Fuller-Market-cover

3rd Qtr. 2021 Retail Report

The Denver retail market is arguably the hardest-hitasset class following the coronavirus outbreak but isstarting to recover from the deepest trenches of therecession. Denver retailers were given the green light tooperate at full capacity earlier this summer, and keyindicators such as leasing activity, absorption, and askingrents responded with noteworthy improvement. While thisbodes well for the local market, many retailers are stillstruggling to shake off the effects of the pandemic, andthe road to recovery isn’t straight forward given that e-commerce continues to cut into market share. The Deltavariant is posing an additional risk of upendingmomentum.

Dozens of national retailers have filed for bankruptcy,and stable retailers have even announced store closures.Denver’s retail market recorded six consecutive quartersof negative net absorption (19Q1-21Q1), the longest stretch on record. Smaller businesses, includingrestaurants and bars, drove most of the negativeabsorption. This trend was reversed in 21Q2 withquarterly absorption turning positive and 21Q3 is shapingup to be another quarter of positive absorption.

Vacancy has risen steadily in the past two years asretailers struggle to compete with e-commerce and newsupply has outpaced demand. The pandemic hasaccelerated this trend with an even greater share of thepopulation relying on online shopping. Vacancy peakedat 5.2% in 21Q3 but the positive recent absorption gainscaused vacancy to contract to 5.0%.

Rent gains were slowing before the pandemic, but manylocal and national tenants are still struggling to meet theirobligations. Lease concessions have become popular aslandlords attempt to hold the line on asking rents.

Source: CoStar

View Report: Denver Retail Market-Q3