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DENVER-The overall Denver industrial market's vacancy rate in the third quarter vacancy rate dipped to 8.2%, the lowest level since 2000, when it stood at 5.11%, according to a recent report by the Frederick Ross Co. The market is headed toward 8%, according the locally owned, full-service commercial brokerage firm.
New construction led to 435,000 sf of positive absorption in the third quarter. More than 403,000 sf of the space was completed during quarter, with 250,000 sf of it occupied. Another 1.5 million sf of inventory remains in the pipeline.
Ross notes that R&D/Flex buildings have begun to turn the corner, with 241,000 sf of positive absorption in the quarter. The vacancy rate for R&D space dropped more than 100 basis points to 18.69% from 19.73% at mid-year. This market the seventh consecutive quarter in which absorption and vacancy rates have improved. "While all sectors of the Denver market look good, the Southeast submarket was particularly strong with about 197,000 sf of positive absorption," Ross notes.
The industrial/warehouse sectors also showed positive signs, with more than 193,000 sf of absorption in the third quarter. The vacancy rate remained low, dipping to 6.6% from 6.74% at the end of June. The Northwest submarket accounted for almost all of the positive absorption, more than offsetting negative absorption in other sectors. The Northwest sector has more than 280,000 sf of increased occupancy in the third quarter. The majority of the positive absorption resulted from two leases of more than 100,000 sf each. Meanwhile, investment activity was steady as six properties of $3 million or greater traded hands in the third quarter.
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