Thu October 18, 2012

Outside Investors Snapping Up Northern Colorado Real Estate

Investors from outside the Northern Colorado market are spending millions on commercial real estate, especially in Larimer County.

KUNC’s Erin O’Toole talks with Northern Colorado Business Report Publisher Jeff Nuttall about what that means for the area.

Erin O’Toole: First off -- what kind of trend are we seeing here?

Jeff Nuttall: Well, we are seeing investors from other parts of the country are snapping up real estate in Larimer County, mostly retail. Referencing just the five deals we analyzed, nearly $150 million has been spent in 2012. Fort Collins especially is really starting to gain a place in the national spotlight.

O’Toole: Why are folks so eager to invest in real estate specifically?

Nuttall: Real estate is once again seen as a more stable investment with better returns than more traditional forms of investment, like certificates of deposit or Treasury bonds. Given today’s low interest rates, investing in real estate can provide a return of 7 to 10 percent, compared with lower rates from other forms of investment, which can be as low as 1 to 3 percent.

O’Toole: Clearly it makes sense to invest in real estate! But what is it that’s drawing these investors here to Northern Colorado?

Nuttall: The Northern Colorado market has grown more attractive to national investors because of its size and the strength of its economy. Many national investors that might have looked at markets as large as Denver or even New York are considering ''tertiary'' markets like Northern Colorado now. Our region is a bit of a sweet spot because it offers those quality assets but without the hassle or higher prices that come with larger markets.

O’Toole: Kind of that 'just right' market size, then. What about the economy here - is that another attraction?

Nuttall: It is. The economy in Northern Colorado is also seen as a stable one because of unemployment rates that are lower than in other parts of the country. The unemployment rate in Fort Collins is 6 percent, and while that's not a great number, it's still 1.8 percent below the national rate. We’re also recovering more quickly than the rest of the country in part because it weathered the recession better.

O’Toole: OK, but shouldn’t we be concerned about some of the recent job losses, like those at Vestas?

Nuttall: We should, but while the layoffs at Vestas are troubling, economic development experts say that other companies are doing plenty of hiring, and not just in one sector. Because the region is home to jobs in health care, education, energy, technology and more, we’re able to hold our own on a national level. Specifically, companies like Leprino and Woodward are still strong corporate players in our area.

O’Toole: So retail seems to be where most of the money is. What other types of properties are being purchased?

Nuttall: There's also been some activity in the multi-family market, driven by low vacancy rates. For example, the Eagle Ridge Apartments in Loveland was purchased by New Jersey-based Raia Properties for $23.5 million - that was in August. These apartments are aimed at a stable tenant base that is attractive to an investor. What’s more, Eagle Ridge is located in Centerra, one of the fastest-growing areas in Northern Colorado.

O’Toole: Is there any chance the trend might continue to spread in other types of real estate?

Nuttall: Well, investors typically specialize in one type of property, so those that have already entered the market by purchasing retail space are likely to keep purchasing retail if they decide to expand their portfolios. Also, Northern Colorado has more investment-grade retail properties than other types of commercial real estate such as industrial or office.

You can read more about this story in Friday's online or print edition.

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