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Investor Snaps Up Portion Of Under-Development Industrial Campus In Central Denver

Industrial real estate has remained a hot commodity for institutional investors in recent years.

Two distribution centers located within an under-development industrial campus in central Denver have traded hands for nearly $85.3M. 

The transaction is the latest sign of rapid capital turnover in the local industrial market, where new buildings are capturing investor attention.

The two buildings are part of 76 Commerce Center, a 155-acre logistics park that was among the first to kick off a wave of development near the I-76 corridor. The Minneapolis-based developers, Mortenson Properties Inc. and Hyde Development Inc., sold the buildings to Principal Real Estate Investors in a deal first reported by the Denver Business Journal. 

The fully leased buildings, totaling just over 618K SF, sold for $137 per SF. That's below last year’s average of $225 per SF, a figure that was significantly impacted by a midyear record-breaking sale and several other high-dollar trades.

A CBRE Group team led by Executive Vice Presidents Tyler Carner and Jeremy Ballenger and Director Jessica Ostermick represented the sellers.

Rather than serving as a pricing milestone, the sale is yet another in a list of industrial properties sold in short order after their completion.

“For industrial, the recycling of capital is happening faster than ever,” Pure Development principal Tyler Morris said during a recent Bisnow panel. The strategy is especially popular among smaller developers, as opposed to large institutional investors, which largely still prefer the build-and-hold model.

Recognizing that replacement costs for industrial properties in Denver are on the rise, developers are cashing in on newly built properties as investors clamor for warehouse and distribution space in the area.

Buildings 4 and 5 at 76 Commerce Center were the first buildings to wrap construction at the project in 2020 and 2018, respectively. Another building is under construction in the business park, and a fourth is planned; all told, the project will span 1.7M SF.

Last year brought several trades for newly completed industrial buildings. Karis Cold Storage sold its 76 Freeze, the Denver area’s first industrial cold-storage facility, in the fourth quarter, less than a year after announcing the project. And, in another of 2021’s behemoth industrial sales, the recently completed Pecos Industrial Park sold for more than $300M just months after its completion in September.

The trend predates the pandemic, which only accelerated demand for industrial buildings. In 2016, local developer Westfield Co. moved at breakneck pace on its Hub 25 project just off I-25 at 64th Avenue to capitalize on the appetite for new product. In less than two years, the company had completed demolition of an existing property on the Hub 25 site, redeveloped the new buildings, leased and sold them for $74M.