25 North Will Kick Off More Construction With $101M In Financing
A 67-acre industrial development in the north Denver suburb of Thornton received a fresh capital injection in the form of a $101.3M refinancing and construction loan that will allow the project to kick off its second phase, working toward its eventual total of 936K SF.
Local developer EverWest Real Estate Investors and Invesco Real Estate borrowed the money to finish construction on 25 North, which EverWest acquired from its original developer in 2020 for $43.4M.
Phase 2 will consist of six speculative warehouse and distribution facilities totaling 596K SF, with some reaching completion later this year and the rest delivering in 2023. The first phase, totaling 340K SF, is complete and fully leased.
Debt markets feel good about Denver, said Eric Tupler, senior managing director for the JLL Capital Markets Debt Advisory team that facilitated the loan on behalf of the borrowers.
“Capital sees growth ahead for Denver. We’ve had very consistent in-migration for the last 25 years, and with the changes in the work environment, people truly believe in the Rocky Mountain region, both Denver and Salt Lake City,” Tupler told Bisnow.
Population growth is a huge motivator for industrial projects, and the expansion of the metro Denver area has spurred a record industrial development pipeline, with 10.5M SF under construction in the first quarter, according to JLL data.
Even with the new construction coming to the market, the vacancy rate remains flat, around 5.9%. This can be attributed partially to the fact that 56% of the new construction in 2021 was pre-leased or build-to-suit. But demand also plays a significant factor, driving further speculative development like that at 25 North.
“Denver’s not a whole lot different from the national market in terms of product type,” Tupler said. “The priorities are multifamily and industrial first. Everyone wants to finance and invest in those because of the strong rent growth.”
But overall, lenders are growing more conservative as money becomes more expensive, a result of market shifts. Although U.S. Treasury yields fell slightly at the beginning of the week, they’ve been at record highs for weeks, and the Federal Reserve expects to make more increases in the base interest rate throughout the year.
25 North’s location near I-25 in metro Denver demonstrates the continued migration of new industrial space toward the north-south corridor that runs the length of the Front Range, in addition to the historical industrial hot spot stretching east toward Denver International Airport along I-70.
Locations north of Denver but adjacent to the highway have grown in popularity among industrial developers in recent years as population growth spiked in metro Denver, Boulder and northern towns and small cities, making the area more attractive for distribution facilities.
The I-25 corridor also offers more opportunities for smaller developers to put up projects, as much of the land east of Denver is owned by some of the country’s largest industrial companies, like Prologis and Majestic Realty Co.