“For Lease” signs are a frequent sight in the commercial areas of Falcon. Property owners, business owners and community leaders have differing views on why spaces have remained empty. Tenants and real estate professionals have indicated the answers extend beyond the sour economy.
The partially empty strip malls are owned by a mix of local and out-of-state real estate investors.
The Falcon Town Center, anchored by Safeway, has four empty units. The El Paso County Assessor's office lists several different investors who own portions of the overall shopping center; however, the center as a whole is managed by Homkor Companies in Denver.
Jean Gilbo of Homkor said they have managed the center since construction began.
An investment company – IDGAS LLC – contracted them, but Gilbo could not speak to the investors involved in IDGAS or what the acronym represents. IDGAS is listed on the county’s public records (assessors map) for property at 7673 McLaughlin Road.
Regency Centers, a publicly traded real estate investment trust based in Jacksonville, Fla., owns the Falcon Highlands Marketplace near Wal-Mart. Four spaces remain empty at the Marketplace. The DPC Development Co., a privately held Greenwood Village, Colo., developer, owns The Shops at Woodmen Hills, anchored by Frankies Too. According to El Paso County records, the firm purchased the property out of bankruptcy in 2010. The Shops at Woodmen Hills has seven spaces currently available.
Some open spaces are empty because of businesses moving or closing during the last six months. Town and Country Preschool and Poblanos Mexican Restaurant have permanently closed. Your Beautiful Expressions closed its florist shop near Safeway and moved their wedding operations into Colorado Springs, said owner Amber Mustain.
Other spaces have never been filled. The Meridian Crossing units adjoining the Falcon Liquor Outlet have never been leased since they were built three years ago, according to the owner, Park Place of Colorado Springs. Three of the open spaces at Falcon Highlands Marketplace have also been empty since initial construction.
Small businesses drawn to Falcon
Mustain opened Your Beautiful Expressions in the Falcon Town Center after doing free-lance wedding and special event work out of her home. Living in Falcon, she wanted to open her florist shop in Falcon's commercial area. “My initial thought was Falcon had a small town feel,” Mustain said.
Tanya Luiten believed there was a pressing need for preschool service in Falcon when she started the process to open Town and Country Preschool seven years ago. “We knew there was a need out here, and I was hoping to fulfill that need.” She looked at several other options before deciding on her eventual location in Falcon Town Center. “We looked at buying property, but it was just too expensive to buy and bring in utilities, so we decided to lease,” Luiten said.
Many businesses choose to open in Falcon for the perceived growth and the draw of residents further east, said Tom Cline, long-time board member of the Eastern Plains Chamber of Commerce. “A business in Falcon has a 75-mile draw to the east,” he said. “I definitely think rents are higher in Falcon (because of that draw). The supply of quality commercial store fronts for small business is still low, and property owners realize this and you see it in the rent.”
Wayne Harris of Park Place said they are asking “about the same or slightly less than properties on Powers Boulevard” – also because of the draw to the east. “Once you put a Wal-Mart in, everyone shows up,” Harris said, adding that comparing costs to Colorado Springs is difficult. “Colorado Springs ranges from $4 to $30 per square foot, depending on the location.” Park Place is asking $20 per square foot for the Meridian Crossing units, he said.
Small businesses struggling with Falcon rents
Rent and associated utility, common area and tax costs will be the largest expenses made by new and expanding businesses, according to the U.S. Small Business Administration. In addition to the base rent described in dollars per square foot per year, a landlord passes along insurance, property tax and common area maintenance to their tenants. These three additional costs are referred to as “Triple Net” expenses. The SBA states that when these are known in advance, businesses can budget for them against their expected income to determine if it is in their best interest to rent a particular location.
The lease for Town and Country Preschool's location included a “good faith estimate of $5.25 per square foot” for the additional expenses, Luiten said. However, each year she received a bill charging additional maintenance expenses, which made budgeting difficult. “The last year, we got a bill for almost $900.” Mustain agreed. She said her florist location's community maintenance charges were adjusted upward every year, amounting to almost a quarter of her rent, with an additional $600 bill at the end of the year.
When Town and Country's lease was up for renewal, the rent increase the center had requested was more than Luiten's business could bear. “Ninety-nine percent of the decision to close was the rent increase,” Luiten said. “I didn't want to close. But I would have had to raise my prices again, and I wasn't willing to do that.” Three of her four preschool programs for the fall were already full when she had to make the closing announcement to her client families. “So I had no problem with business,” Luiten said. “That was why it was a hard decision. Maybe if we weren't growing, it would have been easier to just say we won't renew.”
Mustain's decision to move her business to Colorado Springs' older north end neighborhood made sense, just based on rent. “I found a studio office with a consultation area and a little bit better visibility at $850 per month, instead of $3,100.” Mustain said her Falcon clients understood her need to move. “I still deliver flowers every week into Falcon, and I still get wedding business,” she said. “I feel the people who supported me still support me, and I'm very thankful for that.”
Gilbo did not address individual lease rates, but said because they no longer manage companies in Colorado Springs she could not compare Falcon rates to the Springs.
Light at the end of the tunnel?
Despite concerns by existing businesses, real estate professionals serving the Falcon commercial area are seeing an uptick in interest in the available retail spaces. “Recently, people are starting to look again,” Harris said. “A little bit of everything: dog groomers, veterinarians and barbers are looking at spaces. People are starting to loosen up about the economy.”
As the demand for the existing retail space begins to increase, there will be more incentive for owners of currently empty commercial-zoned land to begin building new retail space to add supply, Cline said. “The draw from the eastern communities and the only logical growth of the Springs towards the east side will mean more small businesses will be able to open to serve that growth, and the better it will be for everyone.”
However, he added, until developers build in Falcon with small startup businesses in mind, which also means lower costs for leasing storefronts and offices, there won't be enough long-term demand for retail space to sustain growth.