CREJ

Page 2 — Retail Properties Quarterly — August 2018 www.crej.com Contents Letter from the Editor I nvestment activity is being driv- en by a scarcity of available, well- located retail properties, write Parker Brown and Matthew Hen- richs on Page 4. Single-tenant, net-leased and small-format strip cen- ters are finding themselves the primary benefactors of this inventory crunch. Reflecting this, retail investment sales this quarter are reported to have topped $166 million with 17 retail prop- erties priced above $3 million trading hands and more than 40 properties priced between $1 million and $3 million trading hands, according to CBRE’s second-quarter Denver retail report.Year-to-date sales volume hit $437.2 million, which is down less than 1 percent compared to the first half of last year. In an effort to capitalize on some of this pent-up demand, there is more than 1.5 million sf of retail space under construction, which is a 34.4 percent increase year over year. Many of these projects are mixed-use with ground- floor retail and infill redevelopments, the CBRE report states. Retail is an undeniable component to mixed-use projects, which we explore in two arti- cles in this issue. On Page 20, Celeste Tanner writes that it is “the retail com- ponent that elevates the project from an office or residential development into a destination.”While on Page 18, Jimmy Balafas calls for the continued development of thoughtful density in urban areas with these projects. While 77.1 percent of the more than 269,000 sf of retail space delivered this quarter was either preleased or build- to-suit, overall direct vacancy increased 40 basis points quarter over quarter, to 7.3 percent. A big contributor to this was almost 250,000 sf of space vacated byToys “R” Us. Big-box vacancies will continue to plague many submarkets across the state, but it won’t last forever. Case in point, in Northern Colorado, many long-vacant anchor and junior anchor spaces are being redeveloped, including several in the heart of downtown Fort Collins, Jake Hallauer writes on Page 6. With an increase in vacancy, lease rates may cool, but we haven’t seen much of that yet.The average asking lease rates still increased this quarter, by 8 cents per sf, to $18.76 per sf triple net.The modest growth helps Denver’s popularity for new retailers considering locations among our peer cities, Justin Kliewer writes on Page 10. Modest lease growth also can help alleviate some of the pressure many small-business owners are beginning to struggle with, thanks to Colorado’s low unemployment rate of 2.8 percent. Gannon Roth shares stories from sev- eral of his clients who are battling staff- ing challenges in our market, on Page 22. Taking all of this into account, retail real estate seems to be stepping out of the apocalyptic frame of mind and into one that is embracing its future. Consumers are still out there, and the retail industry is gaining confidence in its ability to provide these new experi- ences. Michelle Z. Askeland maskeland@crej.com 303-623-1148, Ext. 104 Second-quarter statistics Private capital, limited inventory fuels demand Parker Brown and Matthew Henrichs No sign of retail’s death in Northern Colorado Jake Hallauer Despite changing tenant mix, financing is available Baxter Fain Denver stands out among peer cities, per report Justin Kliewer Downtown Denver ushers in a new era of retail Randy Thelen Centers must embrace tech to stay competitive Allen Ginsborg Personalize, customize to transform the experience Stuart F. Zall A mandate for urban mixed-use development Jimmy Balafas Form strategic partnerships for mixed-use projects Celeste Tanner Strong economy brings about staffing challenges Gannon Roth Create the right tenant mix for your property Ilene Vivinetto-Suter Retailers seek spaces for social media and tech Dave Maxwell Industry begins to embrace parking technologies Chris McKenty 4 6 8 10 12 14 16 18 20 22 23 24 25