Contractors are going belly-up. The real estate market has tanked. Retailers and high-tech firms have fled. Airlines are soft on Colorado Springs.
It's all stuff we know, but taken together in a 600-word overview prepared by El Paso County Assessor Mark Lowderman, the analysis is like a bucket of cold water in the face.
Lowderman's unvarnished look at the local economy, through the lens of his latest property reappraisal data, was submitted last week to the Colorado Legislative Council to assist the state in forecasting property tax revenues for 2011. The state report, due for release Dec. 20, will set the stage for budget discussions by the General Assembly, which convenes in January.
"It's not a pretty picture, is it?" Lowderman said Tuesday of his analysis, the full text of which is included below this story. "We're far enough into the reappraisal we have a pretty good handle on what's going on. It's kind of gloom-doom when you put the facts together in one place."
Because the state pays 62.5 percent of public-school finance, about $3.375 billion this academic year, legislators need to know how much the state must pay school districts to offset falling property values.
The property reappraisal covered sales from Jan. 1, 2009, through June 30, 2010, and will affect tax bills due in 2012 and 2013. Lowderman's final report is expected within 30 days or so, but preliminary data show residential properties declined by 10 percent, plus or minus 3 percent, though some neighborhoods saw greater or smaller declines.
"This decline is based on a high number of foreclosures, increased supply, reduced demand, and economic conditions that have caused a reduction in new construction," Lowderman writes. "A lack of money available due to more stringent lending requirements and speculative home building before the market collapse have led to an increase in supply. Likewise, high unemployment and lower consumer confidence have decreased demand."
Lowderman notes Colorado Springs lost several major employers, such as Intel, and that the impact of new troops coming to Fort Carson was "overestimated for the markets surrounding the post," because families chose to buy in areas farther from the post "due to better schools."
Another negative: Some contractors have left Colorado Springs, while others have gone bankrupt or closed down. "These conditions negatively influence the perceptions of the health of the local residential market for both homeowners and investors," Lowderman continues.
Multi-family property values may decrease by 10 percent to 15 percent, he says, while commercial and office land may drop by about 5 to 10 percent; heavy and light industrial land is expected to go down approximately 5 to 15 percent.
Lowderman describes an abysmal office and commercial market, with high vacancy rates stemming from nationwide retailers fleeing the Springs. Both shopping malls have lost anchor tenants, existing space is vacant longer (which lowers prices), and industrial land around Colorado Springs Airport has fluctuated in value based on uncertainty.
None of that surprises Greater Colorado Springs Chamber of Commerce CEO Dave Csintyan.
He blames the housing market on the "protracted national economic conundrum that has redefined the supply-and-demand game board," and notes we're better off than many communities of comparable size.
Moreover, Csintyan says the number of Chamber members who have shuttered their operations is "relatively low," which he says shows businesses are navigating the economic storm "by making tough choices on the expense side of the business."
For residential properties, we are projecting a decrease of 10% (± 3%).
This decline is based on a high number of foreclosures, increased supply, reduced demand, and economic conditions that have caused a reduction in new construction. Foreclosures have not only increased the number of homes on the market, but have also created price competition as buyers gravitate toward the low priced “fixer-uppers.” A lack of money available due to more stringent lending requirements and speculative home building before the market collapse have led to an increase in supply. Likewise, high unemployment and lower consumer confidence have decreased demand. Colorado Springs has lost several major employers such as Intel manufacturing, and Agilent Technologies leading up to our statistical study period. Additionally, the impact of an increase Fort Carson troops was overestimated for the markets surrounding the post. Many of the new families chose different markets located farther from the fort largely due to better schools. Economic conditions affecting builders have led to some contractors leaving the Colorado Springs market, while others have gone out of business or filed for bankruptcy. These conditions negatively influence the perceptions of the health of the local residential market for both homeowners and investors. Requests for construction permits have steadily dropped over the assessment study period.
The major population center is Colorado Springs, which is expanding toward the east and will merge with the unincorporated town of Falcon. The cities of Monument, Fountain, and Manitou border Colorado Springs to the north, south, and west respectively, forming a megalopolis.
The key land classifications in El Paso County are agricultural, single family, multi-family, commercial (including planned business centers), office, light industrial and heavy industrial. Our analysis is limited at this point; however, it is expected that single-family land will drop about 10%. Multi-family may decrease by 10% to 15%. Commercial and office land may drop by about 5% to 10%. Heavy and light industrial land is expected to go down approximately 5% to 15%.
With a lack of homebuilders, single-family development has all but stopped. Similarly, no new major multi-family projects are expected in the next two years. New office construction out-paced demand over the last two years leading to a high vacancy rate currently being experienced. Most new office buildings are being finished without a sufficient number of tenants. Therefore, additional office construction is not anticipated the next couple of years. Many nationwide retailers have left the Colorado Springs market. The two major, indoor shopping malls have lost anchor tenants. Conversely, the Powers corridor, North Academy Boulevard, and North Nevada retail centers are still commanding good prices for land. However, increased holding periods before new businesses are ready to construct improvements will undoubtedly affect the lot pricing in the near future. The trend for older, in-fill land shows declining asking prices. Industrial land value around the Colorado Springs Airport has been fluctuating on decisions made by airlines to relocate to and from the airport. Prior to being bought out, Frontier Airlines had been planning a maintenance facility at the airport. US Airways stopped service to Colorado Springs within a couple of years after buying America West. Uncertainty is the only certainty surrounding industrial land; and pinning down a specific trend is difficult without further analysis. Any change, up or down, in agricultural land value will be driven by expenses more than commodity price. Nevertheless, that change will be negligible in the overall assessed value for El Paso County.