county has grown in population by 65%, making it one of the fastest growing counties in the United States. Douglas County’s office market contains over 11 Million SF of space and is concentrated primarily along the southern portion of C-470 and I-25 in Highlands Ranch and Meridian. Vacancy dropped significantly in 2012, decreasing by 240 basis points year-over-year to 8.4% in the fourth quarter, due to 260,000 SF of positive absorption. The most notable story in the office market was the announcement that The TriZetto Group would be building a new 186,000 SF property to serve as its world headquarters in Meridian. The property began construction in April and is planned to complete in early 2013. TriZetto is expected to create over 750 new jobs at the facility within the next five years. Hitachi Data Systems also announced that will be expanding into Colorado, with plans to construct a 50,000 SF office building in Meridian “The most notable story in the office market Corporate Center, potentially creating was the announcement that The TriZetto up to 400 jobs at the facility. Group would be building a new 186,000 SF property to serve as its world headquarters in Meridian. The property began construction in April and is planned to complete in early 2013. TriZetto is expected to create over 750 new jobs at the facility within the next five years.” 32 / Cassidy Turley Colorado The industrial market in Douglas County is approximately 9 Million SF and experienced a moderate growth in activity during 2012. Vacancy finished the year at 5.8%, a 50 basis point drop from 2011, with 160,000 SF of positive absorption. The industrial vacancy rate in the county has Population 287,152 remained slightly below that of the metro average, which has helped to push average asking rents Employment 89,824 higher over the past two years. Average rents for Labor Force 160,069 both warehouse and flex space increased 4.0% from 2011, to an average of $8.37/SF NNN in the fourth Average Wage $52,971 quarter. One industrial property delivered in 2012, with Gordon Holdings, a laminate manufacturer, Median Age 37 completing construction on its new 120,000 SF Polystrand manufacturing facility in HighField Business Park. The property also contains a large contingent of office space, allowing it to function as Polystrand’s corporate headquarters. Douglas County is home to some of the larger retail developments in the metro Denver region, including the Park Meadows Mall and the Castle Rock Outlets. Retail vacancy remained stable, finishing 2012 at an average of 5.5%, with minimal market absorption. However, due to high absorption figures over the previous three years, landlords were confident in their ability to increase asking rents, which averaged $18.28/SF NNN in the fourth quarter, a $0.30/SF increase over average rates in 2011. Construction of retail space remains minimal, with only one major project currently under construction, the 110,000 SF Cabela’s, which is expected to deliver in July 2013 off Ridgegate Parkway and I-25. Douglas County also continues to increase its healthcare and medical office infrastructure. In November, Bonaventure completed construction of a 100,000 SF assisted living facility in Castle Rock, while The Children’s Hospital broke ground on a 175,000 SF facility in Highlands Ranch, which is expected to hold 80,000 patient visits within the first year. In addition, Kaiser Permanente is currently constructing a new hospital in Meridian, which will host a mixture of specialized medical services. The hospital will total 275,000 SF on six floors, and is planned to deliver in late 2013. 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado 2012 Douglas County Leasing Summary Property Type Direct Vacant Sublease Vacant Total Vacant 2012 Vacancy 2011 Vacancy Average Asking Rents Office 11,218,158 903,498 36,643 940,141 8.38% 10.77% $22.07 Industrial 8,991,489 515,271 0 515,271 5.73% 6.32% $8.43 Retail 16,161,360 725,570 162,500 888,070 5.50% 5.22% $18.29 Total 36,371,007 2,144,339 199,143 2,343,482 6.44% Douglas County Building Base All rates NNN except for office (full service) 2012 Douglas County Major Sales Address Size (SF) Type Price 19255 E. Cottonwood Dr. 660 Units Multifamily $82,750,000 520 Dale Ct. 356 Units Multifamily $50,850,000 18931 E. Briargate Ln. 326 Units Multifamily $44,500,000 10375 Park Meadows