FOR IMMEDIATE RELEASE:

Wave Form Systems Leases Industrial Space in Aurora, CO

Denver, CO - September 19, 2014: Sherpa Commercial Real Estate, Inc. is pleased to announce a recent industrial lease transaction in Denver,  CO. Sherpa Commercial represented WaveForm Systems (www.waveformsys.com) in the lease of office and warehouse space for their entrance into the Denver market. 

Headquartered in Beaverton, Ore., Wave Form Systems provides mobile medical technology services. Through a thoughtful site selection process, Brady Welsh of Sherpa Commercial, identified an optimal facility in close proximity to the Anschutz Medical Campus in Aurora, CO. 

"The ability to securely store, test and maintain their laser technologies and surgical equipment while remaining in close proximity to key customers was essential for Wave Form", according to Welsh. "We were able to identify and secure a facility that met those needs and allows for expansion opportunities as they grow in the Denver market."

About Sherpa Commercial: Located in Denver, Colorado, Sherpa Commercial Real Estate, Inc. assists private capital investors, industrial and office tenants & owner-users, and institutional owners to purchase or lease commercial properties. www.creSherpa.com

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I am currently representing a technology company looking to expand their current offices into a more desirable location in downtown Denver. Because they are a start-up that's in high growth mode, they have a close eye on their burn rate and a shorter term lease is actually in their favor allowing for flexibility as the company evolves. As a result we are taking a hard look at the available sublease office space in the downtown Denver market.

I thought this would be a good opportunity to share some of my tips and thoughts on how to best negotiate a sublease and to highlight several areas to be careful with.

Why Sublease?

• Can be an opportunity to secure below market lease rates.
• The space is often furnished and wired for data and telecom.
• New business or new to a market? A sublease can be a great way to test the waters.
• Expecting growth and don't want to commit to too much space?
  

Key Terms

• Mater Landlord - The Landlord on the original lease or "Master Lease".
• Sublandlord - The Tenant that is looking to sublease out their office or industrial space.
• Subtenant - The Tenant who is assumes the lease obligations of the Sublandlord.
• Master Lease - The original lease - all terms and conditions of the sublease will be passed along to the Subtenant.
• Sublease Agreement - Outlines the agreement between the Sublandlord and Subtenant.

Sublease Strategies

• Can be an opportunity to secure lower cost space initially and simultaniously strike a direct lease for a longer term after the sublease expiration.
• The Landlord may consider a lease buyout with the existing Tenant and will strike a new direct lease with you. This typically occurs if the new tenant is stronger financially and more "credit worthy".

Common Pitfalls to Watch Out For

• Review the Master Lease carefully, the Subtenant is assumes all liability of that Lease.
• What is the extent of your required Tenant Improvements? Carefully balance that with the remaining sublease term.
• Options to Extend typically are not granted to Subtenant
• Who maintains ownership of and is responsible for the removal of any office furniture
• What is the age and condition of mechanical equipment servicing the space that the Tenant may be responsible for?
• Who is responsible for restoration of space to the original condition at the end of the lease term. Review the Master Lease carefully.

Obviously this is a very general overview of several of the terms and strategies of a commercial sublease. Please contact Sherpa Commercial real Estate with specific questions or consult you own legal or real estate adviser.

Caveat - I am not an attorney and this is not to be construed as Legal Advise. Always seek legal advice for your individual situation and transaction.

The U.S. Industrial Market has recovered remarkably since the last recession especially in the coastal markets that are historically constrained for well-located Class A industrial product. As a result, industrial users have regained confidence in the U.S. economy and have begun to quickly expand their operations.

In many top-tier U.S. markets, absorption rates are on the rise, vacancy rates are compressing and capitalization rates are nearing pre-recession levels. A key driver of this absorption is the continued influence that e-commerce is having on the national and global Business-to-Consumer ("B2C") marketplace. Global online retail sales grew by 14.8% per year from 2007 to 2012 with an estimated total of $1.2 trillion in 2013. Retailers and third party logistics companies are desperatly seeking to capitilize on this trend by securing strategically located distribution facilities in high-density population centers in key markets.

In many cases retailers are adjusting their traditional brick-and-morter store strategies and focusing on online channels to improve delivery times, develop efficient return and exchange procedures and increase market penetration. Success in the retail industry rests on inventory management and quick delivery times, as a result demand for well equipped and strategically located facilities is skyrocketing.

