DENVER – A new research report from CBRE shows that despite continued shake-ups in the retail industry, Denver’s retail market has sustained growth in the post-recession period. Compared to peer markets, Denver’s retail rent growth is moderate, while absorption of space and construction activity is strong. Local retailers are also adapting to the evolving environment, embracing new trends and bringing unique experiences to Denver consumers.
“There’s a lot of negativity circulating about the retail industry today, but in truth, Denver’s sector has performed well in recent years. Retailers are benefiting from our population growth as well as a culture that welcomes new experiences, which is attracting new players to our market and encouraging others to try out different concepts. Retailers also appreciate that Denver’s lease rate growth hasn’t been as dramatic as other markets, making us a comparatively affordable place to do business,” said Justin Kliewer, vice president with CBRE’s Retail Services in Denver.
Compared to peer markets, including Seattle, Austin, San Diego, Salt Lake City, Phoenix and Las Vegas, Denver has experienced manageable lease rate growth—increasing 2.7 percent in 2017. Strong demand for prime locations has driven lease rates upward, but secondary locations have experienced more muted growth. Overall Denver has the third-lowest average asking lease rate ($16.90 per sq. ft., Q4 2017) among the peer markets studied in the report.
In terms of new construction, Denver saw the second greatest amount of retail square feet delivered in 2017 among peer markets. Only trailing Phoenix, 1.2 million square feet of new retail space was completed in Denver last year, and the market had just shy of 600,000 square feet of positive absorption.
The report also identifies new trends retailers are experimenting with to create a unique consumer experience, including:
- Urbanization of the Suburbs – walkable mixed-use projects outside the urban core featuring boutique fitness centers, chef-concept restaurants and dog-friendly breweries have become the new reality. Examples: Eastbridge Town Center in Stapleton, Olde Town Arvada.
- Experiential Retail – marketplaces have become a popular way to give consumers a hands-on experience not-replicable by the internet. Examples: Dairy Block (LoDo), Central Market (RiNo), Stanley Marketplace (Stapleton).
- Omnichannel Offerings – an approach that combines online and in-store shopping experiences, including online ordering/in-store pick-up and “clicks-to-bricks,” when an online retailer opens a brick-and-mortar location. Examples: Warby Parker (opened physical stores in Boulder, Cherry Creek and the Dairy Block), Bonobos (opened in Cherry Creek).
- Pop-up Shops – when a retailer opens a temporary or mobile location to connect with customers, build a brand and/or test a new market. Examples: fashion trucks; pop-up shops in Denver from Modcloth and Ball and Buck.
- Rightsizing – a proactive way for retailers to optimize their physical store portfolio, and adapt to current market needs and technologies, by expanding or decreasing their footprint. Examples: Macy’s Backstage in Broomfield, Target’s new 16th Street Mall location (both smaller formats versus traditional stores).
- Overall Denver’s retail market is being buoyed by positive demographic fundamentals. The city ranked second among peer markets for population growth, income growth, education and median household income. Austin, Tex., took the top spot for the first three metrics, while Seattle claimed No. 1 for median household income.