Denver Industrial Market Insight

May 3, 2023

What do Pepsi Co, Coca-Cola, Dollar General, and Whole Foods have in common? Each company has recently announced plans or broken ground on manufacturing plants and distribution sites surrounding Denver International Airport. Due to its centralized location and access to the largest airport in the country, Denver has become a booming distribution and logistics hub. The expansive industrial market totals 262M square feet and currently has 9.9M square feet under construction.

The team at Rockval collaborated with Eric Fritzke, Owner/Team Leader at the Trinity Team in Denver, CO, to get an insight into the industrial market conditions. Fritzke and his team cover all asset classes and have over 25 years of professional experience in the Denver market.

Market Snapshot

The first quarter of this year now marks the third consecutive quarter with a decline in leasing volume. Overall it is a 21% decrease in leasing activity year-over-year; the first quarter totaled 1.9M square feet in leasing volume. With our data set from Compstak, we can visualize the overall decrease in leasing volume YOY; the peak of leasing volume occurred in 2021.

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According to Fitzke, the average vacancy rate for the market is 6.6%, but with a slowdown in development is expected to decrease throughout the year. The slowdown in development is primarily attributed to the increase in construction costs. According to the North America Quarly Construction Cost Report by RLB, Denver's construction cost index rose 1.28% during the year's first quarter.

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Source: North America Quarly Construction Cost Report by RLB
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North America Quarly Construction Cost Report by RLB

Average net market rents are around $11.76/PSF, and despite the rising vacancy, rents increased 10% YOY. Investment sales volume has also decreased as a result of economic headwinds and a lack of capital. But according to Fritzke, owner-occupier investment demand has remained strong. Denver's lower cost of living and outdoor lifestyle has attracted new residents for years; on average, the MSA gains up to 50,000 new residents per year. The new residents have brought along their businesses, furthering the demand for small bay industrial.

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Median Starting Rent
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Median Securitized Cap Rate
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Re:Cap Key Takeaway

Denver's Industrial boom happened 10 years ago when it was the first state to legalize recreational cannabis. Industrial properties were needed for the growing, distribution, and storage of products. But Interestingly enough, Fritzke has seen an increasing amount of "grow space" come back into the market; the market is retracing from the highs. Nevertheless, the continual population growth and increasing demand from large corporate clients will bode well for this market even through an economic downturn. What are your thoughts on the Denver market?

Denver Industrial Corporate Growth:


Whole Foods:

Dollar General:


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