Coronavirus (COVID-19): The Impact on Commercial Real Estate Lending

As this unprecedented situation with coronavirus (COVID-19) continues to impact communities around the world, people are seeking answers, particularly regarding the current state of financial markets. How will commercial real estate lenders respond as uncertainty continues to overshadow the market? Here’s some insight.

Recently, the federal government pumped $1.5 trillion into the economy in an effort to calm the market and provide liquidity so that business and property owners can maintain operations and keep people employed.

For commercial real estate owners in Colorado, this could be one of the greatest borrowing opportunities in our lifetime.

As the market responds to this dynamic situation, we’re seeing changes in lending behaviors across the industry. Some lenders are choosing to pull out completely; some are planning to close approved deals in the pipeline and re-evaluate; while others, primarily privately funded bridge lenders, are moving ahead in full force.

For commercial real estate owners/buyers in Colorado, this can be a particularly tricky landscape to navigate. During turbulent times, it’s important to have an experienced debt advisory advocate on your side to help evaluate a current situation with existing debt and/or assist with a new purchase.

Need debt advisory guidance?
Tributary Lending provides debt advisory services to assist our clients to effectively maneuver up-cycles and down-cycles using both bank and non-bank lending options.

If there’s anything we can do to help, please don’t hesitate to contact us at info@tributaryre.com.

Coronavirus (COVID-19): The Impact on Commercial Real Estate Lending2020-04-14T14:50:12+00:00

Denver’s Commercial Real Estate Market Update: Q4 2019

It’s no secret that Denver’s commercial real estate market has been incredibly strong for the past few years. In 2019, this uphill trend continued, revealing sustained strength across nearly every sector. Meeting the high demand for commercial and industrial real estate, including downtown high-rises, suburban business parks, warehouses and manufacturing facilities, Denver continues to heat up with new developments to keep pace.

Here’s a round-up of Denver commercial real estate activity in Q4 2019.

Downtown Denver:

While Downtown Denver experienced a decrease in active construction during Q4, plans for more development were announced, further strengthening the area’s reputation as a major business hub for the Front Range.

  • Denver-based developer Jordon Perlmutter & Co. unveiled plans for “Paradigm River North,” an eight-story, 200,000-square-foot office development at 3400 Walnut St. in the RiNo Art District. Slated for completion in 2022, the building is designed to appeal to the next-gen office user.
  • Law firm Fisher Phillips is nearly doubling the size of its Denver office with a move to a new office in the Central Business District. The new office is in a 20,235 square foot space on the 24th floor of the 25-story building at 1125 17th Street.
  • The Downtown Denver Partnership, along with the City and County of Denver and the Downtown Denver Business Improvement District (BID) launched the Urban Forest Initiative to grow Denver’s tree canopy from 4% to 10%. From the funding of the City, BID, Bank of America Charitable Foundation, FirstBank, the Zoellner Family and additional philanthropic support, 17 grantees have been awarded funding for 113 tree plantings in downtown Denver.
  • EF Education First, a foreign language training and travel company, announced plans to move into the new Platte Fifteen building, which is nearing completion on the corner of 15th and Platte streets. Reports say Platte Fifteen is the city’s first commercial building utilizing cross-laminated timber.

 West Denver:

Despite a slight increase in vacancy rate, West Denver experienced strong building sales.

  • The Union Walk Retail, a 12,000-square-foot retail space at 180 S. Union Boulevard in Lakewood, has sold for $5.025 million. The space was fully leased at the time of sale, featuring strong national tenants including Bruegger’s Bagels and Floyd’s Barbershop.
  • An eco-friendly developer broke ground on the Parkview Residences, a 45-unit townhome project in Lakewood. The project will offer a mix of two and three-bedroom units ranging from 1,200 – 1,500 square feet across nine buildings. The units are expected to sell from the high $300,000s to more than $500,000.
  • Clear Creek Commons, an active senior living community in downtown Golden, has sold for $18.75 million. The buyer Griffis/Blessing Inc. paid $416,667 per unit, and the 45-unit community was 100% occupied with a waiting list at the time of the sale.
  • Suite Office Solutions LLC leased 6,257 square feet at 274 Union Blvd. in Lakewood. Dan Bartell represented the landlord.
  • Kiowa Engineering leased 2,177 office square feet at 7175 W. Jefferson Ave., Suite 2200, in Lakewood. Eric Gold represented the tenant.

