Chapter 33.12
MARKET CONDITIONS

Sections:

33.12.010    Market conditions.

33.12.020    Economic and demographic indicators.

33.12.030    Population and household growth.

33.12.040    Median household income growth.

33.12.050    Employment growth.

33.12.060    Market indicators by land use.

33.12.070    Summary of market demand.

33.12.080    Development program implications.

33.12.010 Market conditions.

This chapter presents information regarding current and future market conditions in the Grand Junction/Mesa County area that would affect future development in the 24 Road Corridor. These include economic and demographic indicators, market indicators, and a summary of market opportunities relative to future development.

Leland Consulting Group conducted a thorough market analysis to identify opportunities for new development along the 24 Road Corridor. Since the corridor represents a sub-market within the City of Grand Junction (the City), and as such will likely compete with projects from a broader trade area, overall economic and demographic indicators, supply factors, and demand estimates were analyzed for both areas. The trade area consists of the Grand Junction Metropolitan Statistical Area (Mesa County), Delta County, Montrose County, and a portion of Garfield County. This trade area was determined considering the following factors:

(a)    Current and future development patterns in the Grand Junction area and surrounding communities.

(b)    Employment, residential and commercial development concentrations.

(c)    Influence of competitive projects/communities.

(Res. 109-00 § 3, 11-1-00)

33.12.020 Economic and demographic indicators.

Economic and demographic characteristics in the market are indicators of overall trends and economic health which may affect private and public sector development. The following summarizes economic and demographic trends which will affect development demand within the 24 Road Corridor over the next decade.

(Res. 109-00 § 3, 11-1-00)

33.12.030 Population and household growth.

The Grand Junction trade area population increased at a compound average annual rate of 2.7 percent between 1990 and 1999. In comparison, the City population grew at a slightly higher 3.0 percent rate. This trend is expected to reverse over the next decade, as the trade area population is expected to grow at a compound average annual rate of 2.0 percent, compared to a 1.4 percent growth rate for the City.

Household growth in the trade area and the City closely mirrors population trends, both in terms of historical and projected growth. Average household sizes in the trade area are significantly higher than those for the City, indicating a higher concentration of one- and two-person households and a lower concentration of families within the City.

These population and household growth patterns, projected to continue over the next 10 years, are indicative of regional trends that indicate an increasing number of single professionals and retired couples moving into Colorado.

Table 1: Population and Household Growth

City of Grand Junction

City

Trade Area*

1990 Population

32,893

153,535

1999 Population

43,100

195,600

2005 Population

47,100

221,600

2010 Population

50,300

243,800

1990 Households

14,300

59,660

1999 Households

18,700

77,900

2005 Households

20,700

89,300

2010 Households

22,200

98,700

1990 Average Household Size

2.15

2.51

1999 Average Household Size

2.08

2.45

2005 Average Household Size

2.04

2.42

2010 Average Household Size

2.02

2.41

Source: U.S. Census Bureau; Colorado Department of Local Affairs; Claritas, Inc.; and Leland Consulting Group.

*Trade area includes all of Mesa County, Delta County, Montrose County and one-half of Garfield County.

(Res. 109-00 § 3, 11-1-00)

33.12.040 Median household income growth.

The current median household income for the trade area is $31,300 – significantly higher than that for the City ($24,600). Over the past nine years, the trade area median household income increased at a compound average annual growth rate of 3.3 percent, while the City’s grew at a slower annual rate of 2.8 percent. This trend is expected to continue over the next 10 years, as trade area household incomes are expected to grow at a rate faster than that for the City.

Table 2: Median Household Income Growth

City of Grand Junction

City

Trade Area

1990 Median Household Income

$19,161

$23,352

1999 Median Household Income

$24,600

$31,300

2005 Median Household Income

$26,800

$38,100

2010 Median Household Income

$29,000

$44,900

Source: U.S. Census Bureau; Claritas, Inc.; and Leland Consulting Group.

(Res. 109-00 § 3, 11-1-00)

33.12.050 Employment growth.

Trade area employment is currently estimated at approximately 95,200. The Grand Junction MSA (Mesa County) comprises over 60 percent of trade area total employment. Recent high job growth rates (five percent to six percent) in the trade area are expected to decline to steadier rates in the 2.5 percent to three percent range over the next decade.

Growth in trade area employment will likely continue to be dominated by the trade and services sectors, which comprise approximately 55 percent of the total economy. Another fast-growing industry is manufacturing, projected to grow at an average annual rate of 2.98 percent over the next five years. This is indicative of the national growth trend in small, independent service companies.

