Colorado Commercial Real Estate Market Trends Analysis

Industrial buildings are a kind of commercial real estate that is utilized by businesses that provide services to other businesses (B2B tenants). These tenants might genuinely manufacture the products, or they could be distributors that disburse a producer’s goods to other businesses.

The exception is the quickly expanding category of fulfillment centers that hold and distribute goods sold by online sales platforms directly to their buyers.

The owners of industrial properties are also long-term investor-landlords. These investments benefit from both revenue (rent) and the projected increase in the value of the property. Lease contracts are either gross or net.

Annual and 10 Year Population Growth

Population statistics are significant for industrial investment strategies for reasons that are dissimilar from residential investments. Stagnant or decreasing populations mean a declining tax base. If the local government can’t collect adequate taxes, it is unable to keep up its obligations to adequately repair the infrastructure that industrial tenants require.

All property values, commercial as well as residential, are weakened in places that are dropping residents. Industrial renters are operating businesses that need workers. These renters won’t be comfortable betting on an area that doesn’t have an increasing number of acceptable workers.

Property Tax Rates

Real estate tax rates are the identical economic forecaster for industrial property investors as they are for multifamily investors. Consistent tax rates are the sign of a predictable market for your investments.

You may want to learn more about commercial real estate taxation and how to reduce commercial property tax in the U.S. from our guides.

Accessibility

Industrial building renters typically transport substantial quantities of goods or cumbersome products. Tractor-trailer trucks are routinely employed to handle this. Industrial real estate investors hunt for properties that are adjacent to main highways that large tractor-trailer trucks can access conveniently.

Sometimes industrial companies transport their products by planes or trains. Interstate highways often go adjacent to those types of terminals which is a bonus for industrial properties situated near those interstates.

Utilities

Production facilities often need significant levels of electricity and water. A property lacking the ability to provide sufficient utilities won’t attract those businesses.

Retail buildings lease units to companies whose customers are ordinary people in the area. Those buildings might hold one renter (single-tenant) or several ones (multi-tenant). Retail companies that want to be alone encompass banks, pharmacies, dining establishments, or automobile equipment stores.

Multi-tenant buildings can be two or 3 space properties, small “strip” shopping centers, large “big box” or grocery store shopping centers with national anchor tenants. A large center with a mix of categories including office, retail, and residential are designated “lifestyle” centers.

Retail lease agreements are “net” with tenants taking care of the landlord’s tax, insurance, and maintenance of common areas as additional rent. Renters are responsible for the upkeep of the property as well.

Retail property investors search for the demographic data that their tenants will specify in their site criteria.

Population Growth

The total data for the area being considered is not enough for retail investors. Their renters are looking at the specific area, or trade area encompassing the suggested location. Retailers have to be where their shoppers live, drive past, or are employed.

A trade area that doesn’t currently have sufficient “rooftops” won’t do for retailers no matter if it is expanding. Investors in retail assets will consider all facets of population information including population size, annual and 10 year growth numbers, and how many people work in the trade area.

Median Income

The population’s wage rates are an important component of retail location requirements. Larger incomes demonstrate an acceptable site for higher end retailers, and middle wages are acceptable for blue-collar retailers such as car parts stores.

Median Age

Age data is more critical to retail investors than alternative investor categories. Based on the kind of center (grocery anchored, entertainment anchored, big box retailers) the age of the populace can entice desired retail tenants.

Property Tax Rates

The prior illustration of the way property tax rate data is utilized by industrial and apartment complex owners pertains to retail investors too. Higher taxes cause higher rents which inflate vacancy rates, and places with expanding tax rates frequently have declining property values.

In a neighborhood that has high real estate tax rates, it’s even more crucial to ensure your property isn’t overestimated by the tax office. The best commercial real estate attorneys in Colorado can assist you with a property tax protest procedure.

Office space is leased to corporations that require a location for their workers to operate. Office space can be large enough for a single worker or hundreds of employees. For many significant corporations, leasing office space allows them to use their capital for the growth of their company.

The lease agreement used for office tenants is a gross lease agreement, sometimes referred to as a “full service” lease. All of the landlord’s expenses are included when the rental payment amount is calculated. This arrangement can be adjusted to answer the needs of the owner and the tenant.

Office real estate investors keep these properties for a long time which generates income from both ongoing rental income and the increasing value of the property.

Population

The populace demographic data that office building investors hunt for needs to indicate a good number of workers for office renters. This consists of the populace’s size, age, and education level. It is critical for landlords to understand what their potential clients want and to study the region accordingly.

Property Tax Rates

A financially solvent city that ensures a desirable living situation for office employees will keep stable tax rates. A qualified workforce pool draws sought after office tenants.

Incomes/Cost of Living

Office renters acknowledge current income levels as one sign of the qualifications of the workforce. It can additionally show the wage levels that employers will have to provide.

Education

Office landlords realize that the education level of the labor pool will be significant to their prospective renters. A call center may not require college graduates, but an attorney services renter could.

BRRRR, which means “buy, rehab, rent, refinance, repeat”, is an investing plan to expand your portfolio by taking advantage of the appreciated value of the asset. These are long-term or Buy and Hold investments. The investor earns lease revenue during their ownership and a single sum when the asset’s price goes up, and they unload it.

Initially the investor acquires a property, then they rehab it and locate a tenant. Then the property is refinanced subject to its enhanced worth, and the increase in its worth is paid out to the investor. The investor uses this money to buy more property which is repaired, leased, refinanced, etc.

