Once again, the chief economist at Cassidy-Turley, Kevin Thorpe, is predicting a great year for commercial real estate in the Denver area. However, Thorpe did note that office and industrial space will be in short supply and, therefore, high demand in the coming year. The following is a brief summary of the highlights of Thorpe’s 2014 forecast.

Job Growth: Last year, Thorpe predicted that Denver would add 35,000 to 40,000 new jobs and the actual figure ended up at 43,500. In 2014, he estimates that Denver will add another 50,000 jobs.

Office Market: The office market was projected to absorb 2 million square feet, and rents were expected to increase by 5%. In actuality, the Denver office market absorbed 2.3 million square feet, and Denver rents increased by 6.3%. The 2014 projections call for 2.5 million square feet of absorption and an increase in office rent of approximately 6%.

Industrial Market: Last year, the industrial market’s performance was second only to its performance in 2007 (pre-financial crisis). This year, this market is expected to set a new record for absorption.

Retail Market: Retail spaces in prime locations are predicted to experience double-digit rent increases.

Cap Rates: On average, these are predicted to fall by 50 to 75 basis points.

For borrowers who are interested in purchasing office or industrial properties, Montegra offers hard money loans on these types of properties. A hard money loan can help borrowers who find properties with low occupancy rates or in need of rehabilitation that banks are unwilling to underwrite because the debt service coverage is too low. Hard money lenders will often be willing to include an interest reserve to help borrowers cover the loan payments or renovation costs while they are working to stabilize the property. Once the property is producing a steady-stream of income, then it is often easier for the borrower to refinance with a traditional, long-term mortgage with which to pay off the hard money loan.

Hard money loans can also be beneficial for borrowers who have found a commercial property at below-market value because private lenders, such as Montegra, may be willing to use the higher appraised value, rather than the lower purchase price, to determine the loan amount. Banks and institutional lenders, on the other hand, are required to use the lower of the two values. So it is possible that, even though a bank lender may offer a higher LTV ratio, a borrower may be able to obtain more funds from a hard money lender, who considers the higher property value.