Look for stable year in commercial real estate

           Though the Mesa County economy seems to be strengthening at a snail’s pace, the outlook for commercial real estate this year is looking more positive daily.  Demand should begin to outpace the formerly growing supply in industrial, office and retail properties. 

            Since our country’s credit crisis of 2008, investors have searched for stable investments while watching residential and commercial property values fall, nearly zero returns on bonds, and a stock market that, for some, has taken a Jekyll and Hyde approach to stability.  As baby boomers age, their search for a decent, stable return on their investment dollar has been made tougher by these conditions.  Real estate may now fill part of that need.  Institutional investors (insurance companies and the like) have seen stabilized returns on their core investments, (retail centers and office buildings) and the word is out that these returns are growing and exceed all other types of investments for these owners.  While in Grand Junction we seem to trail the national real estate market by a year or more, greater commercial activity and some recent investor purchases also indicate that our market may be reaching a bottom.

            This may represent good news for those investors with empty buildings and those who have had to offer below-market rents just to retain tenants. 

            It finally appears that the local residential real estate market is stabilizing.  Look, for example, at local home sales over the past year.  While only a little over two thousand homes sold in Mesa County last year, prices have begun to stabilize.  Another surprising factor is that approximately one third of home purchases last year were cash purchases, indicating that investors are shoring up the market, especially in entry-level homes.  This is a great indicator that our local market is turning the corner.

            A number of economic forecasters are saying that the economic growth in Colorado should see a “modest recovery” this year.  Those of us in the trenches know it is still all about job growth.  It is heartening to know that even though natural gas prices are at very low levels, major companies are still hiring new employees to improve their natural gas production.  These jobs are helping to strengthen the employment base in our region.

            A quick look at commercial real estate sectors:

  • Multifamily   Look for at least one and probably two projects to be approved this year for construction of new apartment dwellings in or about Grand Junction.  This is good news for contractors and potentially good news for those looking for affordable housing in the area.
  • Retail   Sunflower Farmer’s Market will represent a new natural food outlet in the city.  Construction should be completed this year.  Other retailers expected to enter our market are some new clothing retailers, fast food outlets, and automobile-related companies.
  • Industrial   We are still attracting some major energy service companies to our area.  Look for some new 10-40 acre company campuses to be erected over the next two years.  We should continue to see industrial leasing activity to increase and investor purchases should once again occur.
  • Office   The office sector has remained relatively strong over the last three years.  Vacancy rates are still fairly low, although much of this may be attributed to lower negotiated rents to retain tenants.  Look for further stabilization in the office sector as the year progresses.
  • Hospitality   The local hotel industry has suffered through this economy with the rest of us, but our Visitor and Convention Bureau along with large annual music events and grape and wine venues continue to draw visitors to the area.  Many of our hotels change hands every three to five years and more transactions should occur in 2012.  More restaurant transactions should also occur this year than in the past.

 All in all, it appears that our economic glass is now half full.  Here’s to your prosperity in 2012!