Commercial real estate market remains strong

Darah Galvin

Despite all the headlines about the effects of higher interest rates on real estate, the commercial market in Mesa County performed better than expected in 2022.

Demand for retail lead the way. Notable sales in the fourth quarter included the Monument RV Park in Fruita for $6.4 million, the vacant building that previously housed the Albertson’s on 12th Street for $2.5 million and St. Kathryn’s Cellars in Palisade for $2.9 million.

That’s not to mention the sale of two Fuoco automotive dealerships for $18 million, the largest retail sale since Bray Commercial started tracking in data in 2008.

While the number of units sold in 2022 was slightly lower than 2021, the total sales volume of retail sales rose more than 22 percent.

Demand for retail spaces was mirrored by sales tax collection numbers. The City of Grand Junction saw a 10.3 percent increase in sales and use tax collections in 2022 compared to 2021, while Mesa County experienced a 9.7 percent increase.

While rising borrowing costs slowed the multi-family purchasing market in the area and volume dropped year over year, multifamily planning clearances in the City of Grand Junction increased more than 100 percent — from 343 in 2021 to 701 in 2022.

Land purchases during times of lower interest rates gave investors an opportunity to increase the low number of multi-family buildings available for rent. The Bray Rental Report for the fourth quarter showed multifamily rents continue to increase and likely will rise further as newly built units hit the market.

The office sector of the commercial market continues to ebb and flow in Mesa County. Sales decreased 50 percent between the third and fourth quarters. Two  large transactions occurred in the sector, however: a multi-use office complex that sold for $5.26 million and medical office building that sold for $3.65 million.

Although office building sales slowed, office leases remain strong for Bray Commercial. As the need for single offices has skyrocketed, buildings offering smaller spaces quickly lease. Coworking spaces continue to gain popularity, with many of them operating with a wait list as more remote workers want dedicated spaces outside their homes.

Since there were more high-dollar industrial sales in 2021, the numbers for 2022 weren’t as strong in comparison. The number of units sold fell 20 percent, while sales volume dropped 27 percent. However, industrial sales for 2022 matched those for 2020 and 2019.

The volume of commercial land sales rose more than 13 percent from 2021 to 2022. Some notable sales included land on North Avenue where the Far East building is located and a commercial plot near the intersection of Horizon Drive and 27 1/2 Road. While some of parcels could have been purchased for land banking, the strength in sales likely heralds new commercial operations in Mesa County.

The year ahead remains just as uncertain for Mesa County as for the rest of the nation. Changing interest rates, higher inflation, continued supply chain issues and an upcoming election all will factor into the deliberations of brokers, investors, owners and tenants.

Still, the seasonally unadjusted unemployment rate continues to retreat in Mesa County, dropping to 3.1 percent in December, the latest month for which estimates are available. Average hourly earnings for Colorado employees on private, nonfarm payrolls increased to $35.52.

Business in Mesa County remains strong. The commercial real estate market should remain strong as well.