Colorado Springs Industrial Market Report

Colorado Springs Transaction Volume | (5,000 – 100,000 SF)

20 Properties Sold in Colorado Springs

Average SF: 12,500
Average Sales Price Per SF: $134/SF
Average Sales Price: $1,807,347
Sales Volume: $27,110,200

Significant Sales

Focused Metrics | (5,000 – 100,000 SF)

Sales Volume

Q3 2024 Volume: $27,110,200
Q2 2024 Volume: $40,456,000

In the Colorado Springs industrial market, quarterly sales volume dropped to $27,110,200 in Q3 2024, down -32.99% from $40,456,000 in Q2. This decline may reflect a cautious approach from buyers looking for more clarity in the market with the economic uncertainty still at hand. Since the start of 2023, however, the average quarterly sales volume has been $30,791,295, indicating that Q3’s performance has been on par with the recent average.

Although sales volume in Colorado Springs declined this quarter, it is still in line with, or even above, the average pace of the past decade, excluding the extraordinary surge between mid-2021 and late 2022. The current sales volume indicates a shift back to more typical market conditions compared to previous years. As the market adjusts, this could create opportunities for both buyers and sellers, prompting stakeholders to closely monitor the evolving landscape.

Average Sale Price Per SF

Q3 2024 Average Sale Price Per SF: $134/SF
Q2 2024 Average Sale Price Per SF: $144/SF

The average sale price per square foot decreased in the third quarter of 2024, dropping to $134 per square foot from $144 per square foot in the previous quarter, a decrease of -6.94%. Although the drop in average sale price per square foot may suggest a cooling trend, overall pricing remains strong, still  holding near historic highs compared to previous years. This shift presents opportunities for buyers to take advantage of more favorable financing conditions than those seen in the last two and a half years, with the potential for future rate cuts. As demand stabilizes and the economic landscape evolves, sellers adjust their expectations, resulting in more balanced pricing compared to the surge during the recent peak.

Vacancy

Q3 2024 Vacancy: 5.1%
Q2 2024 Vacancy: 5.0%

Vacancy rates rose to 5.1% in Q3 this year, up from 5.0% in Q2. This slight increase indicates a continuation of the upward trend observed since 2020. The market is experiencing a period of adjustment as demand for leasing fluctuates. Various factors, including economic conditions and shifting business needs, contribute to this trend.

Under current market conditions, businesses have been hitting the brakes on searching for new spaces due to economic uncertainty. Many companies are having a more cautious approach, opting to reassess their needs and wait for more clarity in the market before committing to new leases or expansions. This trend reflects a strategic shift as businesses prioritize stability and cost management in an unpredictable environment.

Average Asking Rent Per SF

Q3 2024 Average Rent Per SF: $11.35/SF
Q2 2024 Average Rent Per SF: $11.22/ SF

Asking rents improved in the third quarter of 2024, reaching $11.35 per square foot, another all-time high. Despite rising vacancies over the past year, Q3 data shows that asking rent per square foot continues to increase, indicating that demand for industrial space still surpasses the current supply. This is largely due to the ongoing shortage of new construction, especially for properties under 100,000 square feet. As a result, the limited supply has strengthened landlords’ confidence in the ongoing appreciation of rental rates long term.

Under Construction 

Q3 2024 Under Construction: 306,750 SF
Q2 2024 Under Construction: 200,000 SF

The construction pipeline for new industrial properties has surged to 306,750 square feet, a milestone not achieved since the first quarter of 2021. This growth signals that developers are responding to strong demand despite a challenging environment.

With that said, elevated costs associated with construction debt, materials, and raw land have significantly slowed the development of smaller warehouses. As a result, many developers grapple with feasibility issues that complicate new projects of this size.

Construction Starts

Q3 2024 Construction Starts: 106,750 SF
Q2 2024 Construction Starts: 0 SF

The Colorado Aerospace Business Center, situated at 8470 Launch Point, is set to feature an 84,750-square-foot warehouse within the airport submarket. Construction is scheduled for completion in January 2026. A new 22,000-square-foot warehouse that recently broke ground is set to be delivered by June 2025,located off Janitell Road.

Conclusion
The economic climate is beginning to show renewed optimism, surpassing levels seen over the past two and a half years, albeit challenges remain. This increase in confidence is largely attributed to the Federal Reserve’s September meeting, where it implemented a 50 basis point rate cut—the first decrease in over two years. This pivotal move has strengthened the confidence of buyers and lenders in their underwriting processes, following a substantial 525-basis point rate hike from March 2022 to July 2023, marking the most aggressive tightening cycle in decades.

Despite ongoing volatility in treasury yields fueled by uncertainties in job reports and lingering recession fears, experts anticipate the market will continue to rebound. The optimistic outlook will be reinforced by the anticipated election results, as well as the possibility of further interest rate cuts. Together, these factors align with the Federal Reserve’s goal of achieving a “soft landing,” aiming to stabilize the economy while navigating recession fears.