Overview. New business parks dedicated largely to warehouse/distribution space favor areas in the north, northeast, and east with easy access to I-70, E-470, and the airport. Major national developers have acquired large swaths of land near the E-470/I-70 interchange, which has emerged as the epicenter for new warehouse/distribution construction.
High-tech industry is also a major factor in Denver, whose northwest and southeast suburban submarkets are anchored, respectively, by the Interlocken Business Park and the Denver Technological Center (DTC). Renewable energy, so far active mainly in the metro north and northeast, is expected to be a significant growth sector in the future.
- The construction of new buildings here has proceeded at a prudent pace, remaining well balanced with demand. Nevertheless, the recession produced elevated vacancies. Developers active in the region include Prologis, Majestic Realty Company, Lauth, Trammell Crow, and Panattoni.
- Warehouse/distribution. Reis reports 28.6-million square feet of warehouse/distribution space in its East I-70 market, which includes the I-70/E-470 interchange.
- Net absorption in the first half of 2012 all told was positive 169,000 square feet. The total for the second quarter alone was 86,000.
- No space of this type completed construction in this submarket in 2011 or year-to-date in 2012.
- United Natural Foods, Inc., began construction in June on a $45 million, 553,000-square-foot Class A distribution center at E. 40th Avenue and Tower Road, Aurora, on Gateway Park IV East, within The Pauls Corporation’s Gateway Park mixed-use development. Completion is expected in summer 2013, according to the Denver Business Journal.
- More. The 1,200-acre Gateway Park currently includes 2.9 million square feet of industrial space, 600,000 square feet of office space, nearly 600,000 square feet of retail space, 2,200 hotel rooms, and 918 residential units, according to The Denver Post.
- Jones Lang LaSalle reports a 319,158-square-foot warehouse under construction at Prologis Park 70 with delivery scheduled for this November.
- At the same business park, Cushman & Wakefield reports a 220,000-square-foot project under construction for Interline Brands. A third-quarter completion date is cited. Interline has leased the property.
- Reis reports 1.4-million square feet of warehouse/distribution space in three buildings proposed for Majestic Realty’s Majestic Commercenter.
- Also at Majestic Commercenter, a November start is scheduled for a 30,000-square-foot Flex/R&D building.
- At Lauth’s Aurora Commerce Center, 1.9 million square feet of Flex/R&D space is proposed in seven buildings, Reis reports.
- Ramping up. Developers with land along the western edge of Denver International Airport (DIA), many of which were “dormant” during the recession, are “ramping up again because of Denver’s improving economy, stronger real estate markets and the construction underway on the Regional Transportation District’s East Line commuter train, set to open in 2016,” the Denver Business Journal reported in May.
- More. In addition, DIA’s “Airport City Denver” plan for the commercial development of 53 square miles of airport land is moving forward, this source reports. “DIA … and private developers insist they’re not competing against each other, even though their projects sometimes are close to one another and they’re often going for the same capital sources and users.”
- Second-quarter leases include Goodwill Industries of Denver’s 218,750-square-foot Class C warehouse space deal at 4355 Kearney Street, Denver, reports Jones Lang LaSalle.
- Mountain States Logistics renewed for 70,080 square feet of Class C warehouse space at 14700 E. 38th Avenue, Aurora.
- Specialty Sports Venture leased 63,345 square feet of Class B warehouse space at 16303 E. 32nd Avenue, Aurora.
- Reis reports the $6 million ($96 psf) May sale of the 62,198-square-foot warehouse at 10325 E. 47th Avenue. Innovate Colorado LLC and GA Wright Asset Management LLC was buyer and seller.
- Second-quarter vacancy in the East I-70 warehouse/distribution submarket was 16.5%, down 30 basis points for the quarter, down 80 year-over-year.
- Given the generally large size of the warehouse/distribution buildings in this submarket, rents tend to run low. At $3.92 psf and $3.69 psf, second-quarter asking and effective average lease rates were up 0.3% and 0.5% for the period and were up 0.8% and 1.1% since year-end, following moderate losses in 2011.
- Outlook. The positive net absorption trend should continue in the warehouse/distribution sector. Vacancy at 16.4% is projected for year-end. Gains of 1.5% and 1.9% are forecast for the asking and effective average rents for the year. Activity should increase and progress should continue in 2013.
