Competition Is Steep For Denver's Prime Industrial Locations
The competition for land is fierce in metro Denver’s hot industrial market, but not any site will do.
“Everybody’s out there scrapping for land sites,” Comunale Properties President John Comunale said. “It’s hard to compete. We’re trying to be the niche player that’s very locally focused and get out in front of things and take risks to get good sites under control.”
He and others spoke at Bisnow's recent The State of Denver Industrial: The Evolution of a Booming Industry in the Age of E-Commerce and Technology event at The Four Seasons Hotel and Private Residences.
Comunale and Etkin Johnson partner Cyndi Thomas, who both have developed industrial projects at the Colorado Technology Center in Louisville, said a well-located site with access to the labor pool is the key to attracting tenants. They said they believe the CTC, in metro Denver’s northwest corridor, is well-situated.
“We have been fortunate to lease the last five buildings we’ve built in the CTC,” said Thomas, who noted that Etkin Johnson closed on a $75M refinancing for its CTC II Portfolio that enabled it to break ground on the Louisville Corporate Campus at CTC.
Comunale, who has three projects in the CTC, including an 85K SF building the company acquired, said he focused on smaller users that would occupy between 15K and 25K SF. Comunale delivered the first of the new buildings six months ago.
“We filled it prior to completion, which allowed us to get out of our construction loan,” he said.
Paul Hyde, founder and partner of Hyde Development, which recently expanded to Denver, plans to develop 76 Commerce Center, a 1.8M SF industrial park on 122 acres off Interstate 76 in Brighton. He said industrial projects today must provide many of the same amenities developers include in office buildings.
“You need outdoor space, showers, workout space, trail systems,” Hyde said. “It may have been just an office thing five years ago, but that’s not the case anymore.”
DPC Cos. President and CEO Christopher King said he has been looking for infill sites, such as vacant retail that can be repurposed as an industrial property. Retail properties tend to be well-located off highways and other major transportation corridors, he said.
“We see an opportunity to tear down retail and rebuild with mid-box industrial,” King said. “But it’s tricky with cities because they want the tax revenue from retail. The trade-off is that they don’t have to provide a lot of services for industrial.”
While common belief is that the legal marijuana market has eaten into Denver’s industrial market, that is not necessarily the case, Brue Baukol Capital Partners CEO Chad Brue said. Of metro Denver’s 200M SF industrial market, just 4M SF — 2% — is devoted to marijuana, primarily in C and D-quality properties. That is forcing companies that would otherwise consider those older properties to take a step up.
“Marijuana hit its saturation point a couple of years ago,” Brue said. “It will not decline much. I expect it will hover between 3.8M and 4.2M SF.”
