Latest CBRE Report Shows Diverse Activity Across Denver’s CRE Sectors
Metro Denver’s office, industrial and retail commercial real estate sectors all posted strong positive net absorption in the third quarter of the year, according to CBRE’s latest quarterly reports. The market recorded more than 1.4 million square feet of incremental new space occupied in Q3 2019, supported by strong leasing activity across a diversity of industries.
“While we see some consistent leaders in Denver leasing activity, like tech companies for office space and transportation/distribution companies for industrial space, what’s most notable is the overall diversity of activity. This quarter saw entertainment concepts lead retail absorption, and industrial hemp and e-commerce are both quickly growing their share of industrial leasing activity. With no single industry dominating Denver’s economy, we are well-positioned for continued growth,” said Pete Schippits, senior managing director for CBRE’s Mountain States.
Office Market Highlights
- Driven by occupancy in newly constructed space, positive net absorption of 593,000 sq. ft. was posted in Q3 2019.
Technology users continued to lead leasing activity, accounting for 18.7% of the year-to-date office leases signed in metro Denver.
- The average direct asking lease rate increased for the ninth consecutive quarter, reaching a new all-time high of $28.80 per sq. ft. full service gross.
- Investment sales volume totaled $781.6 million in Q3 2019 with the suburban submarkets accounting for 98% of the total sales volume.
- Projects under construction reached 2.9 million sq. ft., with five buildings breaking ground in Q3 2019.
Industrial Market Highlights
- Almost 572,000 sq. ft. of positive net absorption was recorded in Q3 2019 — the 38th consecutive quarter of positive net absorption.
The transportation/distribution and goods manufacturing industries continued to account for the lion’s share of industrial leasing activity through Q3 2019, representing 22.3% and 21.7% of total activity, respectively.
- While the overall average direct asking lease rate decreased slightly, the overall average achieved lease rate (based upon a weighted average of executed lease transactions) rose by 9.9% year-over-year to $7.97 per sq. ft. triple net.
- An overall sales volume of $302.5 million was recorded in Q3 2019, bringing year-to-date sales volume to nearly $1.0 billion.
- Ten buildings totaling 1.9 million sq. ft. delivered in Q3 2019, while construction activity remained elevated with 5.0 million sq. ft. underway.
Retail Market Highlights
- Positive net absorption of 267,000 sq. ft. in Q3 2019 helped push year-to-date net absorption to over 625,000 sq. ft.—almost double the amount posted through Q3 2018.
- Entertainment-use tenants, like the Mission Ballroom and Top Golf, accounted for 48% of the quarter’s positive net absorption (129,200 sq. ft.).
- The average direct asking lease rate was $19.56 per sq. ft. triple net, up 3.5% year-over-year.
- The volume of investment sales priced $3.0 million and greater totaled $160.5 million with the average price per sq. ft. up 40.7% year-over-year.
- Metro Denver’s retail construction pipeline remained healthy with 1.8 million sq. ft. under construction in Q3 2019.