Table 3: Employment Growth

City of Grand Junction

City

Trade Area

1995 Employment

NA

83,500

1999 Employment

NA

95,200

2005 Employment

NA

113,700

2010 Employment

NA

128,600

Source: Colorado Department of Labor and Employment and Leland Consulting Group.

(Res. 109-00 § 3, 11-1-00)

33.12.060 Market indicators by land use.

Critical to interpreting the 24 Road Corridor’s competitive position within the Grand Junction trade area market is an understanding of the supply characteristics of competitive developments and surrounding sub-markets. In order to identify potential market opportunities, given the corridor’s potential competitive position and prevailing market conditions, demand estimates were also prepared. The following discussion presents an overview of existing supply conditions and estimates of future demand by land use type.

(a)    Retail. The Grand Junction MSA recently reached a population concentration level sufficient to attract the attention of national retailers, particularly “big-box” users. These large-scale discount retailers have accounted for the majority of new retail development in the Grand Junction area over the past two years. As with other mid-sized metropolitan areas, this “big-box” development activity has occurred in close proximity to a regional mall – in this case, the Mesa Mall. At the intersection of 24 Road and U.S. Highway 6/50, the Mesa Mall provides a regional shopping destination for Grand Junction, Mesa County and the entire Western Slope. The area developing around Mesa Mall currently consists of a mix of national and regional chains.

(1)    Local retailers are generally concentrated within other commercial areas/corridors in the Grand Junction market area, such as the following:

(i)    Downtown Grand Junction – primarily specialty retail.

(ii)    North Avenue – older strip commercial.

(iii)    Orchard Avenue – older strip commercial.

(iv)    Horizon Drive – new strip commercial.

(v)    U.S. Highway 6/50 – mix of strip commercial and highway-related retail.

(2)    Supply characteristics for the Grand Junction retail market are summarized as follows:

(i)    There is an estimated 3,500,000 to 4,000,000 square feet of retail space in the Grand Junction market area, comprised primarily of regional retail and neighborhood commercial space.

(ii)    Current retail vacancy rates in Grand Junction appear to range between 10 percent and 20 percent, with older commercial areas (e.g., North and Orchard Avenues) experiencing the highest vacancy rates.

(iii)    Retail lease rates in the Grand Junction market generally range between $6.00 and $12.00 per square foot. Older commercial areas (e.g., Downtown, North and Orchard Avenues) are at the lower end of the rent range, while areas such as Horizon Drive and Mesa Mall are at the high end of the rent range.

(iv)    Overall, the Grand Junction retail market is experiencing market stability, with declining vacancy rates, steady absorption, and rent inflation.

Demand for retail space is determined by the potential level of retail expenditures in a given trade area. Existing and projected total household retail expenditures in the Grand Junction trade area were determined by multiplying growth in households with that portion of household income typically spent on general retail purchases. The results of this analysis (shown in Table 4) indicate demand for 100,000 to 150,000 square feet of additional retail space annually in the Grand Junction trade area over the next 10 years.

Table 4: Trade Area Retail Demand

1999 to 2010

Household Expenditure Method

Trade Area

Total 1999 Households

77,900

Total 2010 Households

98,700

New Household Growth

20,800

Annual Per Household Expenditures for Select Retail Categories*

$14,700

Aggregate Retail Sales Potential from Household Growth

$305,760,000

Trade Area Supportable Retail Square Feet (@ $200/SF)

1,528,800

Average Annual Demand for Retail Space (SF)

100,000 to 150,000

Source: U.S. Census Bureau; Colorado Department of Local Affairs; Claritas, Inc.; and Leland Consulting Group.

*Categories include those featured in a community and/or neighborhood center.

(b)    Office. The Grand Junction office market is concentrated in two primary areas: Downtown and Horizon Drive. Serving local professionals, Grand Junction’s office inventory primarily consists of lower-cost Class B and C space. New office activity has been concentrated along Horizon Drive, which is developing as the primary commercial route connecting Walker Field (the regional airport) and Downtown Grand Junction.

Supply characteristics for the Grand Junction office market are summarized as follows:

(1)    There are an estimated 9,500,000 square feet of office space in the Grand Junction trade area, comprised primarily of local service space.

