The Denver commercial real estate market was one of the top ones to watch last year, and that will likely continue throughout 2015.
Denver ranked fourth overall in Urban Land Institute’s 2015 Markets to Watch Report, jumping from 11th place last year. The report cites Denver’s appeal to millennials and a growing housing market as fueling its high placement, in addition to strong technology and energy sectors.
Denver also ranked fourth for retail nationwide, a sentiment echoed in a recent Newmark Grubb Knight Frank retail report, which details increased absorption and rental rates, as well as lower vacancy.
National retailers who want to expand to Denver have struggled to find the Class A retail space they demand, which could fuel speculative retail development, an occurrence that would have seemed unlikely just a few years ago while the market still felt the weight of the recession.
According to CBRE, 20 new national retailers, including L.L. Bean, Potbelly Sandwich Shop, and Trader Joe’s, expanded to Denver in 2014 – and over 15 are expected to enter the market this year.
Denver’s retail market has recently been punctuated by several significant investment transactions. The biggest one took place at the end of 2014, a $124-million acquisition of Cornerstone Shopping Center, in suburban Aurora, by Blackstone Real Estate Partners and DDR Corp.
Additionally, a noteworthy lease was signed by Whole Foods in Denver’s Union Station area—and the 56,000 SF flagship is sure to be a driver of continued activity in the neighborhood. The store sits in 17W, a mixed-use project from Holland Partner Group that includes 640 residential units. Another mixed-use development in the area is a $98-million Continuum Partners project with retail, a hotel, and office space.
The River North Art District (RiNo) is also booming. Profiled in the New York Times last year for its growing arts and restaurant scene, the area is seeing a spike in development, including a mixed retail-condo-townhome complex projected to cost upwards of $90 million.
All of this activity is contributing to booming rent increases. Vacancy rates in multifamily assets were at 3.9 percent in Q3 of 2014, the lowest numbers seen since 2000, according to the Metro Denver Economic Development Corp.
Average one-bedroom apartment rents were at $1,145 in the third quarter of 2014, leaping from $1,073 in the first quarter, despite new supply entering the market. 9,145 new units were built in 2013. Another 8,700 were constructed last year, and the same amount is expected to go up this year.
Denver’s commercial real estate market is firing on all cylinders right now, and few expect it to slow down any time soon.
Image Source: Larry Johnson, Flickr