Colorado is a state with a diverse economy and a thriving real estate market. The state's economy has been growing steadily over the past few years, with a low unemployment rate of 3.5% as of August 2021, according to the Bureau of Labor Statistics. This has led to a strong demand for commercial real estate, particularly in the multifamily, office, industrial, retail, self-storage, and hospitality sectors.

For investors looking to finance commercial properties in Colorado, there are a variety of loan options available. These include traditional bank loans, SBA loans, bridge loans, and hard money loans. Each type of loan has its own advantages and disadvantages, and investors should carefully consider their options before choosing a lender.

Economy in Review

Colorado's economy is diverse and has been growing steadily over the past few years. The state's GDP was $385 billion in 2020, according to the U.S. Bureau of Economic Analysis. The largest industries in Colorado include healthcare, professional and business services, and government. The state is also home to a thriving tech industry, with companies like Google, Amazon, and Microsoft all having a presence in the state.

Despite the COVID-19 pandemic, Colorado's economy has remained relatively strong. The state's unemployment rate peaked at 12.2% in April 2020 but has since dropped to 3.5% as of August 2021. This is below the national average of 5.2% and indicates a strong job market in the state.

Multifamily Market

The multifamily market in Colorado has been strong in recent years, with high demand for rental properties in urban areas like Denver and Boulder. According to CBRE, the average rent for an apartment in Denver was $1,600 per month in Q2 2021, up 4.9% from the previous year. The vacancy rate in Denver was 5.6% in Q2 2021, which is slightly higher than the national average of 4.5%.

Financing options for multifamily properties in Colorado include Fannie Mae and Freddie Mac loans, FHA loans, and bridge loans. Investors should consider the size of the property, the location, and the borrower's creditworthiness when choosing a lender.

Office Market

The office market in Colorado has been impacted by the COVID-19 pandemic, with many companies adopting remote work policies. However, there is still demand for office space in urban areas like Denver and Boulder. According to CBRE, the vacancy rate for office space in Denver was 14.6% in Q2 2021, which is higher than the national average of 11.5%. The average asking rent for office space in Denver was $29.50 per square foot in Q2 2021.

Financing options for office properties in Colorado include traditional bank loans, SBA loans, and bridge loans. Investors should consider the location of the property, the tenant mix, and the borrower's creditworthiness when choosing a lender.

Industrial Market

The industrial market in Colorado has been strong in recent years, with high demand for warehouse and distribution space. According to CBRE, the vacancy rate for industrial space in Denver was 4.7% in Q2 2021, which is below the national average of 5.6%. The average asking rent for industrial space in Denver was $8.64 per square foot in Q2 2021.

Financing options for industrial properties in Colorado include traditional bank loans, SBA loans, and bridge loans. Investors should consider the location of the property, the tenant mix, and the borrower's creditworthiness when choosing a lender.

Retail Market

The retail market in Colorado has been impacted by the COVID-19 pandemic, with many retailers closing their doors permanently. However, there is still demand for retail space in urban areas like Denver and Boulder. According to CBRE, the vacancy rate for retail space in Denver was 7.9% in Q2 2021, which is higher than the national average of 6.6%. The average asking rent for retail space in Denver was $20.60 per square foot in Q2 2021.

Financing options for retail properties in Colorado include traditional bank loans, SBA loans, and bridge loans. Investors should consider the location of the property, the tenant mix, and the borrower's creditworthiness when choosing a lender.

Self-Storage Market

The self-storage market in Colorado has been strong in recent years, with high demand for storage space. According to CBRE, the vacancy rate for self-storage space in Denver was 5.8% in Q2 2021, which is below the national average of 8.4%. The average asking rent for self-storage space in Denver was $1.68 per square foot in Q2 2021.

Financing options for self-storage properties in Colorado include traditional bank loans, SBA loans, and bridge loans. Investors should consider the location of the property, the tenant mix, and the borrower's creditworthiness when choosing a lender.

Hospitality Market

The hospitality market in Colorado has been impacted by the COVID-19 pandemic, with many hotels and restaurants closing their doors permanently. However, there is still demand for hospitality properties in popular tourist destinations like Denver and Colorado Springs. According to CBRE, the average daily rate for hotels in Denver was $123.23 in Q2 2021, down 15.4% from the previous year.

