With Denver’s population growth and e-commerce continuing to expand, industrial development is expected to continue and rents will continue to be pushed up.
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Of the 5.4M SF of new industrial space delivered last year, 2.9M SF was speculative space, CBRE First Vice President of Industrial and Logistic Services Todd Witty said. By the time the speculative space was delivered, 1.9M SF of it had been pre-leased. The region’s vacancy rate for industrial space stood at 5.8% in the fourth quarter.
Witty said he expects 4M SF of new industrial space will be delivered this year, with 66% of that being speculative.
Much of the demand is being driven by rapid population growth — metro Denver is expected to add another 40,000 people this year — and an e-commerce industry that is expected to top $500B in sales in the United States by 2020.
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“Because of those things, we’re seeing new development remain robust,” Witty said. “More retailers are seeking to be closer to their customer base.”
The region’s most sought-after submarket is near Denver International Airport, where 1.3M SF is under construction, according to CBRE’s Denver Industrial report for the fourth quarter. Regionwide, there is nearly 4M SF of industrial space under construction.
Population growth and expansion of e-commerce are not only driving development, but also driving up industrial rents. Between 2016 and 2017, the average asking rent increased 6.9% to $7.67/SF per year triple net.
“Rising construction costs and continued demand will continue to push rents into 2018,” Witty said.
Learn more about the Denver industrial market at The State of Denver Industrial event March 15 at the Four Seasons Hotel Denver.
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