CREJ

June 2021 — Office & Industrial Quarterly — Page 23 www.crej.com INSIDE Market update PAGE 24 Construction trends PAGE 34 Industrial outlook PAGE 30 The market sees record-high delivery volume, positive net absorption and a strong pipeline From Colorado Springs to Fort Collins, industrial construction is thriving E-commerce and in-migration continue to fuel demand for industrial space in Denver June 2021 D enver industrial activity con- tinues to perform in dramat- ic fashion with no pause in sight. Investors, developers, builders, lenders, occupiers and owners remain bullish on the sector, resulting in one of the most remarkable industrial markets on record for construction, deliveries, absorption and sales in Denver. Asking rents closed the quarter at $8.02 per square foot, up 3% since December and 5% year over year for the first quarter. Even an overall vacancy rate that rests at its highest level since 2012 has not curbed the appetite for new product. The torrid pace of expansion for Denver’s indus- trial market over the last expansion cycle is inextrica- bly linked to what were the metro’s concurrent years of net migration aver- aging 36,000 new residents annu- ally. While that growth has slowed since 2017, the rise of e-commerce stepped in to lift the development pipeline. It’s no secret that construction is booming here. There currently is more than 9.4 million sf of indus- trial product under construction along with the growing trend of national developers moving deliberately ahead with large projects metrowide. With Denver being on the radar for devel- opers and institu- tional capital, we will continue to see a strong indus- trial push. The positive outlook extends beyond the Denver metro area. Industrial expansion is occur- ring from Fort Collins to Colorado Springs; from Loveland and Brighton; south through Castle Rock and Mon- ument and extending down Inter- state 25 toward Colorado Springs. Secondary markets increasingly are being targeted by builders eager to discover the next “it” submarkets that allow for more affordable and feasible development opportunities. New construction will continue to pop up in areas stretching outside the “traditional metro.” As the cost of construction contin- Please see Page 37 Larry Thiel Managing director, capital markets, JLL Recent sales activity highlights Colorado’s robustness Carmon Hicks Managing director, capital markets, JLL As the cost of construction continues to rise, investors are purchasing assets in shell condition, taking on the lease-up risk just to capture quality new build product. For example, KKR recently purchased Park 12 Hundred for roughly $173 per sf with only 36% of the space currently leased.