Wave Of New Construction Pushes Denver's Industrial Availability Near 10-Year High
Metro Denver's industrial availability rate reached 9.5% in the second quarter, its highest in more than a decade. The rate was driven in large part by 2M SF of new construction that has been delivered so far this year, according to a new report from CBRE.
Like many markets across the country, Denver’s industrial market is besieged with new product that got started during the white-hot e-commerce era of 2022. But CBRE’s report indicates that of the 4.7M SF wave of new construction delivering in the second half of this year, 42.9% is preleased.
The construction pipeline is also emptying, with square footage under construction dropping 20.9% quarter-over-quarter.
“New construction starts have reduced by 50% over the last 18 months and as leasing continues to be strong we will see the availability rate decrease in the [near] future,” CBRE Senior Vice President Todd Witty told Bisnow via email.
Total leasing volume for Q2 came in at 2.5M SF, a 2.6% increase compared to the previous quarter.
Metro Denver also recorded 408K SF of net absorption in Q2, down slightly from the 467K SF seen in the first quarter.
The direct vacancy rate in metro Denver increased 30 basis points from the previous quarter to 7.9%.
Metro Denver continues to see a wide range of companies expanding their operations to serve the Front Range population, with the largest growth seen among industries servicing the food and beverage sectors, including transportation companies that service food accounts, Witty said.
This is part of a long-term trend associated with the region’s population boom, he said. That growth is driving many companies to open new distribution centers across the Front Range rather than shipping in goods from surrounding markets.
“We are seeing strong leasing today including the 1.1M SF lease just signed on the I-76 corridor and a few large build-to-suits that will complete by the end of the year which will result in strong overall absorption for 2024,” Witty said.
He noted that there are an additional 3.8M SF of leases that are signed but where tenants have yet to take occupancy. That includes several large deals completed in July, which Witty said will contribute to an increased absorption rate later this year.
