Is there a light at the tunnel for the region’s real estate doldrums?
Perhaps, participants in BizWest’s Boulder Valley CEO Roundtable said Tuesday. But what if that light doesn’t represent a means of escape, but a train barreling straight towards us?
This somewhat macabre analogy summed up much of the sentiment expressed in Broomfield this week by commercial and residential brokers, developers, investors and landlords.
On the commercial side, part of the problem relates to a slowdown in new companies setting up shop in the area and existing companies electing to grow in their own backyards.
“How do we win these deals in Boulder County and get these companies to select us?” Dean Callan & Co. president Beau Gamble asked his peers.
Daniel Aizenman, director of development and design at Conscience Bay Co., echoed this question and noted that he’s “wildly concerned about Boulder County not being attractive anymore.”
Matt Wiggins, associate vice president of economic vitality at the Boulder Chamber, said he understands the frustrations, but noted that leads for companies looking to the region for expansion are still flowing in. “Last year we had 40 projects come through, this year we are on pace for 60,” he said.
A tightening of the capital markets is one potential cause for the local “stall out” in development and leasing activity, Vista Commercial president Chris Jensen said, while others pointed to government policies and inefficiencies that they perceive to be gumming up the works.
“The cost of doing business because of our government regulations has become daunting and is starting to chase people away.” Sentinel Management Inc. general manager Kory Cash said.
Tebo Properties Inc. owner Stephen Tebo took issue with a specific policy choice that Boulder officials are exploring: selling a downtown parking lot to a hotel developer. He believes that losing the perception of surface parking in the retail district will scare off shoppers, while city staff have argued that there’s plenty of parking in nearby garages.
“Theres room if you’re willing to drive to the fourth floor of one of the parking structures,” Tebo said, “but nobody wants to do that.”
The arrival of the Sundance Film festival next January could be a boon to owners of Boulder retail and office spaces, but so far the hype hasn’t translated into deals, roundtable participants said.
It’s been “a bit challenging” for some property owners looking to capitalize on the festival to navigate the city process of securing the necessary use permits, Market Real Estate broker Nate Litsey said.
While Crescent Real Estate LLC managing director Ben Molk acknowledged that market “Boulder has not heated up” to the degree of some of its peer communities around the country, the pace of the municipal development approvals and construction permitting process isn’t uniquely local. “We’re saying it’s Boulder (that’s the problem), but it’s happening around the country.”
Element Properties principal Catherine Bean said the municipal red tape is still “killing deals,” but sees potential for improvement as local officials appear more willing to embrace economic development tools such as metro districts and a Downtown Development Authority.
“When I think about developing in Boulder, I see reason for optimism,” she said. “We need to incentivize (commercial) development. We saw it happen with residential.”
The sluggishness of the broader economy isn’t doing the local market any favors, roundtable speakers said. Seth Chernoff, CEO of Chernoff Boulder Property and CB Property Management, said that he’s clocked several “50-year-old businesses going under, which is a little bit troubling to me.”
While the local industrial market is relatively strong compared to some other real estate sectors, “we’re certainly not seeing the level of activity we saw three years ago, especially for our smaller tenants,” The Colorado Group president Karla Brown said.
There have been a few notable industrial and manufacturing deals in the life-sciences and quantum sectors of late, but most activity has been limited to aerospace users. “It just seems like we’re kind of a one-trick pony right now,” CBRE senior vice president Jeremy Kroner said.
The office market continues to struggle, but the gloomy conditions for property owners could represent an opportunity for business users willing to shop around for a deal.
“There’s a crisis around office,” Keys Commercial principal Geoffrey Keys said, “but the silver lining is it’s a really good time to be a tenant.”
On the residential side, the years-long trend of double-digital value appreciation appears to be behind us, particularly for owners of attached homes, Re/Max of Boulder owner Jay Kalinski said. “At this point our showings are lower than at any point in the last six years.”
BizWest’s CEO Roundtable was sponsored by Plante Moran, Bank of Colorado, Berg Hill Greenleaf Ruscitti LLP. Sponsor attendees Tuesday included BHGR’s Ashley Legan and Peter Schaub, Bank of Colorado’s Aaron Spear and Bonifacio Sandoval, and Plante Moran’s Jeremy Wilson.