Optimism in local forecast

Optimism is never in short supply in Colorado Springs’ business community.

So when about 500 businesspeople attended the 17th annual Institute of Real Estate Management’s economic forecast breakfast Thursday, they heard mostly glass-half-full outlooks from a trio of speakers who discussed the 2008 local residential and commercial real estate markets.

When it came to the national economy and the possibility of a recession, however, the glass wasn’t just half-empty. It got dumped on the floor by a local economist, who nevertheless said the Springs might be in a better position to ride out the national storm because of the presence of the defense industry.

The event, which took place at the Crowne Plaza Hotel on the Springs’ south side, was attended by real estate agents, developers, civic leaders and government officials, among others.

RESIDENTIAL REAL ESTATE

Problems in the singlefamily housing market have been exaggerated by the news media, said Brian Maecker, of Re/Max Advantage and the Maecker Team in Colorado Springs.

Though El Paso County had record foreclosures last year, the late 1980s were worse because there were a similar number of foreclosures spread over a smaller population, he said. He also noted home sales were down in 2007, but only if compared with records set in recent years, he said.

He predicts this year will mirror 2007; foreclosures will total about 3,000 while sales will be around 9,000, assuming no major layoffs and Fort Carson soldiers return.

Mortgages have fallen to 5.25 percent for 30-year, fixed-rate loans, builders will construct fewer speculative homes and investors will jump into the market — all of which will boost demand, shrink inventory and keep prices stable.

APARTMENTS

Conditions are improving, said Doug Carter, a commercial broker who specializes in multifamily properties with the local office of national real estate firm Sperry Van Ness.

Citywide, vacancies have fallen to 9.4 percent after rising to 14 percent five years ago, he said.

A hopeful sign for landlords and owners of apartment complexes: Vacancies have fallen below 7 percent at higher-end apartments, where rents also are rising, Carter said. Market turnarounds typically begin with the “nicest and newest” apartments, he said.

Few, if any, new apartment projects are planned and demand will increase as the area’s population grows, he said. The result will be that rents, mostly unchanged for five years, will begin to increase, Carter said.

COMMERCIAL REAL ESTATE

The construction and leasing of stores and shopping centers has been strong in recent years, matching an increase in home construction, said Kent Mau, a broker with Sierra Commercial Real Estate in Colorado Springs. But retail activity will slow without more primary jobs, Mau said.

Industrial building activity has slowed, and the closing of local plants by chipmaker Intel Corp. and electronics manufacturer Sanmina-SCI might drive up vacancies, he said.

Office vacancies have improved, and it will become more expensive to rent office space, Mau predicted.

But the office market will be better positioned for stronger growth starting in 2009 and for the next few years after, he said.

ECONOMY

Mike Anderson, Colorado Springs’ assistant city manager and an economist, echoed what many forecasters have said: Housing and mortgage problems, rising gas prices and a business spending reduction have increased the risk of a recession.

Without a significant addition of new primary jobs, which bring wealth and investment into the community, the local economy will “slide sideways” in 2008. And while additional Fort Carson troops are being counted on to buoy the economy, their effects won’t be felt until late 2008 and 2009, he said. Continued deployments to Iraq will also mute their contributions to the economy, Anderson said.

But Department of Defense spending at local military installations, along with the presence of defense contractors, will help cushion the area against a national downturn, he said.