Pandemic impacts Springs retail market

The effects of the COVID-19 pandemic have started to impact the Colorado Springs retail market, according to a recent report by CBRE.

The firm’s Colorado Springs Retail Marketview noted that the city’s retail market started to feel the impacts of the coronavirus with declining retail sales and consumer confidence.

The market recorded negative net absorption for the first time in 10 years – a number that is likely the tip of the iceberg, according to the report, which noted it will take several quarters to fully bounce back from the impact of COVID-19.

Annualized net absorption through second-quarter 2020 was a negative 205,000 square feet – a drastic change from the previous five years when annual net absorption averaged a positive 244,000 sf. Eight of the 12 submarkets surveyed posted negative net absorption in the first half of 2020 with the northeast submarket recording the largest negative net absorption of 137,000 sf.

During the first half of 2020, four new retail properties were delivered – all located in the northeast submarket –totaling 42,000 sf while nearly 412,000 sf was under construction at the end of the second quarter. CBRE noted that more than 67% of the retail space underway is located in the northeast submarket, the largest of which is the 220,000-sf Scheels sporting goods store slated for opening in April.

The report also noted the direct retail vacancy rose to 6.1% in the second quarter, up from 5% in the fourth quarter while the average direct asking lease rate remained stable at $14.33 per sf triple net.

CBRE also noted that the overall volume of year-to-date investment sales of $1 million and greater was $61.6 million – down 33.6% compared with the first half of 2019 – while the bulk of sales activity this year were from single-tenant, net-leased properties that pushed the average price per sf to $316.

“With the increasing amounts of bankruptcy announcements from national retailers in addition to numerous local restaurant and store closures, the overall impact to retail real estate is likely not fully realized yet,” the report stated.

However, CBRE anticipates that the robust development pipeline, especially in the northeast submarket, fueled by population growth and the record-setting housing market, should help bolster the market’s activity.

Featured in the September 16-October, 6, 2020, issue of CREJ