Peak Performance Newsletter – 2025 Performance

2026 OUTLOOK
THE BOTTOM LINE: Two federal defense initiatives are expected to drive much of the new jobs and
spending tied to Colorado Springs over the next year: the Golden Dome missile defense program and
the associated funding package often referred to nationally as the “One Big Beautiful Bill.”
Together, these initiatives steer tens of billions of dollars toward defense, aerospace, and missile
defense work that Colorado-based firms can compete for. This is why local leaders are expecting a
noticeable boost in hiring and investment in the Springs.
The exact number of new jobs and the total dollars flowing into Colorado Springs will depend on which
local companies secure Golden Dome task orders. However, the consensus is that the combination of
Golden Dome and the broader funding package should translate into more high-paying engineering,
cyber, and manufacturing roles, along with increased defense-related spending in the local economy
over the next year and beyond.
At this time, there is no clearly defined strategy outlining how or when the funds will be released. For
now, it remains a wait-and-see environment as the market looks for signs of when this government
funding will begin impacting local real estate.

2025 PERFORMANCE (PAST 12-MONTHS)

THE OFFICE SECTOR, with no new speculative office product, modest but steady population and
employment growth, and businesses continuing to rationalize space post-pandemic, is most likely to
experience a slow, uneven “grind sideways” in 2026, with elevated vacancies, tenant-friendly leasing
terms, and modest rent movement rather than a sharp rebound. The Department of War (DOW) sector
continues to look at available space with the anticipation of major government funding coming soon,
however most companies have not been making any decisions as of yet.

THE INDUSTRIAL SECTOR remained one of the region’s strongest performing property types through
late 2025, though activity normalized from the rapid expansion of prior years. Vacancy remained low
by historical standards, supported by continued demand from logistics, manufacturing, and technology
users, while rental rates generally held firm or experienced modest growth for modern, well-located
properties. Although absorption turned negative, this largely reflects the impact of new speculative
construction being delivered to the market. New development became more selective and build-to-suit
driven, with speculative projects concentrated in infill locations or along key transportation corridors
where tenant demand is strongest. Investor appetite remained strong for quality industrial assets,
particularly smaller and mid-size buildings with diversified tenant rosters and functional layouts.

THE RETAIL SECTOR continued to be one of the strongest commercial property types in Colorado Springs during the second
half of 2025. Limited new construction, healthy consumer spending, and continued population growth in key corridors supported
low vacancy and generally stable to rising rents in prime locations. Performance remained highly location-specific, with centers in
growth areas and along major traffic arteries experiencing the strongest competition for space, while older or poorly positioned
properties lagged. Investor and lender sentiment toward retail improved compared to prior years, particularly for grocery-anchored
centers, newly-constructed outparcels, and daily-needs retail.

THE MULTIFAMILY SECTOR moved further into a phase of moderation and gradual rebalancing by late 2025. Following a period
of elevated deliveries, new starts slowed sharply, allowing the market to absorb recent supply and improve occupancy across
many newer projects. Strong population and job growth in Colorado Springs supported absorption, and as the development
pipeline thinned, conditions began to tighten, setting the stage for more consistent rent growth heading into 2026. Investors
remained selective, with the strongest interest focused on well-located Class B properties and newer, stabilized Class A
communities positioned for long-term rent and income growth.

CAPITAL MARKETS for commercial real estate in 2026 are expected to improve meaningfully from the 2023–2025 downcycle,
with greater liquidity, modestly lower borrowing costs, and higher transaction volume. However, conditions will remain selective
by asset type and quality. Overall sentiment is cautiously optimistic. Investors anticipate a “reset” phase in which capital re-enters
the market, though underwriting remains disciplined and the differentiation between winners and losers remains pronounced. Real
estate experts expect modestly lower all-in borrowing costs and improving debt liquidity as banks, agencies, life companies, and
private credit lenders increase origination activity. The MBA forecasts CRE lending to rise approximately 20–25% in 2026.