Denver-area Q1 commercial real estate sales down 47% from 2009

Thursday, May 20, 2010, 2:16pm MDT | Modified: Thursday, May 20, 2010, 10:00pm

LoopNet: Denver-area Q1 commercial real estate sales down 47% from 2009

Denver Business Journal - by Paula Moore

Denver-area commercial real estate sales for the first quarter were down 47 percent by dollar volume compared to the same period of 2009, according to a report Thursday from LoopNet Inc.

Selling price per square foot, by product type, dropped 27 percent year over year for office buildings and down 13 percent for industrial buildings, but was up 80 percent for retail buildings and up 7 percent for apartment properties.

Based in San Francisco, LoopNet operates LoopNet.com, an online real estate listing service.

The company’s first-quarter sales figures include transactions of $2.5 million and more.

Specific first-quarter sales information for metro Denver:

• Office buildings — Total sales volume dropped to $316 million from $667 million in 2009’s first quarter. Average price per square foot decreased to $135 from $185 year over year. By comparison, the average sales price per square foot nationwide in this year’s first quarter was $156, down from $252 year over year.

Major Denver-area office building sales for 2010’s initial period included a National Park Service Building in Denver ($28.7 million), Westmoor Technology Park in Broomfield ($24.3 million) and West End Plaza in Boulder ($14.5 million).

• Industrial buildings (warehouses, distribution centers, flex space) — Total sales volume dropped to $189 million from $415 million year over year. Selling price per square foot decreased to $66 in the first quarter from $75 in 2009’s initial period. Nationwide, first-quarter price per square foot decreased to $55 from $66 in the initial period of ’09.

Significant industrial property sales in the first quarter included the building at 13310 James E. Casey Ave. in Greenwood Village ($7.6 million), 1460 Over Look Dr. in Lafayette ($5.46 million) and Dry Creek Center in Greenwood Village ($5.3 million).

• Retail buildings (strip centers, grocery-anchored shopping centers, freestanding stores) — Sales volume increased to $597 million from $430 million in the initial period of ’09. Price per square foot rose to $267 from $148 year over year. By comparison, retail selling price per square foot nationwide in the first period was $142 compared to $180 year over year.

Major first-quarter retail sales included Meadows on the Parkway Shopping Center in Boulder ($30.79 million), Coal Mine Shopping Center in Littleton ($10.5 million) and the Petco store at 4100 E. Mexico Ave. in Denver ($7.8 million).

• Apartment properties — Total apartment/multifamily sales volume in the first quarter dropped to $393 million from $528 million for the same period of 2009. Price per unit increased to $78,318 from $73,112 year over year. Nationwide, price per unit dropped to $85,943 from $93,701 during the same period.

Major apartment deals in the metro area in this year’s first three months included 4550 Cherry Creek in Denver ($52.8 million), Jefferson at Arvada Ridge in Arvada ($28.4 million) and Coronado Crossing in Denver ($6.5 million).

pmoore@bizjournals.com

Shadow market drives vacancies in mountains

By John Rebchook on May 21, 2010 · Comment · ShareThis

The overall statewide apartment rental market showed strength in the first quarter, with the vacancy rate for areas outside of Denver falling to 6.6 percent in the first quarter from 8.5 percent a year earlier, a 22 percent change. (For an earlier report, please visit Colorado rental vacancies fall )

But Colorado’s mountain communities, hammered by a sinister “shadow” market, showed an unprecedented year-over-year percentage increases. Hit hardest was Steamboat Springs, which saw its vacancy rate rising to 8.0 percent from 1.2 percent a year earlier, a whopping 567 percent increase.

Terrance Hunt, a partner and broker with the Denver office of Apartment Realty Advisors had noticed the huge jump in vacancy rates and looked into it on behalf of clients in areas from Summit County to Glenwood Springs.

