The industrial sector in Denver was consistently strong throughout 2018, as we see demonstrated in our Q4 2018 Industrial Market Report.The market, in general, remains healthy and 2019 will be no different from its predecessor in many areas. Continue reading for a synopsis on some of the key factors attributed to its success and download our report for a deeper analysis of the current state and future predictions of the market.
*The fourth quarter of 2018 for Denver’s industrial market had a 4.6% vacancy rate with net absorption of 2.6 million square feet. The Denver market is still very strong with companies expanding, adding more employees, and continuing to thrive.
*Rental rates (both warehouse and flex) in the metro area appear to have stabilized and will see smaller rental growth in 2019. With the amount of new construction along with existing facilities, we expect rents to stabilize over the next 12 months.
*The owner/user sale market is very tight with inventory at an all-time low. The price per square foot, alongside the cost of replicating a new facility, have increased dramatically over the past 24 months due to low inventory and rising costs in the construction industry. Even though low interest rates are still in place, many potential buyers cannot find a facility that meets their needs due to low inventory, or are finding themselves in a bidding war to get the building they desire. There is still significant demand for owner/user’s looking to buy their own facility metro wide.
*The investment market is still on fire with multiple offers on all investment deals. Cap rates still hover in the 6%-7% range (depending on credit of the tenant and term left) and we have seen a few larger transactions trade in the 4.5%-5% range. These lower cap rates were a reflection of investors getting into the Denver market by acquiring newer warehouse products with long term leases in place. We believe with interest rates still staying stable, this trend will continue across the metro area. There are a multitude of institutional investors trying to get into the Denver market, as it is considered one of the top investment cities to place capital. Denver consistently ranks in the top 10 cities nationwide for stable investments. In 2018, Denver’s investment activity set a new record of $1.3 billion.
*5.1 million square feet of new construction was delivered in 2018 and we will expect to see more deliveries in 2019 as the Denver market thrives. There is already 4.9 million square feet currently under construction for 2019 throughout Denver and we expect another 2.5 million to be delivered in 2019, as well.
If you're interested in learning more about the Denver Industrial Market, download our Q4 2018 report below.
