CREJ

June 2021 — Office & Industrial Quarterly — Page 37 www.crej.com INDUSTRIAL — MARKET TRENDS sizable projects. n New construction. Denver cur- rently has 9.5 million sf under con- struction with over half of the space dedicated to build-to-suit projects. These build-to-suits offer a healthy diversity of industry type ranging from e-commerce, food and bever- age, auto and building supply/home improvement. n Leasing activity. Total leasing vol- ume in the first quarter reached 2.8 million sf, up 6.3% year over year. New leases accounted for over two- thirds of the activity. The warehous- ing/storage industry claimed the largest portion of leasing activity over the past four quarters, repre- senting 21.1% of total activity. The transportation/distribution industry accounted for the second-largest share of overall activity at 20.3%. The life sciences industry has continued to see its share of activity grow over the past year. n Investment sales. Fifty-five prop- erties traded hands in the first quar- ter, recording an overall (investment and owner-user) sales volume of $437.3 million – 6.5% higher than the total this time last year. The overall average price per square foot showed slight growth year over year at $138.68. Quarterly owner-user sales numbers recorded the highest volume since second-quarter 2020, posting $87.5 million with an aver- age price per square foot of $141.21. n Looking ahead. After a tremen- dously positive 2020, the Denver industrial market started the new year off strong with record high delivery volume, the 44th straight quarter of positive net absorption and a construction pipeline that again reached new heights. With continued occupier demand and considerably strong leasing activity, achieved rates are expected to see sustained growth throughout 2021. As indicated by a diverse economy, strong fundamentals and healthy investor demand, the Denver region is positioned to remain a highly sought-after destination. Carrying strong momentum into 2021, elevat- ed leasing activity, robust sales vol- ume and a record-breaking develop- ment pipeline all indicate a vibrant and dynamic market. s sam.dragan@cbre.com Dragan Continued from Page 24 ues to rise, we see investors purchas- ing assets in shell condition, taking on the lease-up risk just to capture quality new build product. For exam- ple, KKR recently purchased Park 12 Hundred for roughly $173 per sf with only 36% of the space currently leased. KKR struck gold again by pur- chasing Edge 470 from Etkin Johnson for roughly $180 per sf for two build- ings that were 50% leased. The trend continues with the sale of Potomac Park to Westcore Proper- ties from Opus Development in Cen- tennial for approximately $146 per sf. Westcore also purchased Dove Valley II as part of a forward commitment with Brennan Investment Group at roughly $133 per sf. Other similar trades are rumored to be occurring in the Denver market as capital is rush- ing in to gain exposure to Denver’s growing population. When we look at the numbers, more than 4 million sf of leases were signed in the first quarter of 2021 – a threshold passed in only two other quarters on record and led by a 1 million-sf lease for a build-to-suit in the Interstate 70/East submarket. At 2 million sf, deliveries far exceeded the longer-term trend. Investor appetite for industrial assets has never been hotter and that demand is causing fundamental shifts in pricing worth noting. Inves- tors are no longer solely focused on high-bay, bulk distribution assets and are willing to venture into more flex assets with higher office build- outs. In the first quarter, Etkin John- son sold its CTC portfolio to Star- wood’s real estate investment trust for $393 million, which equated to $236 per sf. This 16-property portfo- lio has varying levels of office finish and also demonstrates how inves- tors are willing to acquire industrial buildings for prices above replace- ment cost. Denver also is experiencing a sig- nificant compression in cap rates having a profound impact on devel- oper returns. The Tower Business Center and Enterprise Business Park transactions were each just north of a 4% cap rate. Additionally, there is a 4% forward commitment sale on a long-term net-leased industrial asset. This trend, along with land repositions, will continue as develop- able land sites become scarce. Lastly, Denver is joining the approximately 25 markets nationally that are expe- riencing sub-4% cap rates with a transaction set to close in the second quarter. And there will be more. s larry.thiel@am.jll.com carmon.hicks@am.jll.com Continued from Page 23 the foundation. Testing and dem- onstration have shown that impact from airborne debris from high wind loads, seismic events and tornadoes are effectively resisted by an insulated wall panel system. Precast concrete is designed for structural stability, is water and weather resistant, and provides resiliency features to acts of nature and fire with high fire ratings for floor, roof and wall members. All precast members can be designed and constructed to meet a four-hour fire rating. In addition, progressive collapse requirements can be accommodated in the early stages of connection design and product placement. As Colorado continues to experience data center demand and construction labor shortages, prefabricated products will continue to be a major factor in the build process by providing structural systems that meet the high-perfor- mance demands required. This durable material inherently provides versatil- ity, efficiency and resiliency needed to meet stringent requirements and long- term demands, and to ensure a data center’s strategic value now and in the future. s Schiebout Continued from Page 36