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Rampant development in RiNo and the $1.2B expansion of Interstate 70 between Brighton and Colorado boulevards has many industrial users looking for new places to operate their businesses.
While the industrial market in central Denver — particularly in RiNo and along I-70 — has traditionally been strong, businesses are reconsidering their locations.
“We’re going to start seeing a greater impact of the I-70 reconstruction,” Cushman & Wakefield Managing Director Drew McManus said. “We’ll start to see some companies moving from that area to further east or the north I-25 corridor. It’s one of those things that companies are expecting to happen but until they actually see the truck delivery delays aren’t doing anything.”
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Glass-sink manufacturer Vitraform, for example, has relocated from a 50K SF building it owned at 35th and Blake to a site off Colorado Boulevard. It sold the 35th and Blake property to Hines, which is building a seven-story office building on the site.
“It was a $225 a SF land sale,” McManus said. “That set the watermark for land sales in RiNo.”
Metro Denver’s industrial market closed the first quarter with a 5.1% vacancy rate, up slightly from 5% during the first quarter last year. Vacancy has fluctuated since the beginning of 2017 as a result of the massive amount of new construction that has delivered with limited pre-leasing activity but leased quickly once delivered, according to Cushman & Wakefield’s Marketbeat first-quarter industrial report.
“The market from the vacancy standpoint continues to do extremely well,” McManus said. “We have very strong demand. There are several large tenants that are very active.”
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Rental rates for all industrial product types continued to set record highs, closing the first quarter at $8.71/SF — a 4.4% increase from the fourth quarter of last year. Leasing activity was strong, with more than 2.1M SF leased during the first quarter. That is up from the 1.7M SF recorded during the fourth quarter of last year and 2M SF during the first quarter a year ago.
More than 900K SF of new construction has been delivered in 11 of the last 12 quarters, including 918K SF during the first quarter of this year.
McManus said the region’s surging population has driven the growth in its industrial market.
“Denver is continuing its push into being a regional distribution market rather than just a local distribution market,” he said. “It’s serving a larger geographic area.”
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