DENVER – CBRE just released its Q4 2018 reports analyzing the year-end performance of metro Denver’s office, industrial and retail real estate sectors. Investment sales volumes soared for both the office and industrial sectors, while the office and retail sectors each recorded all-time high lease rates at the end of the year. Net absorption was strong across the board as is development activity, with office, industrial and retail all seeing active construction pipelines entering into 2019.
“With year-end numbers in, it’s official; Denver’s commercial real estate market concluded 2018 on a very strong note. There wasn’t a clear leader among the individual sectors as office, industrial and retail each posted highlights in different ways. The outlook for 2019 is for continued healthy activity in both the leasing and capital markets arenas as Denver maintains its place as a top live, work, play city,” said Matt Vance, economist and director of Research & Analysis, CBRE.
Q4 Office Highlights
Year-end net absorption reached nearly 2.9 million sq. ft.—the highest annual net absorption recorded since 2000.
Year-end office investment sales volume across metro Denver totaled over $3.0 billion, the highest total this business cycle.
The average direct asking lease rate increased to a record high of $28.34 per sq. ft. FSG, marking the sixth consecutive quarter in metro Denver with a record-breaking office lease rate.
Development activity picked back up in Q4 2018 with five new projects breaking ground, bringing the construction footprint underway in metro Denver to almost 3.0 million sq. ft.
Q4 Industrial Highlights
Metro Denver’s industrial market continued its positive net absorption streak for the 35th consecutive quarter with 2.0 million sq. ft. of positive net absorption in Q4 2018. This brought year-end net absorption to nearly 4.5 million sq. ft.—the highest annual level since 2006.
2018 was a record-setting year for overall industrial sales volume, reaching nearly $1.7 billion, a 51.4 percent increase over 2017.
As of year-end, 4.2 million sq. ft. of industrial space is under construction across metro Denver with spec projects accounting for 85.4 percent.
After reaching a record high in Q3 2018, lease rates declined slightly in Q4, a sign of industrial rents beginning to stabilize in the Denver market.
Q4 Retail Highlights
Denver’s retail market surpassed expectations in 2018 despite the barrage of national retailer bankruptcies, store closures and e-commerce disruptions.
Year-end net absorption reached 709,869 sq. ft., the second highest annual net absorption since 2013 and more than double 2017’s absorption.
The average direct asking lease rate increased 4.3 percent year-over-year to an all-time high of $19.34 per sq. ft. NNN.
Over 1.34 million sq. ft. of new retail space was delivered in the Denver market in 2018, up 18.9 percent year-over year. Construction levels remained elevated with 1.4 million sq. ft. underway at the end of the year.
2018 annual sales volume totaled $782.3 million, up 2.9 percent year-over-year.