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DENVER-According to the 2006 Colorado Business Economic Outlook report by the University of Colorado at Boulder Colorado Leeds School of Business and Compass Bank, the future health of the local commercial real estate market is simple to predict. The market improves with the state’s economy; and the state’s economy does well when the nation’s economy is picking up a steam.

“Commercial real estate investment and development has accelerated since mid-2003, as Colorado has experienced good job growth and attracted new residents,” notes the report. “Traditional industries, such as defense and mining, have sparked pockets of strong commercial real estate activity and added diversity to the state’s economy.”

The report notes that Ross Research, the research arm of the Frederick Ross Co., says that the overall Denver commercial real estate vacancy rates have moved lower due to less supply and positive absorption. “While the office market lost some momentum from 2004, overall vacancy dropped to 20.5%, with the majority of space being absorbed by class A properties,” the report says. “The Southeast suburban market was dominant, but nearly all geographical sectors performed and better overall.”

The report describes the industrially market activity as “robust” absorbing 1.37 million sf through mid-2000, almost equaling its absorption for all of last year. “Organic growth from existing industrial tenants pushed vacancy down to 8.31%,” according to the CU/Compass report. “Industrial vacancy will be tested in 2006, with the delivery of 1.8 million sf.”

The report also says that the metro retail market continues to be a strong performer. The study shows that vacancy shed more than a point as it fell to 7.5%. However, it warns that a large supply is either under construction or on the drawing board.

“Office and industrial lease rates have been stable, while retail rates have risen,” the report states. Citing Grubb & Ellis for the information, the report notes that Colorado’s investment in its transportation infrastructure is helping to attract companies looking to expand “to the interior of the West.” Increasingly, because of high housing costs along the West Coast, Colorado is seen as a more affordable alternative to California.

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