“We investigated it and came to the conclusion it was the shadow market caused by people buying homes and condos, and they are unable to afford the mortgages so they are renting them out,” adding to the supply, Hunt said. The shadow market, in this case, includes condos and homes that buyers expected to use solely as second homes for ski vacations and weekend getaways, but now are looking to rent them year around, or risk losing them to foreclosure. Indeed, the shadow market can include foreclosed homes that investors and lenders are renting until the for-sale market recovers.

Subprime loans culprit

“They purchased these second-homes with subprime mortgages,” Hunt said. “Now, they have seen a big drop in their nest eggs and IRAs, and they no longer feel rich. But they had a different point of view a couple of years ago. The idea was to “Why not just buy real estate? Real estate is always a great investment.” During the “easy money” period it was almost as simple to buy a second home in the mountains, as it was to buy a primary home, he said. Because the financing was available, many people didn’t hesitate in buying a vacation property, he said.

Though Aspen saw the lowest percentage increase of the resort areas – with vacancy rates up 28.6 percent – even that extremely expensive mecca is feeling the pinch. And despite almost a 30 percent increase, Aspen’s overall vacancy rate remains low at a mere 2.7 percent vacancy rate. On the other hand, it was as low as 0.7 percent as recently as the first quarter of 2007.

“I have a client who has a ranch in Aspen, and she told me she used to be able to lease her ranch out over the Christmas week for $75,000 or $100,000,” Hunt said. “Not anymore. Last year, there were no takers at any price. When people flew in from LA or out-of-the-country, they stayed in a nice hotel instead.”

Ryan McMaken, of the Colorado Division of Housing, said a an apartment property manager told him the same thing is happening in Greeley. While Greeley’s vacancy rate rose by about 18 percent, McMaken said it would be a much stronger rental market, if there weren’t so many vacant second homes competing with the traditional rental units.

Still, McMaken noted that in the mid-2000s, many of the mountain communities had much higher vacancy rates than they do today. For example, the vacancy rate as 20.4 percent in Eagle County in the first quarter of 2004, compered with 6 percent today. And the vacancy rate in Steamboat Springs was 22.1 percent in the first quarter of 2006.

“Even though we’ve never seen these kind of year-over-year percentage increases before, to put it in perspective, they are still relatively low,” McMaken said. “There is nothing to indicate, at least in the short-term, that we are going to return to the kind of vacancy rates we saw back in 2004.”‘

Hunt said those large vacancies came in the wake of the high-tech boom and bust.

Perception of wealth vanished

“In early 2000, a lot of people had this perception of wealth,” Hunt said. “Their stock portfolios were going crazy, filled with high-tech companies. People started buying mountain properties, and the demand caused developers to build new products. But a lot of the new product was a little too late, and the bottom fell out of the condo market.”

He said some developers were “too late to the party,” completing their properties 18 to 24 months following the “tech wreck,” in March 2001, followed by the terrorist attacks on Sept. 11 of that year.

“The way to preserve the too late to be sold had to find a way to preserve as much equity as they could, and the way they did that was rent them out instead of selling them,” Hunt said.

But then the mountain rental markets rebounded. For example, after hitting 20.4 percent in 2004, a year later the vacancy rate in Eagle County had fallen by more than half to 9.2 percent, only to drop another 86 percent to 1.3 percent in 2008.

Market	1Q 2009	1Q 2010	% Rate Change
Aspen	2.1%	2.7%	28.6%
Eagle County	2.1%	6.0%	186%
Glenwood Springss	1.5%	3.2%	113%
Steamboat	1.2%	8.05	567%
Summit County	2.7%	4.9%	81.5%

More Real Estate News from John Rebchook's Inside Real Estate News

John Rebchook has more than 30 years of experience in writing and communications. As the Real Estate Editor for the Rocky Mountain News, he wrote about residential and commercial real estate for 26 years. He has won numerous awards for business stories and columns that he wrote, both as an individual and part of teams. In addition to real estate, he also covered economic development, banking and financing, the airlines, and cable TV for the Rocky. In addition, he was one of the original freelance writers for GlobeSt.com, covering commercial real estate for the Internet publication.!
Visit John Rebchook's Inside Real Estate News

Five Bad Home Improvement Ideas

Five Bad Home Improvement Ideas

Published on Saturday, May 15, 2010, 6:18 PM Last Update: 2 day(s) ago by Kimbrough Gray

Category: All Articles » Sales Strategies and Tactics

When considering adding value to a home, you consistently hear from the real estate industry that updated bathrooms and quality kitchens stand out in a home sale. Those are proven sale closers. There are certain other improvements you can make to your home that will beautify it or create convenience for your family. When it comes time to selling, however, those improvements may do nothing to increase the value of the property and may even turn off potential homebuyers.