Dr. 192,359 Office $34,000,000 5642, 5646 & 5650 Allen St. 105,528 Retail $20,600,000 333 Inverness Dr. S. 140,162 Office $18,900,000 304 Inverness Wy. S. 134,691 Office $11,550,000 8757 Ridgeline Blvd. 56,400 Flex $6,768,000 16.9 Acres Land $6,677,951 21,000 Retail $5,600,000 1811 Plaza Dr. 11211 S. Dransfeldt Rd. Cassidy Turley Colorado / 33 Professionals, Sources & Methodology Cassidy Turley Colorado Professionals Methodology Management Office Gregory W. Morris Brian J. Baker Donald L. Kortz President & CEO Vice President Corporate Counsel Chairman of the Board Kristine Reinhardt Andrea Jones Executive Vice President & COO Vice President Marketing & Research Includes Class A, Class B, Class C, suburban garden office buildings and medical office buildings. Class A product is steel and concrete construction, built after 1980, quality tenants, excellent amenities, and premium rents. Class B product is built after 1960, fair to good finishes, and wide range of tenants. Industrial (IND) Buildings used for warehouse, light manufacturing and R&D purposes that meet those building’s specifications. Office Specialists Investment Specialists Northern Colorado Office Manufacturing (MFG) John Ash Ron Allum Travis Ackerman Stockton Baker Jim Brady John Baker Whitney Hake Trevor Brown Brian Hutt Jeff Halsey Russell Baker Manufacturing buildings generally have a parking ratio less than 3/1000, clear height less than 18', dock or grade-level doors, 6-15% office buildout, and one side of glass. Robert Knisely Patrick Henry Jason Ells Warehouse (WHSE) Bill Lucas Kittie Hook Jared Goodman Dan Miller Terry Matthews David Stinnette R.C. Myles Cole Herk Warehouse buildings generally have a parking ratio less than 2/1000, clear height greater than 18', multiple dock and/or grade-level doors, limited office buildout, and a limited amount of glass. Dick Tinkham Brian Mannlein Flex Doug Wulf Aki Palmer Flex buildings generally have a warehouse component with approximately 50% or more of the space built out as office. Office | Tenant Representation Specialists Preston Dunn Ted Harris Dan Ryan Rick Schepis Joe Sigdestad Land Specialists Industrial Specialists Nate Heckel Jim Palmer Chris Ball Dan Bess Tim Gilchrist Esther Kettering F & C Holdings Jeff Roemer Joe Krahn Craig Myles Brandon Ray Teri Merbach, Manager, Graphic Design Total Availables All space being marketed for lease, direct or sublease, available within 90 days. This may include availabilities with pending leases. Alec Rhodes Research Analysis Aaron Valdez Sean Wiseman Ken Egan Brian Wilkes Stan Shapiro Golf Property Specialists John Emmerling Total floor space available for retail sales, usually in SF. Vacancy Sources Available square footage divided by total square footage of inventory. Retail Specialists Special Thanks To Net Absorption Tyler Bray Metro Denver Economic Development Corporation Change in occupied square footage from period to period. T.J. Johnson Art Seiden Gross Leaseable Area (GLA) Design, Art Direction & Production Tyler Smith Stew Mosko A planned group of connected retail stores, usually with an attached parking area, specially developed on a parcel of private property and managed by a single organization. Steve Poole Jim Capecelatro Mike Kboudi Retail Shopping Center David Fried Robert Hudgins Data Provided By Ray Rosado CoStar Group Real Capital Analytics Metrostudy Apartment Insights Bureau of Labor Statistics Gross Absorption Total lease or user purchase activity in a period. Rent Range Range in asking rates at the end of 2010. Unless otherwise noted, office rents are quoted as monthly full service rates, and R&D, mfg, and whse are quoted as NNN monthly rates. Average Rent Rate The weighted average (by square footage) of quoted rents at the end of 2010. N/A Indicates information was not applicable or not available at press time. © 2013 Cassidy Turley Colorado 34 / Cassidy Turley Colorado 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado Professionals, Sources & Methodology Cassidy Turley Colorado / 35 2012 Commercial Real Estate Overview Metro Denver and Northern Colorado Cassidy Turley Colorado Denver 1515 Arapahoe Street, Suite 1200 Denver, Colorado 80202 303.292.3700 phone 303.534.8270 fax Northern Colorado 772 Whalers Way, Suite 200 Fort Collins, Colorado 80525 970.776.3900 phone 970.267.7419 fax www.cassidyturley.com/colorado