Shortage of Affordable Lots Developing

By Molly Armbrister - Northern Colorado Business Report 

The housing market is still a long way from full recovery but the inventory of low-priced residential lots is fast running dry in at least one Northern Colorado city: Loveland.

The trend is most pronounced in the inventory of lots with price tags that allow homes to be priced in the low-$200,000s, according to Don Marostica of Loveland Commercial, LLC.

His company typically purchases lots under $20,000 in order to sell its homes at prices between $190,000 and $225,000, Marostica said.

Loveland Commercial has about 60 lots left in its possession, and is building between four and six homes per month. In other words, it'll run out of lots in about a year.

Low-priced lots are also becoming harder to find in Fort Collins, Marostica said, though Greeley still has plenty of lots at that price.

Marostica considers the homes his company builds to be "affordable," but worries that it won't be able to continue doing so for much longer, at least not west of Interstate 25.

"(Selling homes at) $300,000 to $400,000 is not what we do," he said. "But maybe that is the new affordable."

In all of Loveland, 820 lots were permit-ready as of Feb. 17, according to the city's tracking reports.

Another 1,672 lots have been purchased by developers but have not been signed off for infrastructure required for a building permit.

The city's report doesn't include pricing information, but Marostica estimated there were fewer than 200 lots that he considers "affordable" in Loveland.

Demand, of course, has played a role.

The housing market in Loveland has picked up in recent months, with home prices and number of homes sold both on the rise. Existing inventory is shrinking, so new homes are once again becoming a necessity.

At the end of 2011, new construction was up 20 percent in Loveland and the market had experienced a 207-percent increase year-over-year in lot sales, according to Ceri Anderson of The Group Inc.'s Centerra office.

Another developer of affordable homes, Jammie Sabin of Aspen Homes of Colorado, said that his company has just about 20 lots left.

Building economical homes is becoming more and more difficult to do, Sabin said.

Sabin defines an affordable home as one costing $250,000 or less. The average price of a home in Loveland in 2011 was $232,801, according to The Group.

Aspen Homes' affordable development in Loveland is called Enchantment Ridge, Sabin said. Homes there can be found for as little as $168,000.

The increase in the price of lots in Loveland is a result of the market recovering from the recession, Sabin said.

When the recession began and builders were forced to abandon projects, many banks ended up with the properties on their books. Those properties were later sold out of foreclosure at rock-bottom prices, also depressing the prices of other lots that were not in foreclosure.

Now, inventories and foreclosures are headed back down, so prices are bouncing back up.

Nathan Klein of Loveland Commercial echoed some of these sentiments at a recent panel discussion at an event sponsored by CSU's Everitt Real Estate Center.

Klein estimated that within 12 to 18 months, more lots will have to be developed from what is raw land now in order to build speculative homes for those who need a home without delay.

"It's much easier to sell a house than it is to sell a lot," Klein said.

The increase in home sales in Loveland has resulted in more competition for lots, which also contributes to driving up prices. While the number of homes sold is nowhere near the numbers seen in 2004 – when 2,162 homes were sold in Loveland – the number did increase 5 percent in 2011. That increase represents the first uptick in sales since 2005.

Year-to-date as of April, the number of homes sold in the metropolitan statistical area of Loveland and Berthoud was up 12.7 percent compared with the same period a year earlier.

Loveland Commercial, LLC is currently targeting lot listings and evaluating projects for the lots that can be procured for sale.

Congratulations to Gazelle Transportation, Inc.

Congratulations to Ron Lallo of Lallo Investments, LLC on behalf of Gazelle Transportation, Inc. on the purchase of an industrial property off of US Highway 85 and 31st Street in Evans, CO. The property is located at 3102 State Street, 3108 State Street and 708 31st Street, all off of Highway 85 in Evans, CO. The property totaled approximately 2.577 acres, with commercial buildings of 5,955 and 5,128 square feet, was purchased for $615,000 ($4.98/SF) and closed on May 29, 2012.

Currently the Greeley/Evans area is experiencing an shortage of industrial property with yards suitable to meet the needs of the growing oil and gas industry in Weld County. Lallo Investments, LLC purchased a creative property assemblage to meet their needs. They will be using the former Randy's Diner for their office and storage and the former gas station/convenience storeland and  Truck Wash as a yard and storage for their vechicles.

Gazelle Transportation, Inc., a branch of Gazelle Investments, LLC, has grown to what has become one of the nation's premier crude oil logistics companies. With a presence in most US crude oil-producing regions and are recognized as providing safe, reliable and competitively-priced services to the oil and gas industry. With a growing fleet and well-maintained facilities, Gazelle strives to provide World Class service to its customers nationwide.