(2)    Current office vacancy rates in Grand Junction appear to range between 10 percent and 15 percent, with older office concentrations (e.g., Downtown, North Avenue) experiencing the highest vacancy rates. Newer office space along Horizon Drive appears to exhibit lower vacancy rates.

(3)    Office lease rates in the Grand Junction market generally range between $6.00 and $15.00 per square foot. Older commercial areas (e.g., Downtown, North and Orchard Avenues) are at the lower end of the rent range, while newer areas such as Horizon Drive are at the high end of the rent range.

(4)    Overall, the Grand Junction office market is experiencing market stability, with declining vacancy rates, steady absorption, and rent inflation.

Demand for new office space is derived from two primary sources: expansion of existing industry and the relocation of new companies into the market. Employment projections by industry classification for the Grand Junction trade area were used to estimate an average annual demand of approximately 300,000 square feet of office space between 1999 and 2005 and an average annual demand of approximately 370,000 square feet of office space between 2006 and 2010 (shown in Table 5).

Table 5: Trade Area Office Demand, 1999 to 2010

Average Annual Increase

Penetration Rate

Office Space Employees

Office Square Feet Per Employee

Total Demand

1999 2005

Manufacturing

271

15.00%

41

200

8,140

Mining/Construction

237

15.00%

36

200

7,123

TCPU

173

45.00%

78

200

15,540

Trade

848

35.00%

297

200

59,354

FIRE

130

85.00%

110

200

22,015

Service

866

60.00%

520

200

103,970

Government

496

90.00%

447

200

89,355

Self-Employed

62

15.00%

9

200

1,850

Projected Annual Demand

3,083

1,537

307,347

2006 2010

Manufacturing

326

15.00%

49

200

9,768

Mining/Construction

285

15.00%

43

200

8,547

TCPU

207

45.00%

93

200

18,648

Trade

1,018

35.00%

356

200

71,225

FIRE

155

85.00%

132

200

26,418

Service

1,040

60.00%

624

200

124,764

Government

596

90.00%

536

200

107,226

Self-Employed

74

15.00%

11

200

2,220

Projected Annual Demand

3,700

1,844

368,816

Source: Colorado Department of Labor and Employment and Leland Consulting Group.

(c)    Industrial. The Grand Junction industrial market is concentrated in two primary areas: near Walker Field and along U.S. Highway 6/50. Similar to office space, Grand Junction’s industrial inventory primarily consists of lower-cost space serving small local users. New industrial activity has occurred in the two areas outlined above, locating in those areas primarily for their easy transportation access (air/highway).

Supply characteristics for the Grand Junction industrial market are summarized as follows:

(1)    There are an estimated 8,000,000 square feet of industrial space in the Grand Junction trade area, comprised primarily of local service space.

(2)    Current industrial vacancy rates in Grand Junction appear to range between five percent and 10 percent, with most industrial concentrations experiencing relatively low vacancy rates.

(3)    Industrial lease rates in the Grand Junction market generally range between $2.00 and $6.00 per square foot. Older industrial areas (e.g., U.S. Highway 6/50) are at the lower end of the rent range, while newer areas near Walker Field are at the high end of the rent range.

(4)    Overall, the Grand Junction industrial market is experiencing market stability, with declining vacancy rates, steady absorption, and rent inflation.

Demand for new industrial space is derived from two primary sources: expansion of existing industry and the relocation of new companies into the market. Employment projections by industry classification for the Grand Junction trade area were used to estimate an average annual demand of approximately 270,000 square feet of industrial space between 1999 and 2005 and an average annual demand of approximately 320,000 square feet of industrial space between 2006 and 2010 (shown in Table 6).

Table 6: Trade Area Industrial Demand

Average Annual Increase

Penetration Rate

Industrial Space Employees

Industrial Square Feet Per Employee

Total Demand

1999 2005

Manufacturing

271

65.00%

176

550

97,002

Mining/Construction

237

55.00%

131

350

45,703

TCPU

173

55.00%

95

350

33,238

Trade

848

20.00%

170

350

59,354

FIRE

130

5.00%

6

350

2,266

Service

866

5.00%

43

350

15,162

Government

496

5.00%

25

350

8,687

Self-Employed

62

25.00%

15

350

5,396

Projected Annual Demand

3,083

662

266,809

2006 2010

Manufacturing

326

65.00%

212

550

116,402

Mining/Construction

285

55.00%

157

350

54,843

TCPU

207

55.00%

114

350

39,886

Trade

1,018

20.00%

204

350

71,225

FIRE

155

5.00%

8

350

2,720

Service

1,040

5.00%

52

350

18,195

Government

596

5.00%

30

350

10,425

Self-Employed

74

12.00%

19

350

6,475

Projected Annual Demand

3,700

1,844

320,170

Source: Colorado Department of Labor and Employment and Leland Consulting Group.