Northwest Denver:

With a rise in office inventory from 11.8 million SF in Q3 to 21.9 million SF in Q4, Northwest Denver reached $642 million in total building volume sales – a $390 million increase from the previous period.

  • Partners Group, a $91 billion Swiss investment firm, opened its 129,400-square-foot North American headquarters at 1200 Entrepreneurial Dr. in Broomfield. The company is predicted to grow its headcount to 450 employees within the next five years, adding more than 250 jobs to the region.
  • Schnitzer West was chosen as the developer of two office sites in Downtown Westminster totaling up to 650,000 square feet.

Colorado Blvd/Glendale/Cherry Creek:

In Q4, Colorado Blvd/Glendale/Cherry Creek experienced monumental growth. With the vacancy rate down by 3.6% from the previous period, the total building sales volume reached $1.2 billion – a significant increase from the previous quarter’s $186 million total sales.

  • Florida-based TerraCap Management paid $77.5 million for the 14-story, 168,486-square-foot Centerpoint I and the 16-story, 205,534-square-foot Centerpoint II at 1777 S. Harrison St. Combined, the deal works out to about $200/SF.
  • The four-story building at 101 University Blvd. sold to MDC Realty Advisors for $26 million – that’s more than triple what it sold for in 2011.
  • Equinox Fitness agreed to take space in a new six-story, 75,000-square-foot office building at 240 St. Paul St. The project will be developed by Denver-based BMC Investments.

 Denver Tech Center:

The Denver Tech Center experienced an increase in average rental rates (up by $1.62 from Q3), while also remaining attractive for real estate investment, reaching $247 million in total building sales volume.

  • ML East Tufts LLC sold the Stanford Place II building at 7979 E. Tufts Ave. to Los Angeles-based Lowe for $62.25 million. At 366,184 square feet, the deal works out to $170 per square foot.
  • Schnitzer West announced it will break ground on its latest office development in Q3 2020. Located at 6363 Greenwood Plaza Boulevard, the three, sixteen-story Class-A office towers will include a tower with approximately 290,000 RSF, an efficient standard floorplate size of 30,800 RSF and a parking ratio of 3.0 per 1,000 RSF.

 

 

 

 

 

Denver’s Commercial Real Estate Market Update: Q4 20192020-01-06T16:13:13+00:00

Decade in Review: Denver’s Commercial Real Estate Cycle

Since the global financial crisis over a decade ago, Denver has solidified its status as a city where people – and businesses – want to be. As high-profile companies relocate their headquarters and key operations here, the Mile High City continues to have undeniably strong economic fundamentals. In fact, Denver has consistently ranked among the Top 10 recession-recovered cities for the past few years.

As a result, Denver has become an attractive market for investment. Over the past decade, commercial real estate has seen a steady influx of both domestic and foreign investment – with few signs of slowing down – adding to the city’s already-booming economic growth. While looking to the future is imperative, it’s also valuable to look at the factors that influenced our rise in order to capitalize on best practices.

Here are 5 key commercial real estate trends from the past decade that have helped shape our present industry and will inform the next chapter of development and leasing activity for Denver.

1. The Rise of Secondary Markets

Across the U.S., secondary markets are gaining the attention – and dollars – of investors looking to diversify their portfolios and increase their growth potential. According to CBRE’s Americas Investor Intentions Survey 2019, investor interest in secondary markets grew for the fifth year in a row. Advancing for the third year in a row, Denver tied with Atlanta for the #5 spot. Multifamily remained the primary focus for investors with 42.8% of total 2018 sales volume, while office came in second at 25.8%. Investor interest is expected to remain high in 2020.