Over-the-Top Renovations

Au contraire mon frère, not all renovations will raise the value of your home. Just `cause it's bigger doesn't mean it will be perceived as better by future homebuyers. Unless your home is located in Beverly Hills or some other very posh neighborhood, don't install the bathroom with the supersized steam shower, imported Italian marble and several different spray heads ... unless you have the money to do it for your own pleasure and enjoyment only. That kind of improvement doesn't typically do anything to increase the value of the average home.

On the other hand, if you updated an old bathroom, you could see an increase of several thousand dollars to your home's bottom line. Real estate professionals suggest that homeowners pour over local home listings to see what amenities are the standard in your area, then upgrade your home to meet it. If you overdo it, however, you may not recoup your investment.

Swimming Pools

If you think installing a swimming pool in the back side of your home will draw hoards of homebuyers clamoring to make offers on your home at sale time, you'd be wrong. Some may consider it a perk, but others may perceive it as a pain with all the maintenance it will require.

Homeowners have even paid to have their swimming pools buried to create more yard space. If you shell out the expense to build one, don't expect your home's value to budge. The only exception to building a swimming pool is if you live in states where they are considered the norm.

Home Office Renovations

Although, a home office is often an amenity appreciated by those shopping for a home, it should be built with frugality in mind. Overhauling an office doesn't pay off when it's time to sell your home. Don't steal usable space from another living area to create a home office. Instead, make sure the space can easily be converted back into a bedroom or other living space if needed. If you decide you just have to have the built-in Curly Maple wood shelves, know that you will only recoup around 50 percent of your cost at sale time.

Unique Builds

Home magazines are always coming up with clever and creative ways to change the look of your living space. Some are exotic and outlandish, but they can pique your interest. Tempted to put a classic disco ball with lights in your bedroom, a constellation ceiling in your family room or a peaceful Koi pond in your back yard? Avoid making outlandish changes to your home or changes that will be perceived as adding work for a future homeowner. Don't be tempted to incorporate these ideas into your own home, unless you don't plan on selling anytime soon. Homebuyers may not share your enthusiasm.

Roof Renovations

If your roof needs repair, don't hesitate to have the work done. It will be one less issue you'll have to deal with when listing your home. If in your pursuit to list your home you think replacing your roof with cedar shakes or clay tiles will increase the value, think again. Although they have the ability to make your home stand out, they probably won't inspire homebuyers to pay more for them. So, unless you have the money to burn, keep it simple when preparing your home to be listed on the real estate market.

Ki has been an investor in the Austin real estate market for several years. The website has an Austin home search for listings in Austin, Texas. It also has general statistics covering Austin real estate along with several neighborhoods in Barton Creek.

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Denver sees record April in homes put under contract

By Margaret Jackson
The Denver Post

Posted: 05/08/2010 01:00:00 AM MDT

A record number of Denver-area homes put under contract in April is translating into booming business for mortgage brokers, home inspectors and others in the real estate industry for the next two months.

The increase in contracts was largely driven by the April 30 deadline to put a house under contract in order to take advantage of an $8,000 federal tax credit for first-time buyers or a $6,500 tax credit for move-up buyers.

There were 6,616 homes under contract last month, a 27.6 percent increase over April 2009, according to data released Friday. Last month's total marks the third best of any month. The most is 6,660.

Meanwhile, there were 4,188 residential sales closed last month, up 16.3 percent from 3,602 closings in March and 23.5 percent from 3,390 in April 2009.

