2nd Qtr. 2022 Industrial Report

Driven by robust employment growth and the rise of ecommerce in the COVID-19 era, Denver’s industrial market remains in expansion mode. The market has added 26 million SF in the last five years and is on track to add another 10 million SF in 2022. Businesses continue to choose Denver due to the market’s central location, abundant land availability, and strong infrastructure.

Denver’s industrial market is benefitting from the national logistics boom that has taken hold since the onset of the pandemic, and companies are placing growing importance on maintaining or expanding their supply chains. The market absorbed 8 million SF in 2021, the highest level achieved on record. Amazon, Fedex, Alan Ritchey, and Aspen Distribution were among industrial tenants taking on large space commitments in the metro in the last year.

The current vacancy rate of 4.9% is above both the metro’s 10-year average of 4.8% and the national average of 3.9%. While vacancy has declined in recent quarters since peaking at 6.8% in 21Q2, this comes after a long run dating back to 2016 of new supply outpacing demand. Denver is easier and cheaper to build in relative to most other major metros, particularly those located along the coasts. This aspect of the market gives it the potential to easily become overbuilt. Recent record demand indicates that new projects coming out of the ground should lease well in the near term, while labor and supply issues will act as a governor on runaway supply, thereby insulating the market from large vacancy swings for the foreseeable future.

Surging rents and sustained demand in the Denver market have captured the attention of investors. Investors are willing to pay top dollar for newly delivered industrial product even without a tenant in place, allowing the buyer to capitalize on current market demand while avoiding potential construction risks brought on by supply chain issues. The addition of high-end industrial inventory is helping to drive investment prices higher and tighten cap rates.

Source: CoStar

Denver – CO-Industrial-Market- 2nd Qtr