Denver just had its 38th consecutive quarter of positive net absorption, capping a nearly decade-long hot streak that brought new business, capital and market players to a still-booming commercial real estate market.

The question for 2020: Where should the smart money be heading in the Mile High City over the next 12 months or longer?

CBRE First Vice President Paul B. Kluck said three factors will drive the city's continued economic expansion: a new type of investor looking at Denver; a further boomlet in flexible office space locally; and industrial and retail sectors increasingly transformed by e-commerce.

“As online sales grow, retailers have had to adjust their business models in order to remain competitive," Kluck said. "Logistics, or how quickly and efficiently goods get to the consumer, has become a key differentiator for retailers, especially as expectations for same-day delivery grow."

That refocusing has been pushing demand for industrial space near Denver's major transit hubs and spreading population centers; retailers need 1.25M SF of distribution space for every $1B of growth in e-commerce sales, according to a CBRE study.

“For the past two years, industrial has ranked as the most sought-after property type in CBRE’s annual survey of commercial real estate investors," Kluck said. "In that same survey, Denver advanced in 2019 to now tie as the fifth-most-attractive market for investment."

Denver saw slightly lower industrial sales volume at the end of Q3, recording $999M, a dip from 2018's total during the same period, CBRE found. But the city has been attracting the interest of different types of investors.

“Demand for industrial space, in hand with our region’s outstanding economic performance, has attracted a new pedigree of investors to our market," Kluck said.

"We are seeing record levels of interest from institutional capital, and this has led to some historic sales, including the Colorado Industrial Portfolio sale in January of [2019]," he added. "Berkeley Partners acquired 1.95M SF of industrial space in what was the single largest industrial portfolio sale ever in Colorado.”

Flexible office space is another bright spot on Denver's horizon, even as coworking behemoth WeWork has drastically restructured. The city's flexible office inventory ballooned almost 600% between 2014 and 2019, making it the seventh-largest flexible office market nationwide, a September 2019 CBRE report showed.

Kluck remains sanguine about Denver's prospects in 2020, saying that e-commerce and construction will continue to drive growth as industrial fundamental remain steady. He also points to the the area's diversity across sectors, a highly educated and skilled workforce and a live-work-play lifestyle as significant draws for investors and new residents moving into the next decade.

"Denver has truly advanced to become a Tier 2 market, and investors are taking notice," he said, adding that proactive policies to address commute times and transportation bottlenecks, like the FasTracks light rail system and the Interstate 70 reconstruction, are good signs Denver is bracing for growth.