Colorado’s Outmigration Problem, and its Effect on Commercial Real Estate

Colorado’s Outmigration Problem, and its Effect on Commercial Real Estate

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Newsletter – March 2023

During the course of the COVID season, Denver saw a large influx of out-of-town home buyers pour into the metro and surrounding areas due to the new work-from-home policies adopted by large companies. This was good for the economy, but also drove home prices and real estate prices sky high. Now, with interest rates back to 2007 highs, and inflation affecting metro area cost of goods, people are once again moving out of Denver and into cheaper areas. The Denver area has shifted from an ideal destination with affordable housing options to an exploding metropolis catching up with LA and San Francisco on a cost-of-living basis. As a result, the Denver area, and Colorado, are experiencing outmigration that will alter the scene of commercial real estate in 2023.


Denver ranked 7th in outmigration among major cities in the fourth quarter of 2022. See the chart below, created by Redfin.com:

Top 10 Metros Homebuyers are Leaving

While 2,200 homebuyers seems a small number in comparison to the San Francisco exodus of 26,900, the percentages are surprising.

Record High 24.6%

Among Redfin.com users in major metro areas, Denver has the highest percentage looking to buy elsewhere at 31%, exceeding the national average of 24.6% of total users.
The national average of people looking to relocate out of major cities has steadily increased since 2017, reaching an all-time high in Q4 2022. While this may be concerning, it opens the door of opportunity in 2023.

How does this outmigration affect commercial real estate markets in 2023? As population decreases, so does the workforce. This means that the demand for commercial real estate will also decrease as businesses allow their employees to telecommute from a different city. As demand falls we see prices fall, and this is where the opportunity can be found. For most of 2022 the bid ask spread was too large for any value-add opportunities to make any sense on paper. Now, with decreasing prices, more properties will start to pencil for investors.

Another possible benefit of this outmigration and its effect on the market is a decrease in construction prices. Once again, the laws of supply and demand dictate price in a service market. As population decreases so will the need for construction, and contractors will need to lower their prices to set themselves apart in their competition for limited business. This will open the door for investors to consider ground up development in QOZ’s which require a doubling of the initial basis. These deals have been hard to justify with land and construction prices where they have been in the last couple of years. Now, QOZs and other development opportunities could be possible again, promoting the growth of both the population and the general economy.

Instead of mourning the downfall of the great state of Colorado, look for the carrot. In 2023, we can expect to see the prices of land, commercial real estate, and even residential real estate fall. While this will represent a loss of value for those who already own real estate, it will also afford new owners a prime opportunity to jump into a valuable market. In the coming months of dropping prices, reach out to NavPoint Real Estate Group for all your Commercial Real Estate needs and allow us to assist you in navigating this upcoming down market.

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N Academy Blvd
Sale Transaction

$10M Luxury House Sale in Denver

Jansen, Kaufman & Groothuis PC leased 1,524 SF of office space at 7901 Southpark Plaza, Suite 201 for 2 years. Jeff Brandon and Matt Kulbe of NavPoint Real Estate Group represented

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NAVPOINT REAL ESTATE

CONFIDENTIALITY / NON-CIRCUMVENTION

NON-DISCLOSURE AGREEMENT

NavPoint Real Estate Group (“Broker“) has been retained as the exclusive Broker regarding the sale of the property located at the address noted below.

To receive an Offering Memorandum (“Offering Memorandum“) please read this Confidentiality Agreement and agree to the terms. The details and information contained within the Offering Memorandum were obtained from sources deemed to be reliable. Verification of the information contained within the Offering Memorandum are the sole responsibility of the Potential Purchaser. No representation is made to the accuracy of the information by Seller or Broker. THIS AGREEMENT is made and entered into by and between NavPoint Real Estate Group and “Potential Purchaser” and shall become effective when executed by Potential Purchaser or Potential Purchasers Broker.

A. Commencing with discussions held between their respective representatives the parties have pursued and expect to continue to pursue discussions (the Discussions) relating to the potential sale of:

In the course of these discussions, Seller has disclosed to Potential Purchaser and may continue to disclose to Potential Purchaser certain information of proprietary and confidential nature (“Confidential Information”).

