Market maintains industrial strength
Commercial real estate in great demand in metro Denver
Strong job and population gains continued to support Denver’s office and industrial markets in the second quarter, and even the struggling retail sector got some relief as the number of vacant big-box stores declined.
“New jobs have created demand for new space,” said Matt Vance, an economist and director of research for CBRE in Colorado, which provided a market update Monday.
Of the three major commercial real estate segments, industrial remains the strongest in metro Denver. Tenants have absorbed more space than they have let go for an unprecedented 29th consecutive quarter, with no signs that is about to end.
“That is the longest run in my 30-year career,” said Jim Bolt, executive vice president with CBRE Industrial & Logistics Services. “It is hard to get less vacancy than what we have.”
Industrial lease rates continue to rise, supported by restraint in new construction. About three-quarters of what is in the pipeline will be built around Denver International Airport and on the north side of the metro area.
One reason industrial space is in such demand is that consumers are buying more goods online, necessitating more distribution centers and warehouses.
Traditional retailers, however, remain under pressure. Payless ShoeSource, RadioShack, JC Penny, Sears, Kmart, Macy’s, Guess, Abercrombie & Fitch, American Apparel, Bebe and Gordmans are some of the chains that have announced bankruptcies or wide-scale store closures.
But mixed-use retail, the smaller stores that fill the ground floor of some new urban apartment and office buildings, as well as space for restaurants, remains in demand.
Matthew DeBartolomeis, vice president with CBRE Retail Services, said metro Denver developers have nearly 1.2 million square feet of retail space under construction and delivered 313,000 square feet of new retail space, a 9 percent increase compared with the same period last year.
Just two projects, the second phase of the Stanley Marketplace and the Alamo Drafthouse Cinema in the Sloan’s Lake neighborhood, accounted for more than half the new retail space added.
On the downside, the heavy hail storm in May knocked 50-plus stores at Colorado Mills out of commission until repairs are completed.
A year ago this month, Englewood-based Sports Authority, once the nation’s largest sporting goods retailer, closed its remaining 460 stores, including 31 in Colorado after failing to find a buyer in bankruptcy.
DeBartolomeis also noted that even the big-box retail spaces that dot the metro area are slowly getting absorbed.
There were 92 of those a year ago and 76 at the end of the second quarter.
Chris Phenicie, senior vice president with CBRE Advisory & Transaction Services, notes that all the residential development in central Denver is supporting both retail and office development, giving the area a vibrancy that appeals to educated millennials and the employers trying to locate near them.