Rising industrial vacancy rates in Denver could give tenants more leverage to ask for concessions in 2024 as the market continues to rebound from its slide back to Earth, according to new data from JLL.

Denver’s industrial market ended 2023 on a strong note with a near-record 2.1M SF absorbed during Q4. This brought the market’s full-year absorption total up to over 5M SF, more than 1M SF above the historical average.

But that absorption rate is nearly half of the record-high total of 9.5M SF absorbed in 2021. Absorption coming back to earth, along with a historic development boom, has pushed the Denver area’s vacancy rate up 3% in the same two-year period to 8.3%.

In turn, JLL Research Analyst Brandon Rosely expects the market to continue shifting in favor of industrial property users, and landlords and developers will offer more concessions to attract tenants.

“As more space is slated to deliver vacant and available, options for users remain plentiful and concession packages continue to grow, causing leverage to shift and create a neutral market for landlords and tenants alike,” Rosely told Bisnow in an email. “If vacancy and availability continue to rise during 2024, leverage may shift further toward the user.”

Denver’s industrial market was red-hot during the height of the pandemic, which led to a surge of new development. Q4 2023 was the second-largest quarter for new deliveries in Denver's history, according to JLL, as investors pursued speculative developments with “no tenant in mind,” Rosley said. Companies like Dollar General, Home Depot and Performance Food Group also completed buildings totaling 1.7M SF.

But the construction boom has slowed, with the pipeline of new projects shrinking by about 2M SF since 2020, according to JLL. Despite lower demand, Denver-area landlords are still seeking rents above historical averages. As of Q4 2023, Denver industrial landlords were asking for an average direct rent of $9.44 per SF, which is about $1.50 per SF above the rate charged in Q4 2020, JLL data shows.