(To read more on the net lease market, click here.)
COLORADO SPRINGS-With an overall office vacancy rate just below 8%, the Colorado Springs office market ended 2005 at the lowest rate since 2000, according to a recent report by Grubb & Ellis Co. The market appears to be firing on all cylinders, with the vacancy rate down, absorption increasing and lease rates rising.
"For all practical purposes, the Colorado Springs metropolitan areas economy has recovered," Grubb & Ellis notes in its report. "The return to economic prosperity for the Pikes Peak region is driven by defense, research and development, light manufacturing and service-related industries. Defense contractors are leading the way with multibillion-dollar, long-term contract in hand."
Indeed, a number of build-to-suit office campuses and long-term lease agreements are moving forward thanks to the defense industry, the report notes. Companies that are committing to the area include Scitor Corp., Science Applications International, SI International, Real Time Logic, Lockheed Martin, Northrop Grumman and Boeing.
In addition, companies involved with services, research and development and light manufacturing are "running neck-and-neck with defense contractors," Grubb & Ellis notes.
But the downside of all the activity is that Colorado Springs no longer will be the bargain it has been during the past few years for investors and tenants. "Market demand will force price upward--lease rates will escalate and the cost of buying suitable investment property will increase," Grubb & Ellis warns.
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