2. The Explosion of Population and Business Growth

The Mile High City has long been a magnet for transplants. Since 2010, the Denver metro area’s population has grown more than 15%. With a growing highly educated workforce, the city has captured the attention of major corporations looking to attract top talent.

In the past two years alone, 24 companies have relocated their headquarters or expanded into Downtown Denver, according to the Downtown Denver Partnership. Additionally, hundreds of new companies are founding and growing their businesses here, employing thousands of people and raising hundreds of millions in capital. To meet demand, developers have delivered millions of square feet of office space. In Downtown Denver alone, more than 1.4M square feet of new office space was delivered in 2018.

3. The Evolving Role of the Conventional Office

A decade ago, “going into the office” was largely synonymous with driving to work, clocking in, sitting in a high-walled cubicle, clocking out and driving home. Today, it can mean a variety of activities in a variety of places. As technology has transformed the way we do business, many employees have the flexibility to plug in from the comfort of their couch or work from a local coffee shop.

As companies choose to access a global talent pool, traditional office set-ups have evolved to accommodate remote or partially remote workers. This often means a smaller physical footprint, and, of course, an increased demand for coworking spaces. Denver is currently the 7th largest flexible office space market in the country, according to CBRE. (Read more about the traditional vs coworking office space here.)

4. A Shift in Workplace Functionality

While the size and number of conventional office spaces have generally decreased, the design of in-person workspaces has become more important as companies look to appeal to the elevated expectations of today’s workforce, and attract and retain employees in an increasingly competitive job market. As developers and brokers, it’s been essential for us to become experts in accommodating a variety of work styles and preferences across multiple generations.

While the need for open, flexible layouts has not changed in recent years, there has been a noticeable shift among tenants requesting “heads-down space” for employees for quiet, focused work. Solutions have included huddle rooms, call booths and “zen dens.” As Generation Z enters the workforce, there will undoubtedly be another shift in design trends to meet new demands while supporting productivity across the entire spectrum of the workforce.

5. Changing Tenant Expectations

What tenants expected 10 years ago is not the same as what they expect today. And for good reason. Businesses operate in a completely different world, thanks in large part to technology advancements that have changed how we connect with one another and get work done.

Accordingly, connectivity is an increasingly important decision-making factor for companies looking for office space. As more and more ‘smart buildings’ come online, older assets will need to adapt to keep up with new infrastructure demands.

So, what hasn’t changed in the last decade? Tenants still highly value both location and amenities. Denver continues to see steady development within or close to the city center. Walkability, access to transit and nearby housing options all play crucial roles for buildings looking to attract tenants for the long-term.

Value-add amenities packages – think top-notch fitness facilities, locker rooms, showers, bike storage and common spaces that encourage community-building – are taking on increasingly important roles as elements of experiential, hospitality and residential design make their way into workplace design. We expect to see a continued blurring of the lines over the next decade as a new generation redefines what work looks like.

While no one can predict the future, by looking to best practices from the past decade and remaining flexible in the face of change, the CRE industry can continue to thrive in one of the longest CRE cycles this city has experienced.

Decade in Review: Denver’s Commercial Real Estate Cycle2019-12-18T17:59:51+00:00

9 Reasons to Use a Commercial Real Estate Broker

One of the most frequently asked questions by potential clients is why they should use a broker like Tributary to secure an office lease. As a business owner, you may assume that you can reduce the amount of time, energy and costs it takes to find a commercial space by navigating the process on your own. In reality, a talented broker can make the process easier for you.

At Tributary, we understand that real estate is one of the highest expenses of running a business and that it has a significant impact on your business goals. We believe in serving and advocating for you throughout the lease negotiations, providing robust market knowledge along the way to secure the best terms possible. (more…)

9 Reasons to Use a Commercial Real Estate Broker2019-12-10T17:17:18+00:00

Our Community. Our Responsibility.

