Q4 2022 Industrial Space Report: Denver, CO
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Denver is nationally known for its mountain scenery, monumental landmarks, and collection of world-class museums.
The city’s unemployment declined quarter-over-quarter from 3.2% to 2.8%.
The metro population increased by nearly 40,000 in 2022.
Denver industrial real estate saw vacancies rise, rents decline, and absorption decrease in Q4 2022, but the city’s industrial market is still positioned for growth thanks to healthy purchasing activity.
General Area Overview & Demographics
Denver has an estimated population of 711,463. The majority is White Americans, making up 56.5%. The city also has a Hispanic and Latino population of 31.7%; African Americans account for 7.3%, and Asians 4.4%.
Denver Median Household Income & Population
The median household income in Denver is $65,000. This is slightly higher than the national median household income of $57,652 and Colorado’s state median household income of $60,000.
According to a recent census, 18% of Denver is under 18, 22% is between the ages of 18 and 24, 29.5% is between 25 and 44, 20.5% is between 45 and 64, and 10.4% is 65 and older.
The city is home to four universities: University of Colorado Denver, Metropolitan State University of Denver, Regis University, and the University of Denver.
One of the most iconic landmarks in Denver is the 16th Street Mall, which stretches from Union Station to Civic Center Park. There are also world-renowned venues like Red Rocks Amphitheatre.
Denver enjoys a mild climate due to its high altitude. The average daily temperature in the summer is 75°F, while the winter typically sees an average of 33°F. Denver averages 300 days of sunshine yearly, with about 17 inches of precipitation annually.
Summary of Denver Industrial Real Estate Performance in Q4 2022
Direct vacancy increased from 5.5% to 6% year-over-year. Quarterly, it held steady as it was 6% in Q3 2022 as well.
I-76/Brighton recorded the highest vacancy in Q4, with a rate of 22.1%. Southeast was the only other submarket that had a rate over 10%.
Southwest and South Central posted the lowest vacancy rates at 2%.
1.5 million square feet of industrial space were absorbed in Denver in the final quarter of 2022. This declined from Q3’s 1.8 million and Q4 2021’s 5.2 million absorptions.
With 570,000 square feet, Northeast/Airport accounted for over 30% of absorption. Aurora and Midtown both went negative.
What are industrial rents like in Denver?
Average rents for Denver industrial real estate were $11.13 per square foot in Q4 2022, a modest decline from $11.14 in Q3.
East Boulder posted the highest average rent at $18.68 per square foot.
Rino, Northeast/Airport, and I-76 Brighton were the only submarkets with rents below $10 per square foot, recording $6.93, $7.90, and $4.27, respectively.
Purchase & Leasing Activity
Sales volume for Denver industrial real estate reached over $2.3 billion by the end of 2022, second only to 2021’s historic $2.8 billion.
Activity slowed in the last two quarters of 2022 after the first two quarters recorded the strongest sales performance in Denver’s history.
Average price was $196 per square foot, increasing 10.3% year-over-year.
There were 17.4 million square feet of leasing activity for industrial space throughout 2022.
Notable Industrial Real Estate Deals in Denver in Q4 2022
There were several notable deals that took place for Denver industrial real estate in Q4 2022:
- Lightstone Group purchased 512,000 square feet for $72 million.
- Nuveen purchased 220,600 square feet for $47.7 million.
- Living Spaces leased 141,200 square feet.
- Eagle Rock leased 121,100 square feet.
These are select examples among other activity.
New Industrial Real Estate Development Activity in Denver in Q4 2022
Construction deliveries reached 2.28 million in Q4, a decline from Q3’s 3.4 million. Northwest, Southeast, I-76/Brighton, and Northeast/Airport received 2022’s new builds.
Over 10.6 million square feet of product were in the pipeline at the close of 2022.
Northeast/Airport’s submarket will receive more than half of what was in the pipeline, accounting for 5.5 million square feet of product.
North, North Central, Northwest, Southeast, and I-76/Brighton will take on the rest.
Market Forecast for Denver’s Industrial Real Estate Market
After experiencing a surge of demand in 2020 and 2021, Denver industrial real estate has experienced slower growth as it returns to pre-covid levels.
Leasing volume will remain strong, and tenants will see favorable terms due to rates.
The construction pipeline will reduce its volume but remain healthy, allowing supply and demand to balance.
Takeaways for Industrial Real Estate Investors
With over 70% of product under development pre-leased, Denver will remain a desirable market due to rent growth, solid tenant demand, and other indicators of low investment risk.
Do your research, stay diligent, and happy investing.
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