Denver commercial real estate rebounding

Dennis Huspeni Reporter – Denver Business Journal

The commercial real estate market across the Denver area continued to improve in the third quarter, according to a preview of Newmark Knight Frank Frederick Ross’ (NKFFR) Market Trends report.

Two of the three submarkets showed a slight decrease in year-over-year vacancy rates and all three showing year-to-date positive absorption.

The vacancy rate for the office sector dipped to 18.9 percent in the third quarter, down from 19.2 percent in the second quarter and 19.7 percent from the third quarter of 2010.

For the retail submarket, vacancy rate fell slightly from 9.5 percent last quarter to 9.3 percent in the third quarter, but was up slightly, by 0.2 percent, year-over-year.

The industrial sector’s vacancy rate slid from 8.24 percent in the third quarter of 2010 to 7.9 percent this year.

“Even in the face of all the economic uncertainty nationally as well as globally, we are seeing no signs that the momentum we have built in Denver over the past six quarters is slowing, let alone reversing,” Kevin McCabe, executive vice president, said in the report.

Here are NKFFR’s summaries of each submarket:

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Office

The “flight-to-quality” trend continued in the third quarter. Renters absorbed 747,517 square feet of Class A office space through September, but vacating 85,214 square feet of Class C space in that same period.

For just the third quarter, 300,562 square feet of office space was absorbed, bringing the year-to-date total to 735,124 square feet.

Median rent in the central business district (CBD) climbed slightly, to $24.25 in the third quarter from $24 in the second.

“The oil and gas industry is booming in the CBD,” Jamie Gard, executive managing director, said in the report. “With current tenants such as Newfield Exploration and MarkWest Energy Partners taking full-floor expansions. Also, Noble Energy, Whiting Petroleum and EOG Resources have leased additional space or are in the market to expand their Denver office presence.”

Retail

Retailers absorbed 508,938 square feet of space in the third quarter, bringing the year-to-date total up to 411,300 square feet.

NKFFR’s Frank Griffin, managing director, said in the report: “Infill development will drive growth over the short term.”

In general, the retail market didn’t overbuild ahead of the residential growth, according to Griffin, which should put that market in a good position to recover.

Highlights from the quarter included the opening of the 415,000-square-foot Ikea furniture store in Centennial and Wal-Mart Stores Inc. buying four former Albertson’s and Smart Foods stores with plans to introduce the Neighborhood Market food stores concept next year.

Industrial

Moves by three companies to absorb 487,055 square feet of industrial space helped boost the quarter’s positive absorption to 625,746 square feet. Lincoln College completed the renovation of the former Samsonite building, off Interstate 70, and moved into the 212,000-square-foot space. Germany-based SMA Solar moved some operations into a 148,902-square-foot space and ConAgra Foods Inc. took over 126,153 square feet.

“It’s good to see a few big users take new space but overall, the market has been sluggish,”Chris Nording, senior managing director, said in the report.

The third-quarter rebound should help the year-end numbers, which were hurt by L’Oreal Worldwide vacating the 280,000-square-foot distribution center for its subsidiary Cosmair Beauty Products Inc. in the Majestic Commercenter in Aurora and Ultimate Electronics closing a 345,000-square-foot distribution center in Thorton.

The year-to-date absorption stands at 315,847 square feet.

Read the entire article: http://www.bizjournals.com/denver/news/2011/09/29/denver-commercial-real-estate-rebounding.html?page=all

Dennis Huspeni covers real estate and retail for the Denver Business Journal and writes for the “Real Deals” blog. Email: dhuspeni@bizjournals.com. Phone: 303-803-9232.\

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About dherries
Dave and Sally Herries and The RealtyColorado Team - Real Estate Broker serving the metro-Denver area. Offering properties in urban, sub-urban and rural areas. Our mission statement is "Enriching lives through real estate."

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