Conventional multifamily loans aren’t meant for purchase and repair investments. Conventional financing firms don’t approve this type of projects because they are too risky.

However, lenders who might serve you can be found in PropertyCashin’s commercial real estate vendor directory listing the best Colorado commercial hard money lenders along with the top commercial rehab lending companies in Colorado.

From one of the top commercial and industrial real estate brokers in Colorado, receive advice on the pros and cons of the city for your business. They will be happy to educate you about the important local real estate dynamics described below.

Median Gross Rents

Investors want to see desirable existing rental rate levels and evidence of acceptable rental rate bumps. This could affect decisions regarding locations for investment and which assets to acquire.

Property Value Growth

Buy and hold investments clearly need assets that are likely to appreciate in worth.

Population

BRRRR investors will analyze the populace growth rate. Absent a growing populace, rental units will stay idle and lose value.

Income

To buy the appropriate investment real estate, investors should be aware of their desired tenants’ amount of income. A property that does not meet the needs of the area will have a high vacancy rate.

Property Tax Rates

Higher taxes will stifle both short-term and long-term profitability. On the contrary, stable property tax rates can indicate a growing region.

Additionally, in the local government’s register, your asset can be overvalued, which means you pay extra in property taxes. The best Colorado commercial real estate appraisers along with the best commercial property tax consultants in Colorado are employed by smart property owners to review the value.

People in the real estate business consider development as creating entire residential neighborhood projects or any type of commercial real estate. A developer searches for and buys acceptable land and develops either lots for purchase or buildings that are rented to tenants.

Property development includes working with zoning authorizations, managing sitework plans made by civil engineers, working with engineers and architects on building plans, and guiding the project through the local government for authorization. When all of those steps are successfully finished, the developer oversees the construction work and advertising of the end project.

The time required to finish a real estate development can be several years. During that period, economic and legislative shifts can affect the project’s profitability. For this reason, development is the riskiest type of real estate investing.

Different events may force investors to put a construction process on pause. While the builders aren’t on the site, the building can get damaged. Nevertheless, you can ask the best commercial real estate insurance firms in Colorado to ensure that you get a proper compensation in this event.

Insurance must be factored in the project costs for showing it to a lender. Ask the best commercial new construction financing firms in Colorado what local insurance companies they accept.

Population

Developers use populace size and growth rate in conjunction with economic and education information to make sure that they have enough retail shoppers and housing buyers in the market.

Income

Retail property developers use salary statistics to locate their project where it will attract the buyers that their intended tenants need. A place that does not appeal to a high-end retailer might be just what a low priced company is looking for.

Office and industrial renters will want to see the pay rates that their potential workforce will require. Developers know this, and look at income levels to project a market’s desirability for their preferred tenants.

Education

Industrial and office space renters look for different levels of education in the local population. Office space tenants frequently prefer possible workers with a college degree. Blue collar businesses are happy with high school grads.

Age

Most developers prefer to see a young to middle-aged populace that supplies a consistent tax base. These are the workers that office and industrial tenants have to access. People who are still employed typically shop and dine out repeatedly at retail stores.

Residential neighborhoods developers require the same age category because they are presumably moving up the social ladder, which boosts residential transactions.

To invest in property loan notes, the investor is charged a lower amount than the remaining balance for loans already in place, and takes over from the original lender. Lenders are often willing to sell loans so they can boost their capital, but they frequently sell because the loan is “non-performing”.

The investor could restructure the loan with lower payments giving them a long-term investment with interest income payments. The note buyer is shielded by the mortgage note that the borrower executed and can recover the asset if need be.

Population

Population size and how it changes are critical to these investors for the same reasons as other investors. This data is a quick evaluation of the future economic strength of the market.

Property Values

Property appreciation rates are significant to the promissory note investment strategy. The viability of the property is the strength of the investment.

Property Tax Rates

If real property taxes increase, the larger housing expense will be difficult for struggling borrowers to maintain. Such a scenario hurts long-term investors, but it helps short-term note investors who prefer to turn around their investment faster.

An interesting strategy of investing in the purchase and oversight of real property is to buy shares in a REIT (Real Estate Investment Trust). Lease revenues and occasional asset sales create the REIT’s revenue.

REITs are required to distribute ninety percent of their profits in dividends which appeals to many investors. The capability to cash out by liquidating their REIT shares attracts small investors.

REIT investors are passive investors who have nothing to do with the selection or management of the assets.

Investors, who are no longer interested in active investing but want to stay in real estate, consider REITs. They sell their own real property to reinvest the money into REITs.

A like-kind exchange is meant to benefit investors who have this plan in mind. Read our experts’ articles to understand how to take advantage of it: What Is a 721 Tax Deferred Exchange? and What Is a DST 1031 Exchange?.

The Government requires that you use assistance from a 1031 Exchange facilitator to consider the procedure legal. Get in touch with one of the best 1031 exchange Qualified Intermediaries in Colorado delivering this service.

Another investment vehicle that collects cash from people to invest in real property is a real estate investment fund. These companies do not hold real estate — they own interest in businesses that do, such as REITs.

This investment vehicle does not disburse dividend revenue to their investors. Like with other stock funds, the return is created by increases in the value of their stock.

A real estate fund could be a mutual fund, a private equity fund for high net worth investors, or exchange-traded funds (ETFs). Shares in investment funds are purchased and unloaded on the open market which is convenient for inexperienced investors.

Real estate fund investors are passive investors who are never involved with the decisions of the fund’s managers.