Page 8 — Retail Properties Quarterly — February 2023 Northern Colorado United Properties Denver has the skills, expertise and determination to create powerful results. We build connections. We make things happen. We help move your vision Over 15 years of unmatched retail development experience Well-known for tenacious client advocacy (720) 898-8866 | UPROPERTIES.COM MINNEAPOLIS DENVER AUSTIN forward. N ationwide, we continue to see increasing headwinds for the macroeconomy and U.S. commercial real estate, such as inflation, rising interest rates and concerns about the severity of a potential recession, which leave us cautious to begin 2023. However, the retail sector, on average, throughout the United States has remained strong as consumers continue to spend at a healthy rate. Throughout the nation, develop- ment activity in large speculative retail space has decreased, and we are seeing mostly smaller-scale, end-user-driven development. There are examples of plans for malls to be redeveloped for a mix of uses such as apart- ments, warehouses and self-storage. A reason for the growing vacancy rates in traditional malls is the con- tinued growth of e-commerce, which is causing ten- ants to deploy new strategies with an eye to decreasing operating costs by having smaller footprints. In some instances, we are even seeing larger chains (such as Macy’s) allow smaller specialty retailers (such as Claire’s) to have a branded area within their store. However, in small to midsize retail centers and free- standing spaces, vacancies have reached pre-pan- demic levels due to increasing demand for discount stores, “medtail,” quick- serve restaurants and fitness con- cepts. On average across the U.S., the vacancy rate for the retail market is 4.2%, with rent growth at 3.9% year over year. The average triple net ask- ing price is currently $24 per square foot in the United States, which is a record high, according to CoStar. Many are cautiously optimistic about the retail market heading into 2023. Due to continued demand and lim- ited new supply anticipated to be delivered in the next year, vacancies should remain at a healthy rate. In taking a more in-depth look at the retail market in Northern Colo- rado (Larimer and Weld counties), these markets tended to, in large part, fare in line with or slightly bet- ter than the national average. As seen nationwide, Larimer County also has encountered a robust increase in consumer spending post pandemic. This increase in spend- ing is likely due to the increase in savings people built up from staying home because of restrictions, addi- tional funds provided by the gov- ernment throughout the pandemic, median incomes rapidly increasing above past levels, and pent-up con- sumer demand due to COVID-19 quarantines in Lar- imer County. Vacancies in the Larimer County retail market have dropped below the national average and are sitting at 3.8%, according to CoStar. Within Lar- imer County, John- stown is seeing one of the fastest rates of popula- tion growth in the state. With this increasing population comes the demand for more retail services. We are currently listing two mas- ter planned communities, The Ridge and Encore, in Johnstown. Both proj- ects will bring a mix of residential, retail and industrial uses to the area. In the last year there has been about 54,000 sf of new retail space deliv- ered in Larimer County. There is con- tinued sales activity in the market to private investors, but we have also seen institutional investors enter the market over the past year. The aver- age retail cap rate in Larimer County was 5.5%, and the average sale price per square foot was $216. With very limited new supply under construc- tion, and assuming tenant demand remains relatively strong, we antici- pate the overall retail market will also remain relatively strong in Lar- imer County. Weld County’s retail market has encountered struggles, as with most retail markets, with the changing Cautious optimism reigns in NoCo retail market Ryan Schaefer CEO, NAI Affinity Lauren Larsen Adviser, NAI Affinity Jake Hallauer President, NAI Affinity Please see Schaefer, Page 19