‘Eatertainment’ Venues And Grocery Stores Help Prop Up Denver’s Retail Market
Although the retail real estate markets in some of the larger, more prominent coastal markets are struggling to regain their footing two years after the onset of the coronavirus pandemic, smaller markets like Denver are enjoying small improvements and steady demand.
Average rental rates for retail space in Denver increased by 1.9% from first-quarter 2020 to third-quarter 2021, according to a report from JLL, and retail brokers in the area are “busier than ever,” according to Sam Zaitz, a longtime retail broker in metro Denver and an executive vice president at JLL.
Continued population growth in metro Denver and the corresponding influx of residential development have buoyed the retail sector, adding new service-based operations like banks, car washes and daycare centers, Zaitz said. Also catering to growing populations is the “unbelievable” amount of new grocery development.
Among the new grocery projects are a Clark’s Market, an Aspen-born grocer that broke ground on its first metro Denver location last month, and a Sprouts Farmers Market coming to the Green Valley Ranch area, an indicator of the population growth taking place on the metro area’s eastern edge.
Grocers, along with health and fitness businesses like cycling studios, climbing gyms and health clubs are taking up even the big-box spaces that were hit by high-profile retail bankruptcies before the pandemic, like the collapse of Englewood-based Sports Authority in 2016.
Other common retail types opening in Denver include home goods, luxury, outdoor retailers and food and beverage, Zaitz said.
The “eatertainment” category is also popular and regaining traction after Covid vaccines once again made it safer to patronize establishments where shared equipment and lots of movement inside are the norm. Eatertainment combines food and drink with activities like golf, arcades, lawn games or even things like full beach volleyball courts. This specialized retail use also requires more square footage than a typical restaurant, and is common in high-traffic areas where rents tend to be higher.
Not only has the population along the Front Range swelled in the last decade — by nearly 16% from 2010 to 2020, according to the Colorado State Demographer — but many of those moving here are employed in high-paying jobs, affording them the kind of disposable income that retailers love to see.
More recent local data, from CBRE Group Inc., supports the idea that Denver-area retail real estate is holding the line, with a dip in the direct vacancy rate over the course of 2021 to 6.9%, helped by 442K SF of positive net annual absorption.
The Cherry Creek area, historically a hot spot for retail, is doing particularly well, with that submarket commanding the highest average asking lease rates of any in metro Denver at $29 per SF, according to CBRE’s data. The neighborhood is in such demand that Zaitz and his fellow brokers have nearly fully leased speculative buildings that haven’t even broken ground yet.
Of course, challenges still loom for the retail industry, especially when it comes to staffing. Many restaurants and stores are understaffed and rising inflation makes it more difficult for customers to stretch their dollars. E-commerce is growing faster and customers have more choices than ever.
But the early data following the pandemic indicate the retail industry in metro Denver is already on track for a rebound, along with other smaller cities like Austin, Nashville and Miami, Zaitz said.