CREJ

February 2015 — Retail Properties Quarterly —

Page 17

Neighborhood Profile

t should come as no surprise to

retail brokers or developers that

investors and prospective ten-

ants have the Highland/Lower

Highland neighborhood on their

short list to buy or lease in.

This trend has not always been the

case. Over 150 years ago, the mostly

Protestant, church-scattered neigh-

borhood was initially developed, but

it wasn’t until the

turn of 19th cen-

tury when many

immigrants, mostly

Italian, German and

Scottish, discovered

the neighborhood

as a nearby escape

from downtown

Denver, and the

population truly

grew.

The transforma-

tion of this area to

the predominantly

Hispanic and Italian neighborhood, as

it is known to most longtime Denver

residents, began in the 1920s and the

population demographic remained

largely consistent for 60-plus years.

In the 1990s, new bridges con-

structed over Interstate 25 improved

connectivity between Denver and the

Highland neighborhood, Elitch Gar-

dens relocated to Platte Valley and the

historic site on 38th Avenue and Ten-

nyson Street was redeveloped. These

changes provided the first signs of

eminent rebirth for a now appealing

neighborhood.

After the 1990s rebirth, most com-

mercial and residential develop-

ers were focused on the Highland’s

Square area, roughly 32nd Avenue and

Lowell Boulevard. Development in this

area spread like wildfire as prices for

all property types skyrocketed and

inventory declined. As a result, many

developers, tenants and buyers were

forced to look for nearby alternative

locations, such as LoHi, Sunnyside,

Sloan’s Lake, Berkeley and Jefferson

Park.

Many Denver residents were attract-

ed to the quaintness and character of

those neighborhoods, yet 38th Avenue

was seen as a major traffic corridor of

less desirable uses and unattractive

buildings, such as automotive repair,

pawn shops and brown-bag liquor

stores. However, over the past few

years, many industry professionals

and commercial real estate users set

their sights on the still somewhat

seedy 38th Avenue corridor.

While currently in its infancy of

redevelopment and gentrification,

this is quickly changing and numer-

ous opportunities are opening up for

property owners, developers and busi-

ness owners.

Similar to the Highland’s Square

neighborhood, changes to 38th

Avenue started with a concentration

between Federal and Sheridan bou-

levards. The former Elitch Gardens

site, now a 24 Hour Fitness-anchored,

mixed-use development, brought in

some of the first national retail center-

type tenants and was an indication

of what was to come. However, just

like the surrounding neighborhoods,

activity spread past the east and west

boundaries, and as a result, we are

seeing the rebirth of the 38th Avenue

corridor, as it stretches from I-25 to

Wadsworth Boulevard inWheat Ridge.

Because of the history of this corridor,

it is no surprise that there are proper-

ties of all ages, types and sizes, and, as

a result, urban renewal is taking on a

similarly eclectic appearance.

The perpetual evolution of this

corridor carries an underlying trend

that cannot be ignored – the demo-

graphic shift is reflected in businesses

catering to the needs of these new

residents. Many restaurateurs are

now considering the 38th Avenue cor-

ridor for new or additional locations

and concepts, and while the types

of restaurants vary greatly in price

point and category, they appear to be

competing for and appealing to the

“trendy spot”– craving residents. Two

examples are Denver Deep Dish, open-

ing its second location at 38th Avenue

and Kalamath Street, and Sunnyside

Burger Bar, opening at 38th Avenue

and Lipan Street. Both restauranteurs

elected to remodel smaller properties

that required significant construction

to get them to the attractive caliber

they are at today.

This trend can be seen in other

nearby properties as well, like 2705

and 2709W. 38th Ave., which are plan-

ning an overall update, according

to Dennis McLin, principal of McLin

Commercial. As a result, the ten-

ants are considering a similar update

to their existing business practices

and products in order to entice local

residents and appeal to the changing

demographics.

Despite the popular upgrading

and repurposing trend, not all new

opportunities for business owners

are following suit. A simple search of

commercial listing websites shows

there are many ground-up develop-

ments completed, under construc-

tion or proposed at this time. These

development properties vary in size

from smaller parcels, like the small-

format retail center redevelopment

of a single-family home site at 6690

W. 38th Ave. inWheat Ridge to multi-

level apartment and retail mixed-use

developments, such as Highland Place

at 3380W. 38th Ave. The plethora of

older buildings often in deteriorating

condition, along with the increasing

demand for retail and apartments in

the area, make it unlikely this scrape-

and-rebuild approach will slow down

any time soon.

Even though opportunities exist for

tenants to find affordable rents in the

area, they will be in less desirable, and

often less functional, older properties.

With the high rates needed for new

construction proving to be a hurdle for

many tenants, some newer develop-

ments are not leasing as quickly or for

the rates initially expected; however,

rates on the corridor are still rising.

One would be hard pressed to find

rates lower than the mid-$20s per sf

triple net for the newer or upgraded

properties, and these quoted rates

can go up to the $40s per sf triple

net in some cases. While these rates

and the desirability lag compare

to the LoHi and Highland’s Square

areas for comparable spaces, they

are a far cry from the basement pric-

es expected a decade ago on 38th

Avenue.

The Highland and surrounding

neighborhoods have experienced

exponential change over the last

150 years. For residents, developers,

brokers and business owners alike,

these changes are predominantly

welcomed and are occurring at a

pace not seen since the early days of

the neighborhood.

Exploring the possibilities along 38th Avenue

Gannon Roth

Senior broker,

Unique Properties,

Denver

The former Elitch Gardens site is now a mixed-used development with a Sprouts, FirstBank and 24 Hour Fitness.

Sunnyside Burger Bar, at 38th Avenue and Lipan Street, chose to remodel an old, small

property for their restaurant.

A small-format center development is taking place on a single-family home site along

38th Avenue.