Giving back to our Denver community is a critical part of Tributary Real Estate’s culture. From volunteering with industry associations and nonprofit organizations to leading business community initiatives and helping guide public policy, our team is committed to improving the health and wellbeing of the neighborhoods we serve every day.

Since 2017, our team has spent hundreds of volunteer hours in and around the Denver Metro Area. As a team, we have delivered groceries to hungry families and individuals for Metro Caring, one of Denver’s largest hunger relief programs that distributes between 4,000 and 6,500 pounds of food, baby items, and personal care products to over 500 people every day. We also volunteer at the annual Project Homeless Connect, where we work with people experiencing homelessness to provide resources including ID services, resume workshops and childcare.

Here’s a snapshot of some of our team’s community involvement:

Tributary Partner and Managing Broker Andy Cullen is a member of the 2019 Leadership Denver class through the Denver Metro Leadership Foundation. This 11-month program aims to equip Denver’s leaders with the knowledge, network, skills and experience to enhance their impact in the community.

Andy also serves on the board of Big Brothers Big Sisters of Colorado (BBBSC), an organization that provides children facing adversity with strong, professionally supported relationships. Andy and the BBBSC Board of Directors were recognized as the 2019 Board of the Year for outstanding leadership, innovation, and dedication to serving the youth in Colorado. Andy’s commitment to building up the next generation even inspired some of our brokers to become “Bigs” themselves within the organization.

As the president of the Rocky Mountain Alliance Children’s Foundation, Tributary Partner Amy Aldridge leads a dynamic and energetic group of philanthropists with a mission to improve the lives and wellbeing of children in Denver. Under her leadership, RMA is on track to contribute more than $140,000 to local nonprofits, the largest amount in the organization’s history. As a member of the Executive Leadership Council of the Downtown Denver Partnership, Amy is actively working to create opportunities for mid-career leaders to engage in the greater business community.

Andy and Amy both serve on the Board of Governors for the Metro Denver Economic Development Corporation, helping drive solutions to strengthen the economic growth in the region.

Tributary Associate Broker Grant Oliver was selected this year as a participant in the Downtown Denver Partnership Leadership Program. He’s also an active member of City Build and the Denver Metro Chamber of Commerce, where he serves on the Infrastructure Committee. Grant volunteers with Big Brothers Big Sisters of Colorado and the Denver Active 2030 Children’s Foundation, which develops philanthropic leaders who mobilize the community to impact the lives of disadvantaged children through annual fund-raising events and projects.

As you can see, our values extend far beyond real estate transactions. We believe in building relationships that serve the greater good and make a positive impact on our neighborhoods. Have an interesting cause we should know about? Reach out. We’d love to hear from you.

Stay tuned as we share more ways our team is making an impact in the Denver community.

Our Community. Our Responsibility.2019-10-22T16:07:04+00:00

4 Ways Technology is Transforming the Workplace

The workplace of the future has arrived, and it runs on smart technologies. As office expectations continue to evolve, one of the biggest trends we’re seeing with tenants is the need for flexible and people-centric spaces that can accommodate various work styles with seamless technology integration. (more…)

4 Ways Technology is Transforming the Workplace2019-08-28T17:06:21+00:00

5 Workplace Trends to Know in Denver

No two companies are alike. With so many differences in size, industry, operating style, growth strategy and culture, it takes a certain kind of care and attention to identify what a company needs in terms of their real estate. It’s part of the challenge of a being broker, and one we gladly take on each and every time we work with a new client. (more…)

5 Workplace Trends to Know in Denver2019-05-08T17:22:48+00:00

What Opportunity Zones Mean for Denver’s Growth

“Opportunity Zones” are top of mind in Denver’s development world right now. Since the new tax incentive launched in January 2019, developers and investors – really anyone in the commercial real estate industry – have been trying to figure out exactly what it means and how to take advantage of it. While there are multiple opinions on how it will shake out, the general consensus is that it will ultimately benefit Denver’s (and Colorado’s) growth.

