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Industrial Absorption Plummets In Denver Amid Slowing Demand


Denver’s industrial properties are getting harder to fill as the market’s absorption rate declined by 72% from this time last year, according to CBRE’s latest market report

Industrial properties were perhaps the most sought-after commercial asset in Denver and across the country during the pandemic. As retail stores closed due to low foot traffic and local shelter-in-place orders, industrial properties saw a surge of demand from e-commerce companies. 

But that heightened activity has slowly declined every quarter since Q1 2022, CBRE data shows, which industry experts cite as evidence that the market is normalizing. Denver’s industrial market recorded roughly 450K SF of positive net absorption in Q3, far below the 1.6M SF seen at this time last year. In Q3, the market had about 8.9M SF of industrial space under development at 36 properties, roughly the same as this time last year, but a huge decline from the year prior. 

“The declining leasing activity has also had an impact on construction starts in Denver, which were down 82.5% in Q3 2023 when compared to their record highs that were recorded in 2021,” CBRE’s report states. 

Despite the headline numbers, CBRE Senior Vice President Daniel Close told Bisnow the market seems to be “in a really good spot” to support future growth. 

Close said there is about 2.5M SF of build-to-suit space in the construction pipeline, leaving roughly 6.5M SF of speculative development. Close said that volume speaks to the continued demand for industrial space in Denver and a normalization of the market. 

“We’re not at a point where we are just going to stop building industrial spaces and let it all get absorbed because the market needs that continual flow for the deal cycle to continue,” Close said. 

Denver’s industrial vacancy rate of 6.8% is one of the highest among the western markets, with the vacant space primarily composed of recently completed speculative properties. 

Apart from a couple of huge projects, including Pepsi's 1.2M SF industrial space and Dollar General's 900K SF project near Denver International Airport, Denver industrial leases are in line with the historical average for the market of 60K SF.

Construction activity in the Airport submarket helped push Denver’s industrial availability rate up from 7.3% in Q3 2022 to 8.8% in 2023, according to CBRE. The submarket accounted for roughly 56% of the total construction volume in Q3. 

Going forward, CBRE expects Denver’s net absorption rate to increase because of the 3.4M SF of build-to-suit space that is under development.

CBRE found the metro area’s average asking rent rose to $8.94 per SF in Q3 2023 from $8.61 in Q3 2022. 

Submarkets north of Denver also seem poised to grow in future quarters, especially along the I-76 corridor. The I-76 submarket has one of the lowest average asking rents in the metro area at just $6.43 per SF while also having the highest availability rate at 24.6%. The submarket also has more than 1M SF of industrial space in the construction pipeline. 

The North submarket, which stretches from the I-70 interchange in Denver up toward Erie, is another area that could see more demand in the future. The submarket has about 13M SF of rentable space and has another 1.3M SF under construction.

One recently completed development in the area is Pivot Denver, a 472.8K SF Class-A industrial property at I-25 and 58th Avenue. The property welcomed Total Tool Supply Inc., a national construction materials supplier, as its anchor tenant in September with a lease of 58.7K SF. 


CORRECTION, Oct. 27, 9:00 AM MT: A previous version of this story did not properly contextualize Close's comments describing the size of industrial spaces being leased in Denver. The story has been updated.