The commercial real estate market has been on the rise. Many clients are stakeholders looking to buy investment properties, corporations looking to expand business into the area or medical professionals coming to the area to serve the local community.
“A lot of companies are looking at this area as the next hot spot of growth,” said Katie Davis, commercial broker with Bray Real Estate. “Even though to the local community, our prices seem high, to an outside investor, we’re reasonable because they’re coming from a different market.”
She is also seeing many local businesses on the leasing side that are growing and need to find a bigger space, or businesses downsizing, but there is an uptick in leases.
“We have an influx of investors, buyers and people wanting to lease, but we don’t have enough space for them,” Davis said. “Developmental costs, tap fees to get water and getting electricity to properties is expensive. Building costs have skyrocketed, and labor is hard to find in that industry. These factors, just to name a few, are preventing progress.”
Although people are returning to working in an office or investing in their businesses again, low inventory still poses a challenge for potential buyers.
“There’s plenty of need and demand for development, especially housing, workforce housing and certain types of flex industrial office space,” said Micah Adams, broker associate with S.U.R.E., LLC. “However, with the high interest rates and construction costs, it’s currently difficult to get those projects started. Unless people get grants, buy at the right price or have other tricks up their sleeves, some of those projects have to hit the pause button until the right opportunities come up.”
Davis said that she has heard discussions of potential developments, including small warehouses and office space. Condos are another area of interest for developers.
“It’s also weighing in the factor of if we can build it where people can afford it with the current interest rates,” Davis said. “In residential real estate, people can put five percent down. In commercial, it’s 20 to 25 percent down on top of the 7.5 to 10 percent interest rates. When people are looking at building these, they’re thinking about how buyers have to come with that 20 to 25 percent down, along with the high interest rates. The challenge is making it financially feasible not just for the builder but also the buyer.”
Adams said he has seen growing demand for flex industrial office spaces. People are having a hard time getting ahold of them because there are not many available. Land for development and multi-family investment properties are also popular.
According to Adams, there are currently a couple thousand multi-family developments being built, while a couple thousand more developments are still in the planning process. There are also mixed-use development projects, such as Dos Rios and Costco, that will bring other development opportunities with them.
“I’m feeling optimistic about 2024 and 2025 because I think we’ll see more population growth and job growth, which will be good for commercial real estate,” said Jackson Berry, employing broker with Red Compass Realty. He has also seen interest in office spaces, typically finding an interested party within 30 to 60 days.
With Mesa County’s population breaking 160,000 this year, that has also drawn the attention of corporations and investors.
“People want to be here, and corporations want to expand into the area,” Davis said. “It would be great to have something that helps the local buyer on the lending and building perspective, but we see many clients relocating here and buying properties because it’s affordable compared to their respective markets.”
Adams advised that prospective buyers and investors be wise and responsible with investments.
“Over the last couple of years, it’s been easier for investors and developers to make money because they’ve seen lots of inflation and prices going up for buildings,” Adams said. “There are mixed opinions on if there will be a downturn. It’ll be harder over the coming years, so if you’re investing, make sure you’re running those worst-case scenarios and understanding what happens if you cannot make payments.”
“One challenge for an investor is finding a deal that provides a good enough return for the risk taken when buying a piece of property,” Berry added. “There will be opportunities that will come up as the interest rates start to settle down, and there are some investor owners who overleveraged their properties. When those loans come due, those might present opportunities for investors.”
Davis added that she is starting to see some seller financing being offered, which will facilitate the process for buyers and investors.
“We have several challenges, but in this case, the challenge is the opportunity,” Adams said. “People have to get creative, so we’ll start seeing innovation that will open the doors for investors and developers.”
Davis, Adams and Berry recommended that prospective buyers do their research and choose a commercial broker with an extensive background in that product who can guide them through the process and help them achieve their real estate goals.
“I think it would be good to keep some cash ready for when a good opportunity arises and buy something at a discounted price,” Berry said. “However, right now, we’re in a wait-and-see pattern.”
Adams encouraged investors and developers to keep the local community in mind with their projects, as the same factors that made them money are the same factors creating challenges for families with lower and middle incomes.
“I think whether or not we head into some economic turbulence, we will all need to come together to support each other,” Adams said.
Some notable commercial developments include Panda Express, which hosted its grand opening last week. Enstrom Candies has plans to expand and build a 50,000-square-foot warehouse, which could open by fall next year. The Grand Junction Recreation Center, a 102,000-square-foot facility estimated to cost $82.1 million, is expected to be completed in 2026.
These are just a few of the many new commercial development projects coming to support Grand Junction’s growing economy.
Source: “Commercial real estate is experiencing rising demand”
