CBRE has released its quarter 3 reports which provide information on Denver’s commercial, industrial, and retail real estate markets.
In downtown Denver the commercial vacancy rate is 13.3 percent and the average lease rate is $34.44 per square foot per year. Currently, 1,366,261 square feet of commercial space is under construction in downtown Denver, which leads all Denver metro area submarkets.
The largest office project currently under construction is 1144 Fifteenth Street which is being developed by Hines. This 40-story skyscraper will add 662,900 square feet of office space to the downtown Denver making it the largest commercial project to rise downtown since the mid 1980s. Construction of 1144 Fifteenth Street is slated to be completed in approximately 27 months.
Also under construction is the 22-story 1401 Lawrence project. This 311,015 square foot office building is being developed by Canadian developer First Gulf, the commercial division of Great Gulf Corporation. National law firm Polsinelli has signed a 15-year lease of 90,000 square feet to become the signature tenant of 1401 Lawrence.
Denver’s office market observed a 2.2% quarter-over-quarter increase in its direct asking lease rate. Brand new properties, in high-demand areas close to transit and event venues hit the market in Q3.
Impacting leasing prices and vacancy rates in downtown Denver was the delivery of the 242,807 square-foot Triangle Building on 16th Street and Wewatta. Earlier this year it was announced that cable company Liberty Global has signed to lease 70,000 square feet and WeWork, a firm that provides shared workspace and services for entrepreneurs has signed to lease 72,000 square feet at Triangle Building.
The 299,545 square-foot 1601 Wewatta project was also delivered in Q3. Hogan Lovells LLP signed a 15-year lease to occupy the top two and a half floors accounting for 70,000 square feet of office space at 1601 Wewatta and The Colorado Athletic club will utilize the entire second floor comprising of 38,000 square feet of space.
In suburban markets, a total of 1.1 million square feet of office space is currently under construction. The metro area has seen a positive year-to-date net absorption of 506,285 square feet in commercial real estate.
“Overall the Q3 commercial real estate market in Denver shows signs of solid, consistent strength. New construction in the office sector is driving record-level average asking lease rates for Denver,” explained Jessica Ostermick, Director, Research & Analysis at CBRE.
In the industrial sector, six buildings were delivered in Q3 in the Denver metro area which added 1.2 million square feet of space. Currently 2.3 million square feet of industrial space is under construction and 36.3 percent of under construction space is pre-leased.
The Airport/Montbello submarket saw the greatest amount of net absorption of industrial space at 219,964 square feet. It is also the metro area submarket with the greatest amount of industrial space under construction at 937,220 square feet.
The Q3 Denver metro industrial space vacancy rate is 4.6 percent.
“In terms of industrial, it continues to be a landlord’s market with demand still outpacing supply, and lease rates on the rise,” said Ostermick.
The Denver metro retail market hit a vacancy rate of 5.9 precent in Q3, which makes it the lowest vacancy rate since the recession. Central Denver currently has 130,360 square feet of retail space under construction with a Q3 vacancy rate at 7.9 percent.
Downtown Denver witnessed it’s first full-sized grocery store open with the delivery of the King Soopers at 19th and Chestnut Place.
The southeast submarket stands out with a 2.2 percent vacancy rate and 130,647 square feet of retail space under construction.
Retail construction activity increased 11.6% quarter-over-quarter in the Denver metro area.
“The retail sector is experiencing low vacancy combined with high levels of investment activity. While growth may slow, we expect to see strong fundamentals continue across the board in the coming quarters,” said Ostermick.