Q2 2012 Colorado Springs, Colorado Commercial Real Estate Economy

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Q2 2012 Colorado Springs, Colorado Commercial Real Estate Economy

Colorado Springs’ location at the base of the beautiful Rocky Mountain foothills has not preserved it from persistent economic weakness. Located some 70 miles south of Denver along Colorado’s “Front Range,” this gritty city lacks Denver’s economic diversification, inherent strengths, and strong recovery profile. Given the presence of Fort Carson on the south side and the Air Force Academy in the north, the metro area has strong military connections. Thus it endures the vulnerabilities now common among such cities during a time of possible defense spending cuts; these could cost the area’s aerospace and defense firms billions of dollars, the Colorado Springs Business Journal reported in July. Indeed, according to that report approximately 45% of the local economy is military-related. Although base closure decisions have recently been put on hold, cuts or closures could become a local reality by 2015. While military units based in Fort Carson fight in Afghanistan, a fight in defense of the base (and the local economy) will be fought by politicians closer to home.

Even with the military presence, however, weakness prevails; local employment growth, moreover, took a turn for the worse in 2012. According to preliminary data provided by the U.S. Bureau of Labor Statistics (BLS), non-farm employment as of August was down fully 4,400 jobs (1.8%) from 12 months prior, following a 3,100-job (1.2%) increase over the preceding 12 months. Non-farm employment per the latest August, furthermore, remained down fully 17,000 jobs (6.4%) from August 2007. Indeed, employment in all major sectors of the local economy including Professional and Business Services, Construction, even Education and Health Services declined over the latest 12-month period. The small 200-job increase reported for local federal government employment over the same time could do little to offset the pervasive decline.

Despite the weak economic profile, positive signs have emerged in the local housing market. According to Pikes Peak Association of Realtors, most indicators—as of September 2012—showed improvement. Sales volume year-to-date at 6,909 units was up 503 units year-over-year and was the highest comparable nine-month total since at least 2008. Homes under contract as of September were counted at 1,600, the highest total for that month since at least 2008. Average days on the market had declined to 72, lowest since at least May 2011. Only prices have shown recent weakening. After holding steady in the vicinity of $211,000 for four months, the median selling price slipped to $194,000 in September, a 7.8% decline from the August median (yet a 3.6% increase year-over-year). At $223,497, the average selling price for September was down 5.6% for the month alone.