Opportunistic market: Vacancies, lower prices make commercial purchases attractive
Commercial real estate avoided the fate many economists predicted in the wake of the Great Recession. With bond payments coming due for shopping malls and other major commercial properties — along with tighter lending regulations —owners of commercial properties were expected to file for foreclosure in massive numbers.
So went the hypothesis.
While it’s true some commercial properties have been foreclosed upon — or at least sold for bargain prices — since 2009, there’s been no large-scale closure of malls or big box stores nationwide.
With the notable exception of the closures of Blockbuster, Borders and Circuit City stores, businesses have remained open in most commercial spaces in the Grand Valley. In fact, some vacancies are attributable to business success — the opening of a new City Market grocery store on 24 Road that resulted in the closure of the Eastgate store on North Avenue and the relocation of Hobby Lobby into a new building.
Other companies have entered the marketplace by opening in new structures. Candlewood Suites on 24 Road north of the new City Market opened this summer. American Furniture Warehouse is scheduled to move into a building under construction northwest of Gold’s Gym on U.S. Highway 6 & 50.
In light of the dire predictions from 2009, commercial real estate is downright robust. It’s no picnic for those trying to sell during a soft market. But it can be a very good time to buy commercial.
“This is a great market to find a property that can be purchased at a reasonable price for a person’s business or for investment,” says Dale Beede, managing broker at Coldwell Banker Commercial Prime Properties in Grand Junction.
Interest rates remain low and banks are still lending to qualified customers, Beede says.
“There are quite a few smaller commercial buildings on the market currently for sale or for lease,” Beede adds. “That number has grown substantially in the past year.”
Beede estimates that 10 percent of the commercial space in the valley is vacant. A survey conducted by the City of Grand Junction earlier this year indicated the building vacancy rate varied from a low of 3 percent in the northwest area of the city that includes Mesa Mall to 10 percent in the Appleton Area north of G 1/2 Road and west of 26 Road.
A few large vacant buildings pull up the overall vacancy rate, says Sid Squirrell, a real estate agent with Bray Commercial in Grand Junction.
The retail vacancy rate would be lower if not for the recent vacancies on North Avenue or the holes left when Circuit City and Borders went out of business. Warehouse and industrial vacancy rates were pulled up by the closure of the Manpower building on 21 1/2 Road. So don’t expect large companies to construct new buildings in the near future, Squirrell says. “That space has to be filled before they build new.”
At the same time, office space is tight by comparison — floating between a 3 percent and 5 percent vacancy rate, Squirrell says.
Prices can vary greatly for commercial space, depending on whether it’s retail, industrial or office space.
In addition to vacancies at the former Borders, Redlands Blockbuster, Eastgate City Market and North Avenue Hobby Lobby stores, Office Depot vacated its space near Mesa Mall when it moved next door into a building that previously housed Circuit City.
In addition to the new buildings housing City Market and Hobby Lobby, the Rimrock Trade Center added a Brakes Plus store and Einstein’s Bagels outlet.
A Sonic Drive-In restaurant also opened in the shopping center that features Wal-Mart as an anchor.
In downtown Grand Junction, Steve and Kevin Reimer opened a Springhill Suites by Marriott this summer. The hotel is the third Main Street hotel opened by the Reimers. On Horizon Drive, a portion of what was the Clarion Inn was converted into an Econo Lodge property.
The new and renovated lodging properties better enable the Grand Valley to meet demand for hotel rooms that comes with the late summer and fall seasons. The Palisade Peach Festival, Rock Jam, a downtown Grand Junction auto show, the Pork and Hops Fest, Colorado Mountain Winefest and Fruita Fall Festival all occur in late August and September.
For businesses looking for vacant space — or considering financing to construct space from scratch — the commercial real estate market in the Grand Valley can offer opportunities.
“I think it starts with consumer confidence, which leads to greater job growth and people spend more money,” Squirrell says.
There are two more critical factors, he says. They are pent up demand, which could lead people to buy properties, and fatigue. People eventually tire of delaying purchases until the future.
Beede, Squirrell and others in the commercial real estate business hope such factors spur spending in coming months.