- With 29-million square feet of warehouse/distribution space, Reis’ large Northeast submarket includes some areas along the E-470 corridor (north of the East I-70 submarket) as well as areas between I-225 and Colorado Boulevard.
- Total first half 2012 net absorption of warehouse/distribution space, alongside no new supply deliveries, was positive 199,000 square feet. The total for second quarter alone was 157,000 square feet.
- No warehouse/distribution or Flex/R&D projects have delivered in this submarket in the recent past. None was under construction per the date of this report.
- In Commerce City, a 90,000-square-foot manufacturing facility for UE Compression LLC completed construction in August 2012 at Willow Court and E. 96th Avenue.
- Three buildings with a combined total of 441,600 square feet of warehouse/distribution space are proposed for Enterprise Park at Stapleton at E. 45th Avenue and Geneva Street, Denver, Reis reports.
- Seven buildings with a combined total of 1.6-million square feet of Flex/R&D space are reported in planning stages at Stapleton Business Center at 56th and Havana.
- Jones Lang LaSalle reports a second-quarter lease by Express Messenger Systems for 151,929 square feet of Class B manufacturing space at 5000 Lima Street, Denver.
- Halliburton Energy Services signed an 89,389-square-foot warehouse/ distribution space lease during the quarter at 221 N. Kuner Road, Brighton, reports Cushman & Wakefield.
- Second-quarter vacancy in the Northeast warehouse/distribution submarket was 9.3%, down 60 basis points for the quarter, down 70 year-over-year.
- At $4.19 psf and $3.96 psf, second-quarter asking and effective average lease rates were up 0.5% and 0.8% for the quarter and were up 1.2% and 1.8% since year-end, following small losses overall in 2011.
- Outlook. Modest positive net absorption of warehouse/distribution space is expected for the remainder of the year. Vacancy should show no additional change by year-end while moderate rent growth results in gains for the year of 2.4% and 3.1%, asking and effective.
- Both the suburban South East submarket and the suburban Northwest (see below) have substantial Flex/R&D and office space components, making their profiles significantly different from those of the warehouse/distribution-dominated submarkets of the north and east.
- High-tech business parks here include the huge Denver Technological Center (DTC), Meridian International Business Center, Inverness Business Park, and Greenwood Plaza Business Park.
- Polystrand Inc., in a relocation-expansion move from western Colorado, completed construction in July on a 100,000-square-foot manufacturing-headquarters facility in Englewood. Construction began in June 2011.
- More. Polystrand’s is the first building in Central Development’s 100-acre HighField Business Park. Company executives “wanted a location with access to interstate highways and airways,” according to the Denver Business Journal. HighField is located off E-470 southeast of Centennial Airport.
- Total first half 2012 net absorption in Reis’ 6.8-million-square-foot South East Flex/R&D sector was positive 98,000 square feet, 92,000 of which occurred during the latest quarter.
- Second-quarter vacancy was 17.5%, down 140 basis points for the quarter, down 160 year-over-year.
- At $8.52 psf and $7.91 psf, asking and effective average lease rates were up 0.2% and 0.8% from the quarter before, following losses of nearly 10.0% in 2011.
- Outlook. Vacancy could rise somewhat by the end of the year as absorption slows during the second half. Growth at 0.6% is anticipated for both average rents for the year.
- No projects were under construction in the Northwest submarket per the date of this report.
- Rocky Mountain Bottle renewed its lease for 227,132 square feet during the quarter at Coors Technology Center in Golden, reports Cassidy Turley.
- First half 2012 net absorption in Reis’ 4.1-million-square-foot Northwest Flex/R&D sector was 25,000 square feet. The total for second quarter alone was 26,000.
- Second-quarter vacancy was 17.6%, down 60 basis points from the quarter before, up 170 year-over-year.
- At $7.91 psf and $7.30 psf, second-quarter asking and effective average lease rates were down 0.1% and unchanged from the quarter before, following moderate first-quarter losses and losses greater than 5.0% in 2011.
- Outlook. An essentially flat performance is expected for supply, demand, and occupancy over the remainder of the year. Moderate rent growth is forecast.