The Denver retail market is arguably the hardest-hit asset class following the coronavirus outbreak but is starting to recover from the deepest trenches of the recession. Denver retailers were given the green light to operate at full capacity earlier this summer, and key indicators such as leasing activity, absorption, and asking rents responded with noteworthy improvement. While this bodes well for the local market, many retailers are still struggling to shake off the effects of the pandemic, and the road to recovery isn’t straight forward given that ecommerce continues to cut into market share. The Delta variant is posing an additional risk of upending momentum.
Dozens of national retailers have filed for bankruptcy, and stable retailers have even announced store closures. Denver’s retail market recorded six consecutive quarters of negative net absorption (19Q1-21Q1), the longest stretch on record. Smaller businesses, including restaurants and bars, drove most of the negative absorption. This trend was reversed in 21Q2 with
quarterly absorption turning positive.
Vacancy has risen steadily in the past two years as retailers struggle to compete with e-commerce and new supply has outpaced demand. The pandemic has accelerated this trend with an even greater share of the population relying on online shopping. Vacancy peaked at 5.2% in 21Q1 but the positive recent absorption gains caused vacancy to contract to 4.6%. Rent gains were slowing before the pandemic, but many local and national tenants are still struggling to meet their obligations. Lease concessions have become popular as landlords attempt to hold the line on asking rents.