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12/28/2003

Plenty of commercial space still available

By Tony Kindelspire
The Daily Times-Call

LONGMONT — The commercial vacancy rate was one aspect of the local economy that didn’t improve in 2003.

Numbers for the final year won’t be out until next month, but at the end of the third quarter in September, there was 2.6 million square feet of space on the market — 24.6 percent of the total available space, according to the Longmont Area Economic Council.

Vacant space at the same time last year was 2.3 million square feet, or 22.2 percent.

“It’s a concern, because lots of vacant space means you have unfilled jobs,” said John Cody, president and CEO of the Longmont Area Economic Council. “Obviously it’s a concern, but it also represents an opportunity.”

The LAEC’s numbers reflect the group’s coverage area, which is geographically equivalent to the St. Vrain Valley School District.

Commercial space in the Longmont area is all considered “flex space” — there’s no differentiation between office and industrial.

Within the city limits of Longmont, this year was a dramatic improvement over 2002 for commercial construction — $20.6 million in valuation, year-to-date, compared with just $7.6 million at this time a year ago.

But even the $21 million is a far cry from the boom year of 2000, when there was $56 million worth of commercial construction just in the city of Longmont at the end of November.

With the absorption rate averaging about 419,000 square feet a year from 1992 to 2002, it likely will be years before all the current available space is filled, Cody said.

“It may be three years instead of six years, but it’s not going to all get taken in one year. That’s not going to happen,” he said. “There won’t be (much) speculative construction because of the high vacancy rate.”

The LAEC’s focus is on primary employers — ones that produce goods or services here that are sold elsewhere, bringing new money into the community. Cody and his staff work to retain the companies already here and to convince new ones to consider Longmont for their expansion or relocation plans.

An important note about filling up the vacant space: Companies like Amgen, Seagate, Xilinx rarely come to a place like Longmont and take what is available — at least on a permanent basis.

These companies, Cody said, will typically want to build their own, permanent space.

“You could have a company come in here next year and build a million square feet, but if they build it all for their own use, you still have 21/2 million square feet on the market.”

It’s a stark difference from three years ago, he added, when the commercial vacancy rate in Longmont was around 5.5 percent.

So the commercial rate likely will remain high for the foreseeable future, regardless of what the overall economy does.

But although the construction industry was down locally last year — and likely will be again in 2004 — the situation is far from disastrous, thanks to residential building.

“Residential construction in recent memory seems to be driving the economy,” said Dave Van Allen, chief building official with the city.

Total building permits — including residential and commercial — issued year-to-date in Longmont through November were 3,676, the lowest number since 1996.

Although the overall valuation of the permits issued was down across the board from last year, residential valuation — for single-family dwellings, condos, townhouses and multi-family apartments — is actually the highest it has been in two years.

The years 1999 through 2001 were “all-time record type years” Van Allen said, and to have the numbers drop off the past couple of years is as much a reflection on building cycles as it is on the economy.

“Residential permit numbers are very cyclical,” he said. “It seems like every seven years we go through these cycles.”

Van Allen said he thinks residential construction is on a much more steady pace now compared with where it was a couple of years ago.

“I actually think it’s right around where it needs to be,” Van Allen said. “The city likes to have a 2 percent growth rate, and that’s right about where we’re at.”

The high point for total permits issued, year-to-date through November, was 1999, when 4,846 permits were issued.

Although the number of permits issued steadily declined, total valuation kept rising, hitting a year-to-date peak of $246.3 million in 2001.

Tony Kindelspire can be reached at 303-776-2244, Ext. 291, or by e-mail at tkindelspire@times-call.com.