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Page 24 — Office & Industrial Quarterly — September 2021 www.crej.com INDUSTRIAL — MARKET UPDATE I ndustrial space is the hottest commercial real estate asset class in the U.S. at the moment. Not at all surprising, given the sharp growth of the e-commerce sector since last year – online com- mercial activity now accounts for 17% of core retail sales nationwide. Moreover, the need for data center infrastructure expansion has grown with the percentage of work, educa- tion and other communication being conducted online since the onset of the pandemic. Across the nation’s largest markets, asking rents and sales prices were on a sustained upward trend during the first half of 2021, and Denver is no exception. According to a recent report released by CommercialEdge, Den- ver saw some of the fastest-growing sales prices in the country and one of the highest shares of industrial stock under construction. Of course, Denver’s industrial sector has been on an upward trend since before the pandemic and broke several records in terms of sales and construction since 2020. n Average asking rents for Denver industrial space up 4.2% year over year. Asking rents for industrial space in Denver averaged $7.27 per square foot in June. This marked a 4.2% year-over- year increase, which was on par with the national average. Among the 20 top industrial markets we analyzed, average rates in Denver were the eighth highest halfway through the year, surpassing hubs like Chicago ($5.32 per sf) and Dallas ($4.67 per sf). In terms of tenant absorption, Den- ver recorded a vacancy rate of 8.4%, the fourth high- est among the top markets surveyed for the report. This means that 91.6% of industrial space in Denver was occu- pied through June, as local supply and completed projects absorbed increased demand from new and expanding ten- ants. n Denver industrial sales totaled $771 million through June. By the close of June, the volume of industrial transac- tions made up roughly 52% of sales recorded in 2020. As such, 2021 trans- action activity seems on track to sur- pass last year’s totals. Industrial sales closed during the first six months of this year totaled $23.3 billion across the top 20 industrial markets. During that same time frame, sales closed in Denver amounted to $771 million and accounted for nearly 4% of the nation- wide total. The estimated 2021 sales volume likely will be driven by rising average sales prices rather than the number of assets changing hands – properties sold for an average of $113 per sf in the second quarter, up a staggering 30.6% year over year and 13.3% higher than in the first quarter. This trend began in the second half of the past decade, but market shifts generated by the pandemic boosted price growth. Among the markets analyzed, Den- ver saw the third-fastest rising prices for industrial space, with rates increas- ing by a whopping 39% year over year – from $119 per sf in June 2020 to an average of $164 per sf this June. The surge placed Denver sixth among the top markets by average sales price, ahead of industrial clusters such as Phoenix ($138 per sf) and Boston ($143 per sf). n 11 million sf of new industrial space under construction in Denver . Halfway through the year, 447 million sf of new stock was under construction across the nation, while nearly 130 million sf of industrial space had been com- pleted. The latest pipeline forecasts estimate that developers will deliver around 300 million sf annually until 2026. Developers had almost 11 million sf of new Denver industrial space under construction in June, which accounted for 4.7% of total stock. This placed Denver fourth by share of under-con- struction totals, well ahead of markets such as Los Angeles (1.1%) and New Jersey (1.6%). It’s no secret that construction costs have been rising rapidly across the country, while coastal regions have been struggling with scarcity of developable land. These factors are expected to push the construction pipeline further inland, with markets such as Denver poised to gain from the shift. This trend is noticeable already, as Denver also ranked fourth by the share of planned and started construction projects, which account for 8.4% of the total industrial stock in the market. Overall, the industrial real estate sec- tor is growing at an accelerated pace, and Denver is firmly positioned on an upward trend. In an economic envi- ronment of rising consumer spending and expanding tenant demand, Den- ver’s healthy, diversified economy has attracted increased attention.With such a potent mix of factors, it will be interesting to see how industrial space in Denver evolves through the second half of the year. s Irina.lupa@yardi.com How Denver’s footprint stacks up nationally Irina Lupa Real estate writer, CommercialEdge In June, average rent in the Denver metro area had increased 4.2% in the past year, matching the national average.