The median price for a single-family home rose 9.5 percent to $230,000 in April, compared with the same month a year ago. Median condominium prices rose 7.5 percent, from $130,000 to $139,700, during the same period.

Home inspector Dave Griffin expects he'll do more than 300 inspections this year as a result of the tax credit. He has even had to turn away 10 to 12 clients because he's so busy, a scenario he's both grateful for and nervous about because he's afraid his clients will switch inspectors. "It makes me crazy," he said.

Bill Rodriguez of Cherry Creek Mortgage Co. said May, June and July traditionally are busy months, but the expiring tax credit is making them busier. He has counseled many of his clients to write contracts that give them more time to repair their credit before they sit down to the closing table by June 30.

Mortgage broker Jim Spray said there was a 16.3 percent increase in loan applications nationwide in April compared with the same month a year ago.

"My gut feel is that we did somewhat better in the Denver metro area than in many other areas of the country," Spray said. "Bottom line is that it's too early to tell exactly what effect the tax buyer credit is having. Many of the purchase contracts will close this month and the rest must close by the end of June."

The question, experts say, is whether the rapid sales pace is sustainable. May sales are likely to dip, but it still should be a good month, said independent real estate analyst Gary Bauer.

Sales of homes priced at more than $1 million were up for the third consecutive month, said Chris Mygatt, president and chief operating officer of Coldwell Banker Residential Brokerage. There were 42 homes over $1 million that sold in April, up 24 percent from the 34 homes sold during the same month last year.

Housing to Test Economy's Post-Stimulus Strength

Housing to Test Economy's Post-Stimulus Strength

By MARK WHITEHOUSE

Even as optimism grows about the strength of the recovery, one big question looms: To what extent is the economy running on government life support?

Over the next several months, the housing market will offer a clue.

Housing has been a major beneficiary of the government's stimulus efforts. Tax credits for homebuyers, the Federal Reserve's unprecedented efforts to hold down mortgage rates, and loan modifications aimed at preventing foreclosures have helped housing show signs of life, albeit not as much as many economists had hoped. Prices have stabilized, while sales and construction are up from their recession lows but still well below long-term averages.

Now, the government is pulling the plug. The tax credits expire on Friday, the Fed has already stopped buying mortgage bonds and the pace of new trial modifications under the Treasury's Home Affordable Modification Program has begun to slow. Whether or not the housing market can stand on its own will provide valuable insight into the broader recovery's ability to keep going when the Obama administration's stimulus package peters out around the end of the year.

"That's the nagging question right now," says Yale University economist Robert Shiller. "How much of the strength in the housing market is just the perception of government support?" he said. "I do have concern about a double dip."

To some extent, a weak housing market can actually be a sign of health. The U.S. economy needs to reduce permanently its dependence on credit-fueled construction, and move more toward selling goods and services to booming emerging markets. At the peak of the housing boom, construction and other housing-related services accounted for about 6.3% of the U.S. economy. Now they account for only 2.5%. The right level is probably somewhere in the middle.

Less dependence on housing and U.S. consumers "will mean a better balance and a healthier recovery," says Joseph Carson, director of global economic research at AllianceBernstein in New York.

Still, if house prices were to head down again in the absence of government support, it could be a problem for the recovery. The recent stabilization of prices, which according to the S&P Case-Shiller Index were down just 0.7% in January from a year earlier, has done a lot to support fragile confidence among consumers and in financial markets.

House prices also underpin the value of the $2.6 trillion in mortgages on banks' balance sheets. If a new decline caused banks to fret about their own finances, that could make it tougher for businesses—particularly the small ones that account for an outsized share of new jobs—to get the credit they need to expand. And without new jobs, the rise in consumer spending would be hard to sustain.

Economists see various reasons to worry home prices could drop again. For one, the rising number of foreclosed homes will weigh on an already weak market—a delayed result of the same mortgage defaults that are, in some cases, allowing consumers to free up more of their income for spending.

As of March, banks and investment trusts had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier, according to estimates from LPS Applied Analytics. Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That "shadow inventory" was up 30% from a year earlier.