(d)    Multifamily Housing. Supply characteristics for the Grand Junction housing market are summarized as follows:

(1)    The average single-family home price in the Grand Junction market area was approximately $128,000 in 1998 and the average condominium/townhouse price was $88,000.

(2)    Residential construction has recently averaged approximately 1,600 units annually. Multifamily construction represents a minimal share of new home construction.

(3)    One-bedroom apartment rents in the Grand Junction market area currently range between $350.00 and $800.00, with the majority of units under $400.00. Two-bedroom apartment rents currently range between $425.00 and $1,000, with the majority of units under $500.00. Apartment vacancy rates in the Grand Junction market area generally range between five percent and 10 percent, with older projects experiencing vacancy rates between 10 percent and 20 percent.

Demand for new residential units is primarily a factor of the growth in households within a trade area. Projected Grand Junction trade area household growth was analyzed along with historical patterns of single-family and multifamily development trends to arrive at an estimated average annual demand for 650 to 700 multifamily units in the Grand Junction trade area over the next decade.

Table 7: Trade Area Multifamily Housing Demand

Demand Estimate

Trade Area

Total 1999 Households

77,900

Total 2010 Households

98,700

New Household Growth

20,800

Estimated Percent New Multifamily Units (Rental and For-Sale)

35%

Total Demand for New Multifamily Units (Rental and For-Sale)

7,280

Average Annual Demand for Multifamily Units (Rental and For-Sale)

650 to 700

Source: U.S. Census Bureau; Colorado Department of Local Affairs; Claritas, Inc.; and Leland Consulting Group.

(Res. 109-00 § 3, 11-1-00)

33.12.070 Summary of market demand.

Taking into consideration these market analysis conclusions, specific development opportunities were identified for the 24 Road Corridor. Table 8 presents a summary of these opportunities and their potential timing.

Table 8: 24 Road Corridor Market Opportunities

Land Uses

Short-Term

1 to 3 Years

Mid-Term

3 to 5 Years

Long-Term

5 to 10 Years

Retail

Specialty Retail

X

Entertainment Retail

X

Neighborhood-Serving

X

Big-Box Retail

X

Office

Class A High-Rise

X

Corporate Campus

X

Class B Suburban

X

Incubator Space

X

Industrial

“Flex” Office/Warehouse

X

Light Industrial

X

Office/R&D

X

Housing

Rental Apartments

X

Affordable Housing

X

High-Density Ownership

X

Source: Leland Consulting Group.

(Res. 109-00 § 3, 11-1-00)

33.12.080 Development program implications.

Based on the specific development opportunities identified for the 24 Road Corridor, potential market capture rates were applied to arrive at supportable land utilization in the corridor over the next 10 years. The market capture rates were based on the following factors:

(a)    Market Factors.

(1)    Ability to create theme/identity for corridor.

(2)    Build on current development concentrations/activity in corridor (Mesa Mall).

(b)    Physical Factors.

(1)    Proximity to major transportation corridors (I-70, U.S. Highway 6/50).

(2)    Capacity of base infrastructure (roads, utilities).

(3)    Proximity to corridor amenities (Canyon View Park).

(c)    Regulatory Factors.

(1)    Subarea planning for land use, infrastructure, development regulations, and financing.

(2)    Consistency with community vision.

(d)    Economic Factors.

(1)    Cost of base infrastructure (24 Road improvements, utilities).

(2)    Cost of land assemblage.

(3)    Development risk versus return.

(4)    Levels of public/private participation.

Table 9 presents a summary of the market capture and land utilization analysis.

Table 9: 24 Road Corridor Development Summary

Land Use

Trade Area Average Annual Demand

Corridor Capture Rate

Annual Corridor Development

Total Corridor Development

Projected Bldg./Land Ratio

Total Acres Absorbed

Retail

125,000

20%

25,000

250,000

25%

23

Office

335,000

15%

50,250

502,500

30%

38

Industrial

300,000

15%

45,000

450,000

20%

52

Multifamily

675

20%

135

1,350

20%

68

Total Development

181

Source: Leland Consulting Group.

(Res. 109-00 § 3, 11-1-00)