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February 2015 — Retail Properties Quarterly — Page 17
Neighborhood Profile
I 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.s
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.