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According to the recently released Coldwell Banker Commercial (CBC) Mid-Year 2021 report, “The numbers for the first half of 2021 show that market activity has returned and there are some clear winners and losers. CBC sees strength in the industrial, self-storage and net-leased markets as the year has progressed, while the hospitality, retail and office leasing markets continue to cause concern.  Landlords and tenants in the commercial real estate space have adopted approaches that clearly show they expect inflation will last. Leases with CPI clauses and rent escalations of 4-5%, versus the typical 2-3%, are readily being signed. Coldwell Banker Commercial professionals in a few leading markets are also seeing slight moderation in developer tempo from the beginning of the year due to soaring material costs.

Record amounts of money that’s been sitting on the sideline is now returning to the market, but investors are finding that there is very little product available. While low interest rates drove the decline in cap rates during the pandemic, rather than operating fundamentals, there remains sufficient room for compression as frustrated buyers are now open to purchasing properties at much lower cap rates than they would have ever considered prior to the pandemic. Interestingly, the markets didn’t experience a wave of distressed properties materializing from the pandemic.

The 1031 exchange program now faces an uncertain future and that has emerged as a key factor investors must now consider. This transaction tool become enormously popular during the pandemic, and it has created another surge in demand for replacement properties, as well as a significant sense of urgency to close deals quickly.  Exchange investors who prefer more passive investments are avoiding apartment buildings, multi-tenant retail centers and properties that require more day-to-day management.”

That’s the national picture.  As for Grand Junction and Mesa County, the overall market for commercial real estate was strong in the first six months of this year.  Most of the demand was for multifamily, industrial, and land along with self-storage units while interest in retail and office was mixed.  It was primarily investors that drove the real estate market in the first half of this year and I anticipate it to remain that way through the rest of 2021.

Tim Whitney | Managing Broker | Coldwell Banker Commercial Prime Properties

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