'We're The Darling': Retail Reset Makes Its Way To Denver

Retail real estate's vastly improved run lately has arrived in Denver.

While some restaurant closures and high-profile bankruptcies like that of Big Lots have placed retail space back on the market, metro Denver carried an availability rate of 4.8% in the second quarter, according to CBRE. 

Total net absorption, meanwhile, reached 262K SF in Q2, compared with 81K SF in the year’s first quarter.

“We’re the darling right now,” Crosbie Real Estate Group partner Rhonda Coy told Bisnow, referring to retail across the country. “It wasn’t that way for a long time.”

Across the country, years of demolition and conversion of retail space without much new construction has rebalanced the retail market.

Coy recalled what she referred to as the prepandemic “retail apocalypse,” and then how the pandemic, coupled with rising competition from e-commerce, negatively impacted many retail operations.

“I’ve been doing this for 17 years, and it’s the first time in my career where it’s like, ‘Oh, retail is doing great, everyone wants to be in retail, retail is the darling, vacancy rates are at an all-time low,’” she said.

Coy describes the retail sector as being at a different place in the overall economic cycle compared to other CRE sectors, given that many large retailers have their own capital and are looking to expand and spend their own money.

“So it definitely feels like we’re a little bit insulated from the volatility,” she said, “certainly [compared to] the office market and a little bit of the industrial market.”

While retail remains strong in the region and is following the rooftops as housing construction booms across the Front Range, a lot of current deals will not be delivered until next year, creating a lag that could affect bottom lines for the rest of 2024.

And that lack of inventory, Coy notes, is making the retail market even more competitive than usual, in part due to pent-up postpandemic demand.

“There are so many supply chain issues with electrical equipment and HVAC,” she said. “Tenants have built up demand internally as well. They have goals. ‘We have X amount of capital to spend, to open X amount of stores by X amount of date.’”

That competition for retail space, and especially for smaller shop space, has upped the stakes across the Front Range. Coy expects more inventory coming online within the next 18 to 24 months but believes the competition will remain fierce, especially for quality, new construction.

“The industry is moving so quickly on new construction”, she said. “As a broker, you have to be really on top of what’s coming out of the ground, what’s next. We’ve had leases signed for several months now. It’s a great thing on the landlord rep side of it. But if you’re a tenant, once you see walls going up, it’s probably too late.”

Coy noted that national retailers, especially quick-service restaurants, are doing very well in metro Denver, and that they have the time, money, sales volume and energy needed to deal with the headaches of a very competitive market.

“Our retail in general has done very well,” she said. “We don’t have these big, vacant malls like you see in Michigan and the Midwest. We just haven’t had that big fallout, or everything was redeveloped proactively years before it became blighted.”