Banks have so far been slow to dump homes on the market: At the current rate of sales, it would take almost nine years to work through both the real and "shadow" inventory. "They're just squeaking them out," says Loren Gonella, owner of Coldwell Banker Gonella Realty in Merced, Calif.

At some point, banks will have to sell all those houses. Meanwhile, foreclosures could accelerate as loan modifications slow and an increasing number of those who received relief go back into default. New government initiatives are also encouraging mortgage servicers and lenders to agree to so-called short sales, in which the borrower sells the house for less than the mortgage debt and the bank forgives the difference.

All that will add to the supply of distressed homes on the market, even as the government programs supporting demand come to an end. Ed McKelvey, an economist at Goldman Sachs in New York, estimates that the combined effect will depress prices about 5%. That's on top of whatever the market would have done on its own—an underlying trend that could as easily be down as up.

"You have a market that's got more supply than demand, and we know what happens to prices in those kinds of markets," says Mr. McKelvey.

A new leg down in house prices could benefit some, such as first-time home buyers who have long been priced out of the market. On average, homes are already more affordable than they've been in decades—though prices still look high by historical standards in many parts of the country, including New York City.

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Colorado gears loan program toward Main Street

By Andy Vuong
The Denver Post

Posted: 04/22/2010 01:00:00 AM MDT

Gov. Bill Ritter announced new lending initiatives Wednesday that provide $40 million in funding for Colorado's farmers, manufacturers and small businesses.

The Colorado Housing and Financing Authority will make $30 million available for manufacturers seeking loans of up to $10 million to fund real estate acquisitions, renovations and equipment purchases. CHFA is launching a mini-bond program that will provide loans ranging from $500,000 to $2 million to smaller manufacturers with 50 employees or fewer.

Funding will come from federal private activity bonds, passed through the Colorado Department of Local Affairs.

Additionally, the state treasurer's office will invest $10 million in CHFA's guaranteed purchase program, which supports long-term, fixed-rate loans for agricultural and small businesses.

"While Washington continues to fight over Wall Street, we here in Colorado are fighting for Main Street with yet another initiative to help businesses grow and create jobs," Ritter said. "Small businesses are the backbone of Colorado's diverse economy and the No. 1 driver of job creation."

Under the guaranteed purchase program, CHFA will buy Small Business Administration, Farm Service Agency and Rural Business Service guaranteed loans originated by community lenders.

"This program is about putting funds directly into the hands of Colorado's small businesses and farmers at a time when they need it most," said state Treasurer Cary Kennedy.

The Credit Union Association of Colorado criticized the initiatives Wednesday because credit unions are barred from participating. "We want to be an option and give small-business owners who use the governor's program all available financial resources," said John Dill, the association's president.

Andy Vuong: 303-954-1209, avuong@denverpost.com or twitter.com/andyvuong

Monday, April 19, 2010, 11:32am MDT | Modified: Monday, April 19, 2010, 10:00pm

Q1 home resales up 1% in Denver area

Denver Business Journal

Home resales in the Denver area rose less than 1 percent in the first quarter of the year from the same period a year ago, a local real estate analyst reported Monday.

Gary Bauer, a Littleton-based independent residential real estate broker, said 8,121 existing-home sales closed in an eight-county region that includes Denver, Aurora and Boulder in the first three months of 2010, up from 8,043 in the first quarter last year.

The data are for stand-alone houses and condominiums, but not apartment buildings. The figures also do not include sales of new homes.

Of the 8,121 home resales in the first quarter, 1,849 were in Denver, 1,676 in Arapahoe County, and 1,355 in Jefferson County, Bauer said.

He said 46 percent of the homes sold at less than $200,000, and 73 percent at under $300,000.

Eighty-five of the homes, meanwhile, sold for more than $1 million, including 23 each in Denver and Arapahoe County, 18 in Boulder County and 10 in Douglas County.

Bauer’s data are for Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, Elbert and Jefferson counties.

denvernews@bizjournals.com