As much as 2.5 million sf of new industrial spec buildings could hit the market. Concerns about water and growth limitations could impact retail sales. These are some of the projections for 2001 by Denver-based Fuller and Co., one of the largest locally owned commercial real estate firms in the region.
Fuller predicts industrial vacancies will continue to hover between 5% and 7%, while 2 million sf to 2.5 million sf of spec space will be added to the market. Rents and sales prices will increase by a modest 3% to 5% and at least two new business parks will come on line.
Overall, the Denver investment market will experience a leveling of prices with cap rates rising as investors expect less lease rate appreciation. CBD offices and apartments will face the largest appreciation and competition. Limited service hotels and retail power centers will be the least attractive to investors. Land that is already entitled - zoned and ready to develop - will be hot property for users. Adams County in the northeast portion of the metro area should lead the way with land sales, but a lack of water may stifle future development.
If the state legislature doesn't pass growth legislation - one of Gov. Bill Owens' top priorities - voters likely will propose and pass their own initiative in November. This could curtail both user and developer land activity.
Among Fuller's other calls are a 6.75% and 8.5% overall office vacancy rate; 1.2 million sf and 1.6 million sf of spec office development will begin; and stable rents in all but the northwest corridor, where hikes as much as 4% to 8% could come down the pike.
Downtown Denver's office market ended last year with a vacancy rate of 5.5%, according to the report. It says only two buildings currently offer more than 100,000 sf of contiguous office space, which seems to justify construction of new speculative office projects.
But there is one wild card in the pack - Qwest Communications. "While it is anticipated that Qwest Communications will lay off several thousand employees, it is a bit uncertain as to how much space may become available," according to the report. "Our projection is that as much as 500,000 sf of Qwest office space could become available in 2001."
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