CREJ - Retail Properties Quarterly - November 18, 2015
The employment market undoubtedly impacts commercial real estate, and aside from housing, one of the biggest beneficiaries is retail. This year, - the state is anticipated to add 45,000 jobs, which will expand headcounts by 3.3 percent, according to Marcus & Millichap’s Retail Research for the third quarter. As these new employees settle in and establish homes in Colorado, they become consumers and help increase retail demand. Because of this, we are seeing plans for new locations and property expansions. The most active retailers, which led absorption of available space, include big-box grocery, fitness and medical retail, including clinics. However, demand continues to outpace supply. For 2015, it is anticipated that net absorption will be greater than 1.4 million square feet, which will drop the vacancy rate to 5.8 percent. “Vacancy has consistently deteriorated every year since 2009, while net absorption has outpaced development every year since 2010,” said the report. In an attempt to meet this demand, 500,000 sf of space will be delivered this year, with preleased single-tenant assets dominating the completions. No slowdown appears visible as more than 3.2 million sf is in the project pipeline. “Demand for quality retail space and the lack of deliveries has caused developers to consider redeveloping infill space, especially space geared toward tenants 10,000 sf and smaller,” according to CBRE’s Denver Retail Q3 2015 Marketview. Single-tenant assets are receiving the most attention from buyers. An article by Garrette Matlock and Ryan Bowlby on Page 8 breaks down the statistics of recent single-tenant and multitenant sales. The most sought-after locations are in the downtown and southeast suburban Denver markets. Rents climbed 22.8 percent to $31.44 per sf downtown and increased 8.3 percent to $19.06 in the SES. In both areas, single-tenant space drove the increases. The Colorado Boulevard/Midtown corridor saw the largest rent increase – $5.99 per sf triple net. This area and the SES market recorded the lowest overall vacancy at 2.2 percent. Boulder witnessed the largest vacancy decrease, while the Denver market enjoyed its 14th consecutive quarter of positive net absorption, according to the CBRE report. Sales to date – at the time of CBRE’s report – totaled 18 properties and over $588.6 million transacting. “Year-to-date totals show heightened retail investment volume of $987.4 million compared to $309.5 at this time in 2014,” the report stated. It will be interesting to see if 2016 can keep pace. Also, I’m interested to hear what you would like to see covered in 2016. Thanks to all the authors who participated and contributed. And thanks for reading. Michelle Z. Askeland maskeland@crej.com 303-623-1148, Ext. 104