A growing trend towards three key property types is emerging across the U.S. and internationally:
- Mega e-fulfillment centers;
- Parcel hubs and delivery centers;
- Urban Logistics Centers

Please contact Sherpa Commercial Real Estate if you would like to discuss these emerging CRE trends, if you are a retailer in need of distribution facilities or traditional retail space, or are an investor looking to capitalize on the anticipated strong demand for well-located distribution facilities.

www.creSherpa.com | 303.949,6443

As the industrial real estate vacancy rate in Denver approaches all time lows, asking prices for most new industrial sale and lease listings are approaching all time highs. While this is a natural trend in real estate cycles, the marijuana industry in Colorado has drastically tempered the recession phase since 2009 and increased the progression through the recovery phase and into the expansion phase into 2014. 

The insatiable absorption of industrial warehouse and manufacturing properties by the marijuana industry in the last 4 years has driven sales prices up 100% and lease rates up over 300% in many cases. With an estimated 2.5 - 4.5 million square feet of industrial space now occupied by the industry, "traditional users" are now either priced out of the market or left with no opportunities to move or expand their operations.

How will this effect Denver and its short and long term economy?

Restricted Job Growth in Denver?
- If a company cannot expand within or enter this market because of the lack of space, countless jobs could be missed out on.
- Denver has historically maintained a cost advantage over Tier 1 markets across the country. How many companies are waiting on the sidelines or are moving on to more cost effective markets in the region?

Are there still Opportunities?
- Almost all new speculative industrial construction has been of modern distribution facilities over 200,000 square feet with minimum divisibility of 35-50,000 square feet. Nobody to date is developing smaller modern facilities for the local and mid-tier industrial users in the I-70 corridor of Denver. Historically these buildings have not been cost effective as older industrial product was always an available lower cost alternative. With many of those older facilities now occupied by the marijuana industry, the time may be perfect for new and smaller development as the expansion phase continues.
- Property owners in Denver County of I-A and I-B zoned industrial properties who anticipate selling in the next few years should consider listing their property in the near future to capitalize on the current demand and favorable market characteristics. 
- Don't get greedy and be selective. By reasonably pricing your asset a seller can attract multiple interested parties and properly vet potential buyers to help ensure a successful closing. Many properties get tied up and fall apart at the closing table as a result of insufficient funding of marijuana growers and dispensaries and the restrictive banking regulations on the industry. 

A Looming Bubble?
- Denver is in many ways rapidly creating a dependence on the marijuana industry. If the current state industry laws and federal stance should change drastically against the marijuana industry, Denver could face a similar market correction to the Oil & Gas bust in the late 80's and the technology bubble in the 90's.
- The trickle down effect of the industry has benefited property owners, contractors, service companies, ATM machines (ha-ha), and has created a ton of jobs in a "growing industry". The risk from the uncertainties of the industry are hard to measure.

The Risks of "Addiction" to an Industry
- As apartment construction continues to increase to meet the project population increases along the Front Range and tourism hits all time highs, a pot bubble could drastically effect the hospitality, retail and multifamily sectors.
- As the strong market fundamentals of the expansion phase signal the right time for new industrial constriction, market timing and proper product design and location are critical considerations.
- If negative changes in the marijuana industry occur, a flood of stigmatized, highly specialized, and antiquated industrial properties would cripple the Denver industrial market.

Who is safe?
- With little office absorption attributed to the industry so far, the office market should remain relatively resilient to a correction. It's doing just fine on its own! Stay tuned for the Bitzer Real Estate Partners 1Q2014 Office Market Report!
- Counties and Cities in Colorado that did not jump on the MMJ bandwagon should see absorption by traditional companies in need of space and will not experience the CRE inflation risk in Denver county.

How Likely is a bubble to occur?
- While many will argue that the cat is out of the bag and there is no stopping marijuana legalization in many parts of the country, many thing can not be predicted. These include: new Federal and State guidelines; industry consolidation similar to the healthcare industry, continued restrictive banking regulations, or a public change of public opinion.
- The commercial real estate oversupply and recession market cycle phases are always looming and inevitable. It is only a matter of time so let's enjoy the good times while we can!

"Those who fail to learn from history are destined to repeat it." - Churchill

Please contact Brady Welsh at 303.949.6443 if you would like to discuss listing your property and how these market trends affect your asset.