Financing options for hospitality properties in Colorado include traditional bank loans, SBA loans, and bridge loans. Investors should consider the location of the property, the borrower's experience in the hospitality industry, and the borrower's creditworthiness when choosing a lender.

Commercial Real Estate Loans by Purpose

There are many types of loans available for commercial properties in Colorado, and the best fit for you depends on your investment strategy. Here are some broad categories of financing available.

Permanent Financing

Permanent financing is a type of loan that remains in place for an extended period of time. It's commonly used to finance the acquisition of commercial properties or to refinance existing debt. Types of permanent financing include bank loans, loans from government-sponsored entities like Fannie Mae and Freddie Mac, HUD loans, credit union loans, loans from life insurance companies, commercial mortgage backed securities (CMBS) loans, and other types of loans depending on the specifics of the commercial property.

Refinancing a Commercial Real Estate Property in Colorado

I wouldn't quite call this a separate type of loan, but I have to mention refinancing in here. These are typically permanent loans (but not always) used to pay down an existing, partially amortizing or interest-only loan.

Often you may be able to time a refinance to happen after an interest rate drop — an ideal solution — but if your loan is maturing during a period of higher rates, you shouldn't stress too much about this. We'll work with you to find the best loan terms for your commercial property by reaching out to potentially thousands of lenders. Just complete the form below, and we'll get to it.

Construction Financing

Construction financing, also known as interim financing, is used to finance the cost of construction for commercial properties. It is usually a short-term loan that covers the cost of land development and building construction. Once construction is completed, the borrower can typically convert this into a permanent loan or pay it off with a new loan.

Bridge Loans

Bridge loans are a type of short-term loan that can be used to cover costs in the interim period between the end of one loan and the beginning of another. They are typically used in commercial real estate to finance the transition between construction financing and permanent financing. Bridge loans generally have higher costs than most other financing options and are often interest-only and non-recourse.

Commercial Real Estate Loans by Type

Depending on the purpose of your loan, you will have several financing options available to meet your investment goals. Read below to learn more about specific loan types.

Bank Loans

Bank loans are a common financing option for commercial real estate in Colorado. They can offer competitive interest rates and flexible terms, but the specifics can vary greatly from bank to bank. While they may not always be the best fit for larger, more complex projects, they can be an excellent option for smaller, simpler properties.

Life Company Loans

Life company loans are typically used to finance high-quality assets in major markets. They generally have lower loan-to-value ratios than most other loan types but offer competitive interest rates and long terms. However, they may not be suitable for riskier projects or properties in less established markets.

Agency Loans

Agency loans, offered by government-sponsored entities like Fannie Mae and Freddie Mac, are typically used for properties that are mostly multifamily. They offer attractive loan terms, low, fixed interest rates, and are non-recourse. However, there are restrictions on the amount of income that can come from other commercial uses.

HUD Loans

HUD multifamily loans are government-backed loans that are primarily used for the construction, substantial rehabilitation, purchase, and refinancing of multifamily properties. These loans offer long-term, non-recourse financing with competitive interest rates but have extensive requirements for qualification.

CMBS Loans

Commercial Mortgage Backed Securities (CMBS) loans are a type of mortgage-backed security backed by commercial real estate loans. Lenders focus more on the strength of the property than the borrower's credit, making them a good option for properties with strong cash flow.

SBA Loans

Small Business Administration (SBA) loans, such as the SBA 7(a) and SBA 504, offer attractive financing options for small businesses. However, the maximum amount for an SBA 7(a) loan is $5 million, while SBA 504 loans can go up to $20 million. They cannot be used for multifamily properties and are only available for properties that the business owner occupies.

Mezzanine Loans

Mezzanine financing is a hybrid form of financing that combines elements of debt financing and equity investment. It is typically used in commercial real estate to fill a funding gap between the primary loan and the total cost of a project.

Commercial Property Insurance in Colorado

This part isn't about loans, but it's just as important to your investment's success. Let's talk (quickly) about insurance.

Insurance premiums have skyrocketed in the past few years, as I'm sure you know. While multifamily gets a lot of the attention, rates for insuring anything from office buildings to shopping centers have jumped significantly.

Janover Insurance Group is dedicated to finding the best insurance solutions for your commercial real estate assets in Colorado. Click to get a free insurance quote for your property — no obligation.

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