Current Industrial Market Overview
Over the past decade, Denver has emerged as one of the most robust industrial markets in the United States. The demand for industrial space in the region has been supported by the strong economic growth of employment, retail sales, and manufacturing. While the legalization of marijuana kicked off an entirely new demand cycle in 2012, increased, high cube distribution space has been the primary driver in recent years.
In 2019 developers of industrial products shattered records by delivering over 6 million square feet of a new product, with approximately 6.8 million square feet currently under construction. These deliveries and new products have helped flatten market rental rate increases, which stands at roughly $9.97/SF. The current average market sales price of $138/SF is up year over year by approximately $5.00/SF, representing an appreciation of 3.6% over 2019 figures. With the amount of new construction in the pipeline, we expect rates to remain relatively stable for the next two quarters with potential for enhanced concessions being available for larger users as developers deliver space, especially for distribution space, which has seen less demand manufacturing space.
Coronavirus shutdowns have had less impact on an industrial property than any other major commercial property type. The essential nature of most industrial operations kept industrial tenants open for business. In the case of 3PL and E-commerce uses seeing rampant upticks in demand for their services fueling expansions evidenced by the likes of Amazon’s 700,000 SF lease at Majestic Commerce Center in Aurora.
Prologis recently reported nearly 49 million square feet in new leases in the third quarter of 2020 alone on a nationwide basis, with two-thirds of that leasing being done in the food & beverage, healthcare, and consumer product industries. In the Denver-Metro area, Prologis owns approximately 10.2 million square feet of industrial space with new projects on the horizon.
Have any other questions on the industrial market in Denver? Curious about how other retail or office markets are performing? Email Jason Bollhoefner at Jason@crebenchmark.com or give him a call at 303-395-0116.