Designed as an economic development driver, the federal Opportunity Zone program is part of the 2017 tax reform package aimed at balancing the disparity that still exists between economically strong versus economically distressed communities following the Great Recession over 10 years ago.

In short, it’s a tax incentive to encourage investment in low-income urban and rural communities using “Opportunity Funds,” which are a new class of investment vehicle. The incentive includes the deferral, reduction and potential elimination of certain federal capital gains taxes. (Click here to see a great breakdown of the model.)

Opportunity Zones in Denver

Across the U.S., each state designated Opportunity Zones with input from local governments and community stakeholders. There are dozens of areas throughout Colorado that are designated as Opportunity Zones. In Denver, there are 10 zones in the following neighborhoods:

  • Clayton
  • Elyria/Swansea
  • West Colfax
  • East Colfax
  • Northeast Park Hill
  • Montbello
  • Sun Valley
  • Northeast Westwood

For anyone following Denver’s growth trajectory over the past several years, it should come as no surprise that these areas should be flagged as opportunities for further investment. A lot of these areas were already on developers’ and investors’ radars as development opportunities, and in some cases, projects were already in the works. Now, they have the added benefit of being in an Opportunity Zone. A couple of redevelopments that fall into this category are the Robinson Dairy Marketplace and the Mile High Stadium District in Sun Valley.

The Opportunity Zones program will inevitably spur even more development in these areas, which will ideally create new jobs and opportunities for increased economic activity in the neighborhoods.

Areas highlighted in yellow are designated opportunity zones.

Time Restraints on Opportunity Zones

Contrary to current rhetoric, investments through Opportunity Funds don’t have to take place in 2019, although doing so allows for the maximum tax benefit. Investments can be made through this program through 2026, which allows developers and investors to continue evaluating opportunities over the coming years, rather than rush into major decisions.

Many developers and investors, including Tributary, are taking a cautiously optimistic approach to this new incentive. At the end of the day, a deal in an Opportunity Zone still needs to make financial and business sense. Because investors are required to hold the asset for 5, 7 or 10 years, it requires some patience and long-term planning.

During various panels on this subject, hosted by organizations like Bisnow and ULI, some seasoned experts have speculated that trigger-happy investors might rush into new projects without fully understanding Denver’s commercial real estate landscape. We would echo the advice that anyone looking to capitalize on the program use a trusted developer with both the means and the vision for developing in these areas without the incentive.

Tributary’s Approach to Opportunity Zones  

Bottom line: At Tributary, we believe in intentional development. With decades of experience in Denver’s commercial real estate industry, we’ve seen a lot of incentives come and go. While this program might be a “once-in-a-generation” opportunity – as some have referred to it – we know that deals still need to make good business sense, regardless of any after-tax benefits.

As an integrated real estate firm, we’re able to view the market through the lens of development, investment and brokerage, allowing us to formulate our position with the benefit of multiple perspectives. We will continue to make deals where it makes sense, concentrating our efforts in Denver’s urban neighborhoods.  If those align with Opportunity Zones, great. If not, we remain confident in our ability to contribute meaningfully to the urban fabric and create new opportunities for locals to live, work and play in Denver’s urban neighborhoods.

Top photo credit: Bisnow.

What Opportunity Zones Mean for Denver’s Growth2019-04-02T17:12:55+00:00

Get to Know Team Tributary

We guarantee you won’t find a team of brokers, developers and investors who enjoy what they do quite as much as us. We love Denver, and make it our job to know the ins and outs of this market so we can make informed decisions that maximize value for our clients and partners. Plus, we have fun doing it. Our customized approach to Denver brokerage, development and investment is built on strong relationships and data-driven insights. Watch this video to get to know who we are and what we’re all about!

Get to Know Team Tributary2019-02-05T18:01:25+00:00
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