According to CBRE’s Q1 2025 Denver Industrial figures, the first quarter of 2025 saw total net absorption come in at positive 531,000 sq. ft., shrinking slightly from the previous quarter but surpassing the amount seen in Q1 2024 by 9.9%. Historically, the beginning of the year has experienced a sluggish start, as Q1 absorption is the lowest quarterly total in nine of the previous 10 years.
The construction pipeline resumed its decline this quarter as 864,000 sq. ft. were delivered across six buildings, while three projects spanning 397,000 sq. ft. commenced. All ground-breakings this quarter were on a speculative basis and located within the Airport submarket. Total vacancy increased 10 basis points (bps) quarter-over-quarter due to delayed tenant build-outs and smaller speculative deliveries, despite 77.7% of completions this quarter being build-to-suits or preleased. Sublease availability in the market only increased by 69,000 sq. ft. in Q1 2025 but has risen 16.9% year-over-year.
Key findings:
- Metro Denver recorded 531,000 sq. ft. of positive total net absorption in Q1 2025, an 8.4% decrease quarter-over-quarter but a 9.9% increase compared to the positive 483,000 sq. ft. that occurred in Q1 2024. The largest positive absorptions this quarter were retailer Target occupying their newly delivered build-to-suit project in the North submarket for 529,000 sq. ft., and Discount Tire occupying 339,000 sq. ft. at 9400 E 46th Ave in the Airport submarket.
- Both the direct and total vacancy rate experienced a slight increase, rising 10 bps quarter-over-quarter to 7.7% and 8.1%, respectively. Year-over-year, total vacancy has increased 30 bps but remained below the recent peak of 8.2% that was seen in Q2 2024. Speculative deliveries continued to be the driver of the increase in vacancy.
- The overall average direct asking rent remained steady compared to Q4 2024 at $9.61 per sq. ft. but experienced a 3.2% increase year-over-year. Achieved rents reached $8.48 per sq. ft, which was stable quarter-over-quarter and an 8.2% increase year-over-year.
- Leasing volume in Q1 2025 totaled 2.7 million sq. ft., a 13.0% decrease compared to the previous quarter, but still surpassed the volume seen in Q1 and Q2 of 2024. Renewal activity saw an uptick, outpacing new leasing volume for the first time since Q2 2020. New leases and expansions accounted for 41.0% of total activity, while renewals and extensions were 59.0%.
- Goods MFG surpassed the Other category as Packaging Corporation of America signed the largest lease this quarter, while Transportation and Distribution maintained its spot at the top with 38.0% of activity in the last four quarters. The Airport submarket captured the bulk of activity in Q1 2025 with 1.6 million sq. ft. or 60.0% of total leasing and the top five deals of the quarter all being located there. The Northwest submarket had the second highest amount with 365,000 sq. ft. signed, followed by the Southeast with 176,000 sq. ft.
- Development activity resumed its decline after increasing in Q4 2024, with the amount under construction decreasing 467,000 sq. ft. to 4.7 million sq. ft. Three buildings broke ground for a combined 397,000 sq. ft. while 864,000 sq. ft. were delivered. New projects this quarter were Evergreen Development’s Superblock Building A & B, as well as CIG’s Eastpark 70 Building 7, all of which are speculative and located within the Airport submarket.
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