3rd Qtr. 2021 Industrial Report

The industrial sector has arguably emerged as the mostresilient asset class in commercial real estate since theonset of the pandemic. Key trends have accelerated asbrick and mortar retail takes a hit, such as e-commercetaking more market share, and consumers growing moreaccustomed to ordering online.

According to the Census Bureau, U.S. e-commercesales jumped by 24% year-over-year through April asthe pandemic and social distancing measuresencouraged more online buying. Amazon is positioningitself to take full advantage of this shift in consumerbehavior, both locally and on a national scale. Amazonleased 700,000 SF in Aurora in mid-March of last yearas part of its plan to hire an additional 175,000 workersacross the U.S. This represents 8% of Denver’s totalleasing activity in 2020 in a single deal.

Tenants occupied 300,000 SF in the first half of 2021.Although Denver’s industrial market has enjoyedelevated demand, a robust construction pipelinecontinues to put upward pressure on vacancies with over3.5 million SF delivering year-to-date. Since the beginning of 2021, the vacancy rate has risen by a fullpercentage point to 6.6%, its highest point in nearly adecade. Another 7.8 million is currently underconstruction.

After years of healthy rent hikes, rent growth in Denver’sindustrial market decelerated in the last year. While themarket has had to contend with an ongoing pandemic,the decline was instead likely due to the onslaught ofnew speculative supply. Rent growth has since ticked upwith an increase of 3.2% year-over-year as of 21Q3,marking a reversal after 11 consecutive quarters ofdecelerating rent growth. Denver rents achieved an all-time high of $10.40/SF in 21Q3, which is still at aconsiderable discount relative to competing markets tothe west.

Despite an uncertain economic outlook nationally,investors and lenders remained bullish on the long termoutlook of Denver’s industrial market. Total salesapproached $1.9 billion in 2020, just slightly behind the$2.1 billion recorded in 2019. Momentum has carriedover into 2021.

Source: CoStar

View Report: Denver Industrial Market-Q3