Commercial real estate outlook encouraging

Dale Beede
Dale Beede

Several national sources list Colorado as the state with the fastest-growing economy in the nation. We all know Denver and Front Range communities have experienced fantastic growth in payrolls as well as housing prices and industrial lease rates.

Meanwhile, the Grand Junction economy seems to be plugging along. We’re reminded that we tend to follow the Denver economy by 2 to 2 1/2 years. Does that mean we’re just months away from a growth economy?  Maybe. But maybe not.

The year has seen strong growth in investor purchases of primarily industrial buildings in the Grand Valley. Most of the sales have been cash transactions, and nearly all the properties sold had ongoing leases in effect.

Capitalization rates have ranged from 8 percent to as high as 10.5 percent, meaning investors expect to achieve an 8 percent to 10.5 percent return on their investments in the first year. This is a good signal we’ve passed the market bottom and some growth could now occur in the sector. Coldwell Banker Commercial Prime Properties reports a year-over-year increase of 40 percent in commercial sales through July

The rumor mill remains busy. The unconfirmed, but prevailing, rumor is that Encana will return to the Piceance Basin in Western Colorado and drill 114 new wells next year. If this were to occur, certain energy services companies would be able to add local employees and the monetary trickle-down effect would help lift all ships in the Grand Valley marketplace.

In addition, rumor has it Community Hospital soon will announce construction will begin on a new hospital along G Road at 23 1/2 Road. Those new construction jobs also would be a boon to the local economy. And if St. Mary’s Hospital continues to move forward with the interior construction on two of its unoccupied floors, we could once again see the start of a mini construction boom in the valley.

When we turn from market statistics and the rumor mill, we see a local economy that’s gaining strength, but still weak in terms of the job base. Yes, our unemployment rate has slipped to its lowest level in nearly six years. But what happened to the 20,000 to 30,000 jobs that were shipped to North Dakota and Texas?  Consider that a lower unemployment rate means a higher proportion of residents are working. But if we lost all those jobs, is the local economy really stronger?

When considering market cycles, it appears the higher number of investor purchases of income real estate, lower foreclosure rates on homes and lower unemployment rate all point to an economy that’s bottomed and is poised for growth. The worst could very well be behind us.

But, not so fast. It’s interesting to note the Mesa County economy now closely replicates the United States economy. As job growth, new construction and economic growth goes in the country, so goes our local growth in all those sectors. When we consider the available talent and leadership in both the United States and Grand Valley economies, we must expect job growth to continue in both and should give the edge in total growth to our local economy.

Here’s to continued success for our valley and our country throughout the remainder of this year.