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Page 4 — Retail Properties Quarterly — February 2017
I n the seven years since the
downturn in 2009, Denver’s
retail market has tightened
considerably from the high
of nearly 10 percent vacant
space. Despite an improving national
economy, corporate closings have
continued – notably Safeway in 2015
and Sports Authority in 2016 – add-
ing to vacant space in the Denver
market. As a result, the third quarter
finished with absorption of negative
128,000 square feet, and year-to-date
absorption was stable at 95,000 sf.
However, the Denver retail mar-
ket ended the third quarter with a
healthy vacancy rate of 6.3 percent.
Typically, after the Christmas retail
season, struggling retailers make
hard decisions, and 2017 is no differ-
ent. The Limited filed for bankruptcy
and closed all locations nationally.
Kmart and Sears announced upcom-
ing closures of underperforming
sites, while department stores like
Macy’s and Kohl’s are shuttering
underachieving performers following
disappointing holiday sales. While
the area is experiencing only moder-
ate exposure from these closures,
Denver’s bifurcated retail market
offers its own opportunities and
challenges.
In many ways, Denver retail is
a tale of two markets. Because of
limited new supply, there is high
demand for second-generation
space in well-located, Class A retail
centers, which are full and thriv-
ing. Many national retailers cannot
find the prime space they require
to expand in or enter the Denver
market, so they have no option other
than waiting for the completion
of new product.
Despite competi-
tion for Class A
space, Denver con-
tinues to attract
international retail-
ers (IKEA, Uniqlo
and H&M) as well
as national ones
(Whole Foods’ flag-
ship store, Trader
Joe’s, Cabela’s and
Alamo Drafthouse
Cinema).
Conversely, aging
Class B and C
centers with poor
demographics, often with vacant
anchor space, continue to be chal-
lenged. As the retail shopping land-
scape changes, unproductive loca-
tions and destinations that have lost
its vibrancy will be transformed.
What is changing the face of
today’s retail? Startups are augment-
ing traditional retailers. What distin-
guishes a startup enterprise? Gener-
ally, these emerging companies find
new ways to reduce the needed capi-
tal investment, allowing for a quicker
market entry. Examples include food
halls and markets, booth rentals and
pop ups.
In Denver, this concept has taken
off with several new food empori-
ums – The Source, Avanti and Denver
Central Market are all making waves
with collective spaces offering diverse
options and social aspects. This model
offers a testing ground for new con-
cepts and menu items, and it appeals
greatly to the millennial set, which
craves social experiences as well as
innovative food options.
E-commerce continues to push
retail concepts to evolve. Despite
concerns that e-commerce would
eliminate brick-and-mortar retail-
ers, today’s trending retail is evolv-
ing from an online-only presence to
actual establishments – essentially
“click to brick,” and include expan-
sion of lines, not just hard and soft
goods. Examples include Fabletics,
Omaha Steaks, Lumen Optical and
Amazon, which perhaps is the big-
gest click-to-brick success story thus
far with a new concept test store to
open in Seattle this year. The newest
evolution is grocery offerings – Blue
Apron, Hello Fresh and GroceryBabu
(delivered by Amazon) – that deliver
fresh ingredients and recipes to
your door. This concept is gaining
momentum in major markets like
Denver.
Conversely, Walmart’s expanded
online presence is an example of
completing the cycle “brick to click.”
The megastore is working hard to
offer more value to customers, pro-
viding in-store pick up and many
items online only. The company
also is pushing its presence in select
urban markets with designated
delivery lockers designed expressly
Carolyn
Martinez
Associate director,
Newmark Grubb
Knight Frank,
Denver
Market Update
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