The Denver industrial and flex markets have made headlines in the past 24 months, largely due to the growing industry base, new developments hitting a record high in 2016 and an exploding population. Tyler Reed with JLL Industrial Services said these factors place inevitable stress on not only the companies that have called Denver home for many years, but also on those looking to relocate or expand to the region.

With rents having grown 3.9% quarter-over-quarter and vacancy sitting at a low 3.8%, companies are running out of space. Many of these businesses have turned to the Denver peripheries as a way of managing costs, while still being able to meet consumer demand.

The peripheries provide greater options for transportation and distribution efficiency, a significant incentive for companies dealing with higher rents. As more household retail names land in the area, the credit of tenants has improved and is leading to larger deal sizes in the region. This has created a shortage of available space with ease of access to major thoroughfares. JLL has identified three submarkets to keep an eye on during 2017.

North

Lower land prices and the availability of water has made the North I-25 submarket a desirable location for many new industrial and flex developments. New residential construction has driven more potential employees to that area, encouraging businesses to relocate to have a steady, healthy employment base. The intersection of I-25 North and E-470 allows for easy access to the entire Front Range without enduring congestion in the metro’s center. Less time on congested highways means major cost savings. Following rapid population growth, household names such as IKEA, Top Golf and Simon Outlet malls will soon be in the area. As this submarket diversifies, industrial and flex tenants will follow suit to meet other industries' demands for products and services.

West

Moving counterclockwise to the West submarket, the price of development rises, yet still remains favorable for new industrial and flex development due to its location and ease of access. There are several major thoroughfares throughout the submarket: 6th Avenue, I-70, Colfax Avenue and E-470. Rents are above market average at $8.27/SF for industrial space and $11.25/SF for flex product, which can be difficult for some companies to manage. The municipalities in the West submarket are partnership-friendly and will offer incentives for business, easing the strain of the higher cost.

South

The Southeast and Southwest submarkets together comprise more development opportunity than some of the other peripheral markets. The Southeast has the largest office inventory in the region, creating greater need for ancillary industrial and flex products and services to support business. The Southeast also owns the lion’s share of new flex construction with 90k SF under development. E-470 intersects with several major highways, allowing distribution and transportation companies to circumvent the city’s congested center.

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