- Denver’s industrial availability rate hit a decade-high 9.5% in Q2, thanks to 2 MSF of new construction.
- Of the 4.7 MSF of new industrial space that will hit the markets in 2H24, 42.9% is already preleased.
- New construction starts fell by 50% over the last 18 months, and strong leasing is expected to further lower availability.
As reported by Bisnow, Metro Denver’s industrial market saw its availability rate hit 9.5% in Q2, the highest level in more than a decade.
Lots of New Deliveries
According to a report from CBRE, the jump in Denver’s industrial availability is largely attributed to the delivery of 2 MSF of new construction that has already hit the market this year.
Denver was flooded with new industrial space, most of it originating during the e-commerce boom of 2022. But of the 4.7 MSF of new construction expected in 2H24, only 42.9% has been released.
The city’s industrial construction pipeline is also dwindling, with square footage under construction falling 20.9% from Q1 to Q2.
Supply And Demand
Total leasing volume for Q2 was 2.5 MSF, 2.6% higher than the previous quarter. Metro Denver recorded 408 KSF of net absorption in Q2, slightly down from 467 KSF in Q1. The direct vacancy rate rose by 30 bps from the previous quarter to 7.9%.
Companies, especially those in the food and beverage sectors, are expanding their operations to serve the growing Front Range population. This growth trend is leading many companies to open new distribution centers across the Front Range.
Future Outlook
With strong leasing activity, including a 1.1 MSF lease on the I-76 corridor and several large build-to-suit projects that will be completed by year-end, Denver’s industrial availability rate is expected to fall further. An additional 3.8 MSF of signed leases will also increase absorption rates later this year.
CBRE SVP Todd Witty also noted that the city’s new industrial construction starts have fallen by 50% over the last 18 months.