B. Seller will provide to Potential Purchaser certain printed, typed and handwritten materials and other tangible materials containing or relating to Confidential Information (“Documentation”).

In order to protect the Confidential Information, both during the term of the Discussions and after their expiration or termination, Potential Purchaser agrees as follows:

  1. Potential Purchaser shall maintain the Confidential Information in strictest confidence and shall not disclose to any third party any Confidential Information received from the other party. In addition, Potential Purchaser shall ensure that its officers, employees and agents likewise maintain the Seller’s Confidential Information in strictest confidence and that such persons do not disclose such Confidential Information to any other party. Potential Purchaser shall not have the right to use, duplicate, reproduce, copy, distribute or disseminate Confidential Information except for purpose of the discussions and negotiations as needed.
  2. Potential Purchaser agrees to limit access to Confidential Information received from the Seller to its own officers and employees on the absolute need-to-know basis solely for the purpose of the Discussions, and to use the same degree of care in reserving the secrecy of the Confidential Information furnished by the Seller and/or Broker as it uses in preserving the secrecy of its own Confidential Information.
  3. Notwithstanding the conclusion or termination of the Discussions, Potential Purchaser shall continue to fulfill its obligations hereunder for a period of one (1) year from the date of disclosure. Upon termination of the Discussions, all Confidential Information, including all forms of Documentation shall be returned to the Broker, including any copies or adaptations made by the receiving party.
  4. The obligation of Potential Purchaser under Paragraphs 1 and 2 above shall not apply or shall cease to apply to any information which Potential Purchaser can demonstrate by reasonable documentary proof- (a) to have been in the possession of Potential Purchaser at the time it was first disclosed by the Seller and/or Broker; (b) was in the public domain at the time it was disclosed to Potential Purchaser; (c) entered the public domain through sources independent of Potential Purchaser and through no fault of Potential Purchaser; (d) was lawfully obtained by Potential Purchaser from a third party who is free to disclose such information to Potential Purchaser; (e) to have been at any time developed by Potential Purchaser independently of any disclosure from the Seller; or (f) has been in the possession of Potential Purchaser for more than five (5) years.
  5. Potential Purchaser shall not have any right to register any copyright, trademark, service mark or corporate name based upon Confidential Information or otherwise register or claim any right to use any Confidential Information disclosed to it by the Seller without the express written consent of Seller and Broker. Nothing herein, and no disclosure of Confidential Information or Documentation pursuant hereto, shall be deemed a grant to Potential Purchaser, whether by implication, estoppels or otherwise, of any right or license under any industrial property right of the Seller.
  6. The Discussions shall continue until the date on which an Agreement shall have been concluded or the date on which either party shall have given written notice to the other of termination of the Discussions. All obligations of the parties hereunder shall survive any termination of the Discussions.
  7. Each party acknowledges and agrees that the unauthorized disclosure or use of Confidential Information disclosed to it by the other party or any other breach of its obligations will result in irreparable injury to the party, which furnished the Confidential Information. Therefore, each party agrees that the injured party shall be entitled to receive injunctive relief in any legal proceeding instituted by such injured party.
  8. This Agreement shall be governed by, and interpreted and construed in accordance with, the laws of the State of Colorado, USA.

For purposes of creating a binding contract in determining the rights and obligations under such contract in any court of law, the parties acknowledge that a signature reproduced by either digital signature, electronic signature, facsimile or photocopy shall have the same force and effect as an original signature and that the original and any such copies shall be deemed one and the same document. In the event this Non-Disclosure Agreement is submitted electronically, this agreement is provided under the Uniform Electronic Transactions Act – Col. Rev. Stat. §§ 24-71.3-101 et seq. By submitting this agreement, you are confirming your agreement to submit this Non-Disclosure Agreement electronically, and your indication of agreement, along with information provided, will have the same force and affect as if this agreement was submitted manually and your manual signature was provided. You should retain a copy of this agreement for your records.

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