Commercial real estate professionals predict that industrial/flex property sales will remain strong, that the office market will “gently recover,” and that the retail market will have a rough ride in the year ahead.
But all that depends upon propinquity.
Propinquity is “the state of being close to someone or something,” which 2020’s experience with the pandemic has stripped from people.
Lynda Gibbons, president and managing broker at Gibbons-White Inc. in Boulder, led off the discussion of commercial real estate at BizWest’s 2020 Boulder Valley Real Estate Conference with the vocabulary lesson Wednesday morning.
While working from home has disrupted business norms, including the need for offices, Gibbons said that “being together allows people to be more creative, more productive,” and predicted that “returning to the workplace will be a powerful stimulant” in the months ahead as the pandemic gets under control.
Together with Gregory Glass, senior broker associate at Gibbons-White, Gibbons reviewed where the Boulder commercial market has been during the past year, which a year ago she predicted would be growing and stable.
To a degree, that forecast remained true. The industrial/flex market has remained strong with space in that sector undersupplied and showing a 5% vacancy rate.
Office space, meanwhile, has a vacancy rate of 9.6% with many companies working from home. Retail has a 7.1% vacancy rate, which may increase in the coming year, according to Glass’s presentation.
“Downtown felt like a science fiction movie set with darkened windows,” Glass said. He cited significant business closings downtown but also some openings that predated COVID. The pandemic has knocked the hospitality industry, Gibbons said, although two hotels — the Hilton Garden Inn and the Millenium Harvest House Hotel — were both rented by the University of Colorado Boulder to house students. She said that Boulder and especially The Hill neighborhood will be transformed in coming months after CU builds its convention center and hotel and a private hotel opens on the Hill.
The retail industry is in the throes of “reincarnation,” Gibbons said, as the pandemic accelerated the movement to e-commerce sales at the expense of brick and mortar retailing.
Nationally, 20% to 25% of malls are expected close by 2022, she said, although developers are finding reuse opportunities such as indoor recreation centers, theme parks, office redevelopments and film sets.
While rents in Boulder and the area are higher than the national average, the two said, a trend toward subletting in the short term at lower rates will place downward pressure on rents.
“We find ourselves in the sweet spot” of the nation, Gibbons said, with the region’s highly educated workforce, expanding technology companies and desirable place to be helping to sustain commercial real estate.
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