‘The hottest market I’ve seen’ –

LOVELAND — Despite increasingly worrisome economic indicators, the commercial real estate market in northern Colorado is still seeing incredible demand. That was the message from Ryan Schaefer, CEO of brokerage firm NAI Affinity, at the Northern Colorado Real Estate Summit hosted by BizWest last week.

“It’s the hottest commercial real estate market I’ve seen in my career,” Schaefer said.

Schaefer’s forecast for commercial real estate included bad news and good news. The bad news, Schaefer said, is that many broader economic indicators are moving in the wrong direction. Inflation has become excessive. The movement of the Treasury to 10 years is worrying. And the recent oil price shock following Russia’s invasion of Ukraine is also alarming.

“There’s a 90% chance of a recession within two years of an oil shock,” Schaefer said.

Despite all of this, however, the commercial real estate market in northern Colorado is booming to unprecedented levels and shows no signs of slowing down. The hottest sectors, Schaefer said, are industrial, quick-service restaurants and rest areas.

Large industrial facilities are springing up all along the Interstate 25 corridor in northern Colorado. Schaefer cited projects such as the Access 25 logistics park in Mead as an example. As the economy becomes increasingly reliant on e-commerce, these types of distribution, last-mile and warehouse facilities will begin to phase out traditional retail developments, Schaefer said.

“Industrial is the new retail,” he said.

Schaefer also cited Amazon Inc. (NYSE:AMZN) as an example of this trend. The e-commerce giant is closing all of its retail stores in the United States, showing that this strategy has failed. However, he has become one of the biggest names in retail thanks to his industrial projects such as the planned 3.8 million square foot distribution facility in Loveland, Schaefer said.

To accompany this, retail construction in northern Colorado is slowing.

“Every retail piece built on the Front Range last year would fit in a regional mall,” Schaefer said.

Now the name of the game in retail is convenience, Schaefer said. This is exemplified by the continued development of quick service restaurants and rest areas such as the planned 50,000 to 70,000 square foot Buc-ee’s in Johnstown, scheduled to open in 2024.

Driving all of this is a supply of commercial real estate that is still quite limited, Schaefer said. Demand is so high that he closed a sale last year in 45 days, when the process usually takes eight to 12 months. Rents are rising and triple net leases are seeing increased interest.

“We’re seeing huge buyer demand,” Schaefer said, “and huge increases in values.”