The oil and gas industry continues to grow in Weld County, as seen in many articles, for instance:
"Average wages are going up considerably in Weld County, due in large part to the increase in employment in the oil and gas industry and its supporting activities." Sharon Dunn / Greeley Tribune, June 23, 2012.

The property purchased was listed for sale by Nathan Klein, Partner and Broker for Loveland Commercial, LLC out of Loveland, CO.  Mr. Lallo, the buyer, was represented by Steve Kawulok, Managing Broker of Sperry Van Ness/The Group Commercial, LLC out of Fort Collins, CO.

Congratulations to Pinot's Palette

Congratulations to Tony Curtis and Kim Fain of Pinot's Palette in the new three year lease of a 2,744 square foot retail space in downtown Fort Collins.  Pinot's Palette has leased property located at 159 West Mountain Avenue, on the corner of West Mountain Avenue next to the Rio Grande Mexican Restaurant and South Mason Street, across from the Larimer County Motor Vehicle Dept. 

At Pinot's Palette, they intend to bring the "Paint & Sip" concept into the thriving downtown Fort Collins area, where customers can enjoy trying out their artistic abilities while enjoying a refreshing glass of wine or other refreshment of their choice. The “Paint and Sip” industry competes with other “Girls Night Out” establishments, including Wine, Sushi and Martini Bars, as well as Date Night options such as dinner and a movie.

Nathan Klein, Partner and Broker of Loveland Commercial, LLC, assisted Tony and Kim in locating the ideal space for their new venture.  The new location was not a property that was on the market at the time, but was located by some in-depth research by Nathan.

Panelists: NoCo commerical real estate improving

By Molly Armbrister
Northern Colorado Business Report

FORT COLLINS - A panel of commercial real estate professionals expressed slowly-returning confidence in the Northern Colorado market Wednesday.

Specific segments of the market are definitely beginning to pick up speed, including office space, according to Josh Guernsey, a partner at Brinkman Partners.

"The office market took a pretty solid hit," Guernsey said, but office real estate, particularly Class A space, is making a comeback. Class B and C are also improving, but not at the same rate, Guernsey said.

Guernsey was joined on the panel - hosted by the Everitt Real Estate Center - by Russell Baker, a vice president at Cassidy Turley Fuller Real Estate; Mike Hill, vice president of multi-family development operations, McWhinney, and Nathan Klein, partner and broker associate at Loveland Commercial. The panel was moderated by Steve Stansfield, president of Realtec Commercial.
Loveland office space has not seen the same improvements as Fort Collins, according to Klein, because Loveland has less Class A space to offer.

Retail is another segment that is seeing improvement, and Northern Colorado is on the radar for a number of national retailers, said Guernsey, whose company manages Front Range Village in Fort Collins. The shopping center is at 92 percent occupancy, Guernsey said.

The multi-family market continues to serve as a strong presence in the market, according to Hill, whose company was not involved at all in the mulit-family market four years ago and is now a major player.

McWhinney's customers tend to be more educated when they begin looking for a place to live, have done their research and are ready to negotiate, Hill said. Many of those McWhinney serves are also "rent by choice" customers who could afford to buy but choose to rent for a variety of reasons.

Conventional loans for commercial real estate are still hard to come by, according to Baker, who said that most of his customers are building with cash. Baker estimated that it could be another one or two years before local banks begin financing projects again, but that some national banks have begun making their way slowly back into the commercial realm.

Congratulations to Cozy Cottage

Congratulations to Tammy Ahlquist of Cozy Cottage in the relocation of Cozy Cottage from the Promenade Shops at Centerra at NEC Highway 34 & I-25 in Loveland, to 4250 Corbett Drive, #308-310 in the Front Range Village Shopping Center, just north of East Harmony Road and east of Ziegler Road, in Fort Collins. 

Cozy Cottage is a retail home decor shop whose inventory includes antiques, seasonal items, candles, jewelry, gourmet foods, bedding and upholstered furniture, just to mention a few.  Cozy Cottage is also planning the possibility of opening a cozy coffee bar within the store sometime in the future.  Be looking for their Grand Re-Opening sometime in Fall 2012.

Nathan Klein, Partner and Broker for Loveland Commercial, LLC, represented Tammy Ahlquist in finding the ideal relocation spot and securing the 7 year lease with the Landlord of the property.  The space had been on the market with Joshua Guernsey of Brinkman Partners, LLC in Fort Collins.