- Increased Consumer Spending: An uptick in consumer spending, driven by both e-commerce and brick-and-mortar retail sales, boosts industrial fundamentals in Colorado Springs.
- Demand for Distribution Centers: The rise in retail and logistics providers’ need to improve distribution networks and inventory has led to an increased demand for distribution centers across the city.
- Low Vacancy Rates: Consistent demand, coupled with minimal supply pressure, has kept industrial vacancy rates low at around 4.9%.
- Industrial Rent Growth: High demand for industrial space drives rent growth, with annual rents increasing by 5.4%, below the national average of 8.1%.
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Increased Consumer Spending
An uptick in consumer spending is boosting industrial fundamentals in Colorado Springs. E-commerce is booming, and brick-and-mortar retail sales are also rising. This has increased demand for distribution centers across the city, which store goods before they reach the consumer.
Demand for Distribution Centers
Retailers and logistics providers are expanding their industrial footprints. This expansion aims to improve distribution networks and build up inventories. Consistent demand and minimal supply pressure keep vacancies low at around 4.9%. The demand surge is evident in the market’s performance.
Low Vacancy Rates
Retail-to-industrial conversions are gaining traction due to online buying challenges. Amazon took over a former Sam’s Club in the East Submarket. Amazon completed the 135,000 SF lease in March 2021 and finished construction in late 2021. High demand drives rent growth, with annual rents rising by 5.4%.
Industrial Rent Growth
Despite high demand, rent growth in Colorado Springs remains below the national average of 8.1%. There have been 105 sales in the past year, averaging $154/SF. The estimated market value is $127/SF. Most transactions, 69 out of 105, have been for logistics space.
Market Sales and Cap Rate
In the past three years, 410 sales worth approximately $692 million have occurred. Colorado Springs’s market cap rate is 8.6%, which is moderately above the trailing three-year average of 8.0%. The logistics space is the largest subtype in the market.
Vibrant Community and Outdoor Recreation
With its proximity to the mountains and views of Pikes Peak, Colorado Springs offers outdoor recreational opportunities. Residents enjoy city amenities without sacrificing nature, which makes the area a vibrant community attractive to both residents and businesses.
Booming Industries
Colorado Springs is home to booming industries, including aerospace and military technology. Innovation in life sciences and medical devices also flourishes here. The diverse career opportunities contribute to the city’s ranking as one of the best places to live. Affordable housing and short commute times enhance its appeal.
Strong Military and Defense Presence
The economy in Colorado Springs is deeply rooted in military and defense. The metro houses three Army and Air Force bases. The U.S. Air Force Academy, with 4,000 students, is also located here. Defense contractors like Northrop Grumman and Lockheed Martin have a strong presence.
Employment Growth
Employment growth in Colorado Springs outperformed the national benchmark for nearly a decade before the pandemic. The fastest-growing industries include Professional and Business Services, Education and Health Services, and Natural Resources. Mining and construction also contributed significantly to job growth.
Affordable Housing Market
Unlike Boulder and Denver, affordability has been a manageable factor for apartment demand in Colorado Springs. Average asking rents are over 30% lower than those in Denver and Boulder and 20% below the national average, making Colorado Springs an attractive place to live.
Stable Economic Footing
Colorado Springs benefits from its proximity to Denver and several universities. Nearby military bases provide a stable demand for goods and services. These factors support the stable footing of the Colorado Springs market. The city’s diverse and robust economy continues to grow.
Closing Thoughts
Colorado Springs offers a unique blend of economic growth and vibrant community life. The industrial market is thriving and supported by strong fundamentals. The region’s diverse industries and affordable housing make it an attractive investment. Contact Lumicre for your investment needs.