Denver Industrial Market Proves Resilient in Q3 While Office Activity Remains on Hold
CBRE just released its Q3 reports for metro Denver’s office and industrial sectors. While the Denver office market continues to feel the impact of the pandemic, Denver’s industrial market has proven itself resilient during uncertain times.
“Office activity remained largely on hold in the third quarter of the year as companies continue to monitor the COVID-19 situation and evaluate their future office needs. Class A office product performed the best, recording over 180,000 square feet of positive net absorption. In the industrial sector, metro Denver remained remarkably resilient, further extending our 10-year streak of positive net absorption. The growing adoption of e-commerce and the restructuring of retail supply chains are fueling demand,” said Pete Schippits, president of CBRE’s Mountain-Northwest Division.
- Metro Denver posted 547,000 sq. ft. of negative absorption in Q3 2020, bringing year-to-date net absorption down to negative 216,200 sq. ft.
- Despite softening fundamentals, the average direct asking lease rate increased $0.21 to $29.02 per sq. ft. FSG.
- Total vacancy increased 137 bps quarter-over-quarter to 15.0%.
- Sublease availability climbed to 4.3 million sq. ft., up 28.2% from Q2 2020. This uptick pushed total availability up to 20.0%, a 220 bps increase from the last quarter.
- Two buildings delivered in Q3 2020, adding 396,000 sq. ft. to the Denver office market. Over 3.3 million sq. ft. was under construction at the end of Q3 2020.
- Investment sales volume reached $571 million, bringing the year-to-date total up to $1.4 billion.
- Over 966,000 sq. ft. of positive net absorption was recorded in Q3 2020—a 69.0% increase from Q3 2019.
- The overall average achieved lease rate for Q3 2020 climbed 1.6% quarter-over-quarter to $7.65 per sq. ft. NNN.
- The overall average direct asking lease rate rose 1.2% quarter-over-quarter to $9.00 per sq. ft. NNN in Q3 2020.
- Direct vacancy remained stable quarter-over-quarter at 6.9%, while total availability increased by 28 bps to 10.5% in Q3 2020.
- Six buildings comprising nearly 815,000 sq. ft. delivered in Q3 2020 as construction activity remained elevated with 7.1 million sq. ft. underway—the highest total in over 20 years.
- Year-to-date investment sales volume reached nearly $945.0 million, up 20.8% year-over-year.