Colorado Real Estate Journal - May 4, 2016
A buyer quickly growing its Colorado Springs multifamily portfolio added to its holdings with its acquisition of Foothills West. Lavington Colorado Investments LLC out of California paid $2.65 million, or $75,714 per unit and $77.88 per square foot, for the 35-unit community at 720 Melany Lane. Lavington acquired the community in an all-cash transaction – it’s third purchase in the Colorado Springs market in the last six months, noted Saul Levy of ARA Newmark. “It closed in less than 30 days, really even before we could fully go out to market,” said Levy. “It speaks to the level of competition and activity for the Colorado Springs apartment market. There are a lot of aggressive buyers entering this market pretty recently.” Foothills West’s location on a nearly 2-acre site attracted potential buyers, added Levy. The community comprises two- and three-bedroom units, some of which are larger than 1,000 sf and all of which have in-unit washers and dryers, which is rare for 1960s construction. Additionally, the “significant” value-add potential of Foothills West drew investors. Foothills West Apartments LLP sold the property and had made some capital improvements to the property, including paint and work to entry stairways, however, Lavington Colorado is anticipated to focus more on renovations to the units themselves. Improvements planned include new flooring and making units more modern. There also is the potential to add common amenities, such as a playground and carports. “The rents were kind of below market, so through a renovation program, the buyer should be able to increase them quite a bit,” added Levy, who, with Kevin McKenna of ARA Newmark, handled the sale. There was a single vacant unit at the time of sale. “Last year, in the overall market, there were around 47 apartment transactions in Colorado Springs. Half of them were to buyers who didn’t own in Colorado Springs previously,” explained Levy. “It’s another example of a lot of new money, newer groups coming into this market. I think from a national perspective, Colorado Springs is starting to pick up traction and we’re seeing more and more investment groups take a harder look at this market.” Other News The Colorado Springs office market started 2016 strong with a total net absorption of 119,532 square feet, according to a first quarter report by Quantum Commercial Group Inc. Overall vacancy also dropped in the first quarter to 11 percent, down from 11.6 percent at the end of 2015. The average quoted asking rental rate for available office space, across all classes, was $16.54 per sf at the end of the first quarter – a 3.7 percent decrease in quoted rental rates from the end of the fourth quarter of 2015. During the first quarter, no new space was completed in the Colorado Springs office market. The firm anticipates steady, moderate growth for the remainder of 2016. It noted that the addition of new jobs is what is needed to fuel additional positive absorption and higher occupancy rates. Quantum Commercial Group also reported on several other sectors’ performance in the first quarter. The overall industrial vacancy rate remained unchanged at 9.4 percent while rental rates dipped slightly from $6.24 per sf triple net to $6.22 per sf triple net at the end of the first quarter. The warehouse sector had the lowest vacancy rate – 7.1 percent – while the flex sector had a much higher vacancy rate at 19.9 percent at the end of the first quarter. The firm noted, however, vacancy rates have stayed relatively flat over the past four years and it expects this trend to continue through the year and may even see slight decreases in vacancy rates over the next few quarters. Quantum Commercial anticipates that there may be a slight decrease in industrial sales activity this year due to the high number of sales in 2015 (24 transactions) and the limited number of available options on the market for investors and owner-users. Additionally, it sees that demand for new construction may kick-start new projects later this year. Colorado Springs’ retail market continued to improve its fundamentals as vacancy continued its downward trend to 5.6 percent at the end of the first quarter while asking rental rates increased to $11.50 from $11.45 at the end of 2015. Additionally, the retail market saw positive net absorption of 182,786 sf, sublease space trended downward and multiple large tenants inked deals. Twenty retail investment sales closed in the first quarter, including the $12.98 million sale of the Albertsons Center at 6905-7095 Austin Bluffs Parkway. Quantum Commercial Group’s quarterly reports also included a look at the investment market, which the firm expects to remain strong throughout 2016 with no projected increases in interest rates in the near future. The firm noted that with the first hints of overbuilding in Denver surfacing, investors will focus on Colorado Springs as a lower-cost alternative for all market sectors, including multifamily. “The opportunity for higher returns in smaller markets such as Colorado Springs is capturing the attention of both local and national investors,” according to the firm. Commonwealth recently released its first-quarter 2016 Apartment Sales Report, in which it noted 782 units sold for a total of $92.23 million. Within the Class A market, a single property, The Retreat at Cheyenne Mountain, sold for $49.6 million, or $179,100 per unit. The sale is the second Class A sale that closed in the $180,000 per door range. During the quarter, there were no Class B sales while there was a single Class C sale. The 288-unit Village at Lionstone sold for $28.1 million, or $97,569 per door. Commonwealth reported that the Class D market was the most active with four closed sales. The four complexes totaled 218 units with a total sales volume of $14.53 million. The average price per unit was $66,628 and the price per sf was $90.