CREJ

Page 30 — Office & Industrial Quarterly — March 2021 www.crej.com INDUSTRIAL — MARKET UPDATE opment company. The RMCIT property, a four-build- ing complex consisting of a total of 811,757 sf, sold for $15.5 million, or $19.09 per sf. The Woodward building consists of 209,000 sf and sold for $4.2 million, or $20.22 per sf. By removing these three transac- tions from the calculations, the aver- age sale price of industrial sales in 2020 becomes $137.28 per sf, which is much more reflective of the actual market. This average price reflects core-and-shell delivery with minimal finish. The industrial market in Weld County slowed a bit but still is strong and growing again. The vacancy rate of 4.65% grew from 2.5% but is still very good. Lease rates are at an all- time high of $10.54 per sf. Almost 526,000 sf of new construction was delivered to the market in 2020. By contrast over 734,000 sf was delivered in 2019. Most of the starts were in the second quarter. Construction activity slowed dramatically in the third and fourth quarters. That slowing trend has turned around as 559,000 sf are now under construction. Weld had only 52,600 sf of negative absorption in 2020. Industrial sales volume was $102 million at an average price of $115 per sf. Weld County may see an increase in demand for industrial space as oil prices rebound after the disruption to the supply due to the disaster in Texas caused by the cold snap in Feb- ruary. According to CoStar, over one- third of Colorado’s oil and gas wells are in Weld County. As of this writing, West Texas Intermediate Crude was at $61.03 per barrel. A year ago, pre- pandemic, it traded at $53.88 before dropping to a low of -$37.63 (yes, negative) on April 20, 2020. To summarize, Larimer and Weld industrial markets are very similar in activity. The pace of new construc- tion in Weld County decreased in mid-2020 but has picked back up. Lease rates are historically high and vacancy rates are low in both mar- kets. Larimer County prices tend to be 10% to 15% higher than those in Weld County. The office markets began to see struggles as the effects of the COVID- 19 pandemic took hold. Most busi- nesses that are able to do so have minimized office staff. Companies have transitioned to a work-from- home environment using Zoom or other online products to hold meet- ings. That trend is expected to con- tinue for a while, but employers and employees are beginning to miss the social aspect of seeing and collaborat- ing with colleagues. The office market in Larimer Coun- ty was hit hard by the pandemic. Vacancy rates have increased to 7.9%, almost double from a year ago. Lease rates are down less than 1% to $23.09, but I expect more downward pressure as the year progresses. Only 89,000 sf of new construction was delivered to the market in 2020. CoStar is reporting 381,000 sf of negative net absorption. The office market inWeld County mirrors Larimer County. Vacancy rates increased to 5.6%, double from a year ago. Lease rates are down less than 1% to $19.63 per sf. Only 25,000 sf of new construction was delivered to the market in 2020 and none is under construction. CoStar is reporting 131,000 sf of negative net absorption over the last 12 months. So, office bad, industrial good. Ana- lytics are moving in the wrong direc- tion for office. While things are bad now, we have not completely fallen off a cliff as we did in 2009. If the vac- cine is effective and life returns to a semblance of normal, we should recover nicely. Northern Colorado still is one of the most desirable places to live in the country. s joep@affinitycre.com Continued from Page 19 Trade @ 2534 is a three-building, 280,000-square-foot project in the 2534 development in Johnstown. pro forma, this capital is attracted to the intense cap rate compression in recent sales that can make any deal look a little more attainable. With the newest Class A sales approaching 4% cap rates, the yield on cost spread for these deals is too attractive to ignore and even a less expertly executed project can be a home run on the dis- position. For those considering this market, population growth has driven the conversation, as over 50,000 people have moved to Colorado between July 1, 2019, and July 1, 2020. U.S. News ranked Colorado as the No.1 econo- my in the country and SmartAsset has designated Colorado as the state with the second-most “boomtowns.” With a lifestyle that sells itself and an extremely educated workforce, investors continue to be enamored with Denver. As a result, there was over $1.2 bil- lion in industrial transaction volume in 2020 alone, up 16% year over year. The market fundamentals remain strong and Denver has considerable runway. While many of my con- temporaries debate the prudence of going all in on GameStop stock, I’ll stick with industrial real estate; the “prettiest girl at prom” also happens to have a great grade-point average. All research not cited was provided by Colliers Denver and Colliers USA. s nick.rice@colliers.com Rice Continued from Page 26