According to CBRE’s latest market update, strong population and job growth is supporting Denver’s industrial and office markets in the second quarter of 2017. Industrial remains the strongest — tenants have absorbed more space than they have let go for an unprecedented 29th consecutive quarter — more distribution centers and warehouses are needed due to an increase in online shopping.
Office Q2 Highlights
- Over 4.5 million sq. ft. (MSF) of office space is currently under construction in metro Denver, 4.1 million of which is speculative construction
- Of the 4.1 MSF of spec construction, 46 percent is already pre-leased
- Suburban projects accounted for 2.7 MSF of spec construction with 43.3 percent pre-leased
- Downtown projects comprised 1.4 MSF of spec construction with 51 percent pre-leased
- Sublease availability in the downtown market declined 12.1 percent year-over-year
- Investment activity remained stable with $476.8 million transacting in Q2 averaging $252.22 per sq. ft. (PSF), a 48 percent increase over Q2 2016
Industrial Q2 Highlights
- Metro Denver industrial market continued its positive net absorption streak in Q2, marking the 29th consecutive quarter of positive net absorption
- Large Class A space continued to be in high demand while demand for smaller buildings less than 20,000 SF slowed due to high lease rates
- Overall average asking lease rates remained flat but are expected to climb as more Class A assets are delivered
- Construction activity surged ahead with 5.3 MSF underway, 2.5 MSF of which is speculative
- 1.4 MSF of spec space delivered in Q2, of which 79.2 percent was pre-leased
- Total combined owner/user and investment sales reached $269.1 million in Q2, up 12.4 percent compared to Q2 2016
Retail Q2 Highlights
- Overall Denver’s retail market performed well in Q2, surpassing many expectations in the face of store closures
- Average lease rates increased 1.6 percent quarter-over-quarter to $18.17 PSF; while this is the highest lease rate since Q1 2009, it shows that lease rates are starting to level out
- Construction activity remains active with 1.1 MSF underway, a 5.7 percent increase from last quarter
- Over 371,000 SF of new retail space delivered in Q2, nearly a threefold increase compared to last quarter
- Total transaction volume exceeded $158 million with 24 properties trading hands, representing a 15.7 percent quarter-over-quarter increase in sales volume and a 9.3 percent increase in the price PSF
Image courtesy of Wikimedia.
