Office space along I-25 tightens

Colorado Springs Business Journal, Jul 29, 2005 by Becky Hurley

With 50 percent of existing office and commercial space located north of Garden of the Gods Road along Interstate 25, the north interstate corridor has become a harbinger for an improving local economy and a growing corporate community.

Sierra Commercial Real Estate office specialist Kent Mau reports the market is beginning a steady upswing. His conclusions are based on two factors.

No. 1, no new Class A buildings on the north end have been added since mid-2002. Today's total of 4.2 million square feet-the same amount reported in June 2002-represents almost half the city's total Class A space.

No. 2, since the third quarter of 2004, north Colorado Springs has seen positive absorption of almost 300,000 square feet of existing space. At the same time, 530,000 square feet of sublease space along the north corridor has burned off, either taken off the market or leased by corporate owners. A total of 875,122 square feet was available for lease or for sale in June.

There are two or three very large floor plate buildings like Tiffany Square or the former Chapel Hills MCI building vacated by companies of 100,000 square feet or more, Mau said. If you were to subtract those specialized facilities from the total, north Colorado Springs would only show an office vacancy rate of around 10 or 12 percent. That's very healthy.

Mau also said he believes that the disappearance of sublease space, which began to increase as early as June 2001 and reached a high of 618,675 square feet two years ago, can be attributed to smart building owners with deep pockets.

Corporate America basically funded the last recession, he said. Owners had enough equity in their properties and staying power that they didn't have to dump large amounts of space onto the market during a three-year down cycle.

His optimism about the future of the north I-25 corridor-and his observations that Class A office inventory may soon become tight is confirmed by John Cassiani, vice president for business development at the Economic Development Corp.

There are several reasons companies see the north I-25 corridor as attractive, he said. They include the availability of buildings and developable land, proximity to a potential work force in Monument-Jackson Creek-Black Forest and Falcon, and convenient highway access to Denver International Airport and to the South Denver work force.

A number of local companies along I-25 are not only happy with their locations, but are capitalizing.

USAA, for example, is working with NAI Highland Commercial office brokers Michael Palmer and Jim Spittler to develop a build-to-suit project on a 26-acre parcel adjacent to its existing campus.

Celebrating its one-year anniversary in Northcreek III off Mark Dabling Boulevard, the California State Automobile Association (CSAA) chose its location in large part because of the facility's proximity to surrounding neighborhoods.

Andy Shinn, a spokesman for CSAA, said the company looked for a location that would that would attract a strong employment base.

We currently employ around 400 people and we'll be up to 500 or so before the end of the year, he said. Our site doesn't have to be along the freeway, but it does make the commute easier.

FedEx corporate spokesman, Jim McCluskey, said the Rocky Mountain Technology Center off Interquest Parkway is one of the company's premier locations.

We employ 600 people and the facility's proximity to both the Colorado Springs and Denver airports is very important, he said. Smaller professional office tenants are also lining up for the opportunity to fill north side facilities.

Of 37 Class A multistory buildings north of Garden of the Gods, Mau's research shows eight are fully-leased.

A total of 628,235 square feet is available in the remaining 25 facilities, including 126,830 square feet at Tiffany Square and 69,128 square feet in Northcreek I, off Mark Dabling. Among 19 single story Class A buildings, 11 are completely occupied.

Only three buildings, 1175 Chapel Hills Drive, 2075 Research Parkway in the Briargate Research Center and 9950 Federal Boulevard, are more than 50 percent vacant.