Flex Space Feasibility Study in Colorado

Colorado is a top-ten state for this investor building class

For flex, office and retail investor buildings, filed in the nonresidential lessor class, Colorado ranks 6 of 51 among states, with 61 loans approved from FY2017 to FY2026 worth $71.2 million. A location quotient of 1.50x shows the class takes a larger share of Colorado's SBA lending than of the national pattern, though inside Colorado it is 17 of 39. The median loan of $765,000 is 1.27x the national median for the class, and requests run from $345,000 to $1.5 million across the central half. The class is small enough that a handful of loans moves every figure.

Mostly 7(a), several lenders, county spread

SBA 7(a) carried 58 loans and SBA 504 carried 3. Franchise affiliation is 4.9% of loans. Enterprise Bank & Trust holds 6 loans worth $5.9 million, The Bancorp Bank National Association holds 5 worth $14.7 million, and Live Oak Banking Company holds 5 worth $5.8 million, so The Bancorp holds far larger loans on average. Arapahoe County has 8 loans, Denver and Jefferson 7 each, and Boulder, El Paso and Weld 6 each.

Cancellations, repayment and the lessor note

Cancellations came to at least 15.0% of approvals for the FY2017 to FY2024 window, and the ceiling matches. Among the 36 loans disbursed over FY2017 to FY2021, losses to date stand at 0.00%, with none inside five years; these are floors. The recent numbers need a special reading. Lessor reporting nearly stops from FY2024, and the table shows only 2 loans in FY2024, none at all in FY2025, and 1 loan worth $75,000 in FY2026, after 14 loans and $17.3 million in FY2021. That fall follows from the FY2024 rule under which SBA regards most businesses that only lease property as passive, and so ineligible; it should not be read as a lack of demand for Colorado flex space.

What a flex space study must test

The study should test tenant demand for the mix of office, light industrial and showroom uses, vacancy and rents in the submarket, and the sponsor's own leasing plan. Cost covers shell and tenant improvements, while the real risk is lease-up time. Coverage should be proven with the building partly vacant, not only fully leased. The appraisal turns on stabilised income and cap rate, and must hold up under a conservative assumption.

Nothing in the industry list isolates flex buildings from office or retail lessors; a single code holds flex, office, retail and banquet hall rental together.