2018 Q2 Industrial Report
A slight increase in vacancy and a minor decrease in net absorption has not slowed confidence in Denver’s industrial sector. Investment activity totaled approximately $352 million during the second quarter bringing the year-to-date total to $827 million – a 62 percent increase from the 2017 mid-year total. Healthy absorption and controlled construction activity continue to be indicators of Denver’s well performing industrial sector. Approximately 1 million square feet have been absorbed and 4.6 million square feet of construction activity is underway in 2018. With an estimated 4.9 million square feet anticipated to break ground within the next 12 to 18 months, the industrial market shows no signs of slowing.
2018 Q2 Office Report
At the halfway point of 2018, Denver’s office market continues to perform well with steady vacancy, increasing asking rental rates, and strong positive absorption. After a relatively slow start to the year, second quarter absorption totaled over 1.1 million square feet with the metro’s top submarkets, Downtown and Southeast, contributing a combined 800,000 square feet. All positive absorption during the quarter came from Class A properties, as occupiers move into new, higher quality space. Overall vacancy has remained steady, even as the market has experienced more than 2.7 million square feet of deliveries year-to-date. Confidence in the office sector is unwavering, especially in the Downtown market, as Block 162, a 595,000-square-foot, speculative Class A office building broke ground during the quarter.
2018 Q2 Retail Report
Denver’s retail sector experienced substantial negative absorption during the second quarter recording more than -325,000 square feet. The negative absorption stems almost entirely from the closure of seven metro Toys ‘R’ Us locations totaling nearly 318,000 square feet. Although the amount of space flooding the market at one time is significant, it is not unusual in today’s retail climate. Big box retailers continue to close brick and mortar locations as the traditional retail model adapts to the growing dominance of e-commerce. Despite increased vacancy and negative absorption, asking rates increased quarter-over-quarter, and approximately 8.3 percent year-over-year. Construction activity reached a 12-month high with more than 1.2 million square feet under development, signaling a healthy market overall.
Investment activity in the Metro Denver retail sector totaled approximately $247 million during the second quarter, as 43 properties transacted. The most significant transaction of the quarter was the purchase of Thorncreek Crossing in Thornton by The Kroenke Group. The nine-property portfolio sold for approximately $45 million, or $230/SF, respectively.