Commercial, residential brokers expect robust 2024 – BizWest

LOVELAND — Whether on the residential or commercial side of the market, real estate professionals expect the market to be robust in 2024.

That’s because demand continues unabated on the residential side with just interest rates among the primary dampeners. And on the commercial side, the vibrant, growing industrial and retail marketplace is helping propel growth.

Those are the assessments of Dennis Schick, managing partner of Re/Max Alliance, and Ryan Schaefer, CEO of NAI Affinity. They spoke at the annual Northern Colorado Real Estate Summit at the Embassy Suites in Loveland today.

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Here’s a deeper dive:

Residential

Schick noted that some of the top-performing communities have changed in recent years with Timnath, Firestone, Estes park, Lafayette and Severance the top five in new single-family listings in 2023.

Towns that had once led the pack, Greeley, Wellington, Brush, Frederick and Milliken saw declines in listings.

Communities with the higher percentages of closed sales were Firestone, Timnath, Red Feather Lakes, Lafayette and Johnstown. And those with decreases were Brush, Eaton, Berthoud, Greeley and Milliken, he said.

The median sales price of homes throughout the region, as recorded by IRES — the multiple listing service — was $555,000 in the region, with sales in the Broomfield and Boulder area on the high end of the range and the median in Greeley in the mid-$400,000s.

“We’re starting to see some corrective action in sales activity,” Schick said. He  noted that builder profits “have never been tighter” due to water costs and impacts from fire codes.

The market is seeing some negative metrics, he said, but interest in condominiums and townhouses are not among them, with median prices growing in the region.

He said the market will soon see a bigger wave of prospective buyers; nationwide 45.5 million people will “age into their prime home buying years.” 

With housing undersupplied nationwide, including in Northern Colorado, prices are not likely to decline.

Mortgage interest rates have and continue to slow the pace of growth, he said. He noted that 72.1% of potential buyers are saying that interest rates are the primary reason that they’ve paused their buy decisions.

He predicted that interest rates will drop from about 7.5% to 5.8% by the fourth quarter of the year, which will result in those standing on the sidelines re-entering the buying market.

He predicted that appreciation of residential real estate will be between 4.5% and 5% in 2024 with a transaction volume increase of 15-20%.

Commercial

Schaefer noted that one biggest impediment to new commercial construction, whether multi-family apartments or commercial, has been government fees, which include dedication of water.

“The hard cost of construction has gone up, but beyond that, city fees including water” are the biggest factors, he said. “In one community, government fees are 25% of the cost of the new home,” he said.

Schaefer said that industrial properties remain hot in the region. “The quality of industrial property continues to go up,” he said, and he predicted “an increased velocity of leasing this year” for industrial properties.

For retail, he noted that as a nation Americans are spending less on apparel and at craft and dollar stores, along with home improvement stores. “We’re spending more on beauty supplies, fitness, fast food, hair, pet supplies, sporting goods …”

In looking at the region, Schaefer said that Weld County retailers were seeing “strong traffic performance regardless of where I looked.”

Unlike some parts of the country, retail has performed well in Northern Colorado. There’s less delivery of new retail space, he said, but in Weld more retail space was absorbed than delivered.

He cited a new epicenter of retail coming to Johnstown with the opening of Buc-ee’s convenience store and the Ledge Rock Center across the interstate to the east. 

New retail coming to the old Foothills mall because of new design concepts will spur interest, as well as what could come to Centerra South in Loveland.

Because income demographics in the region are not as high as the top performing mall markets in the country, he advised people to “temper our expectations for the kind of retailers we say we want but never shop at.”

In the office sector, the national marketplace has been hit hard since the pandemic with 200 million square feet of office space “given back” as office workers continued to work from home. “We’ve given back more office space as a country than the entire Front Range has office space,” he said.

Larimer County’s office vacancy rate remains low at 6.6% and Weld’s is 5.3%, he said.

“Master planned communities will lead the way in growth over the next decade,” he said. He noted that there are 15.5 square miles of land along the northern Interstate 25 corridor that will be developed into master planned, mixed use communities over the next few years. Among them is the Bill Gates-owned Turion development at Berthoud and Mead. 

“If people like Bill Gates believe this is a great place to invest, why shouldn’t we?” he said.

Ken Amundson

Ken Amundson is managing editor of BizWest. He has lived in Loveland and reported on issues in the region since 1987. Prior to Colorado, he reported and edited for news organizations in Minnesota and Iowa. He’s a parent of two and grandparent of four, all of whom make their homes on the Front Range. A news junkie at heart, he also enjoys competitive sports, especially the Rapids.