Colorado Real Estate Journal - July 6, 2016
Nearly halfway through 2016, Denver’s investment sales market remains active with strong sales volume across all property types. Continuing on the heels of 2015’s $5.2 billion in sales volume, 2016 already has seen $1.8 billion in investment sales volume (office, retail and industrial transactions over $5 million). Year to date the investment sales market has grown more than 44 percent over the previous year. It is expected that Denver’s total investment sales activity in 2016 will eclipse 2015’s total, as investment sales activity typically is much stronger in the third and fourth quarters than in the first and second quarters. With more than $2.5 billion in office sales since third-quarter 2015, Denver is proving to be an attractive investment market globally. The largest central business district office sale in the last 12 months is the $65.5 million sale of 303 E. 17th Ave. Broadreach Capital Partners and Equity West sold the 92 percent-leased, 295,000-square foot office building located in uptown to Kennedy Wilson. The largest suburban office transaction thus far in 2016 is the $189 million sale of Panorama Corporate Center in Denver’s southeast market in the first quarter. The 94 percent-leased, 708,649-sf project was developed in 1996 and was purchased by EverWest Real Estate Partners and Chile-based Independencia; Miller Global Partners was the seller. Another recent significant office transaction was GEM Realty Capital’s acquisition of Central Park Tower from Franklin Street Properties in January. The 86 percent-leased, 11-story tower is located in the Interlocken Business Park in Broomfield. The property traded for a record-breaking $281 per sf, or $83.5 million. The strong capital flows into the U.S. real estate market combined with limited high-quality properties available nationally in the top 12 to 15 markets have led to continued cap rate compression for Class AA assets over the last 24 months. Many investors that typically focus on gateway cities – New York City, San Francisco, Los Angeles, Washington, D.C., Boston and Seattle – continue to be frustrated by the lack of properties available and the tremendous competition for core assets. These investors are turning their sights to cities like Denver; Austin, Texas; Chicago; and Miami for opportunities. As evidence of strong capital flows into Denver and the void of CBD Denver office opportunities, seven suburban Denver office buildings have been purchased by German, Swiss, Norwegian, Canadian, Mexican and South American investors in the last 12 months. Large retail sales also have been strong through the first half of the year in the Denver market. Retail investment sales thus far in 2016 have increased more than 166 percent year to date over 2015. A large contributor to 2016’s robust retail transaction volume was the sale of Clayton Lane in Cherry Creek North. Invesco Real Estate and Oliver MacMillan purchased the Whole Foods-anchored center from AmCap in January for $169.6 million. Another recent and significant sale was Starwood’s acquisition of Belmar from GF Properties and Continuum Partners for $293.5 million. Belmar is one of the largest investment sales in suburban Denver’s history. The dynamic mixed-use center in Lakewood contains nearly 875,000 sf of retail with over 280,000 sf of office and 171 apartment units. Some institutional capital took a slight pause in the first quarter, related to concerns about non-real-estate issues like China, terrorism, potential European recession and an atypical U.S. presidential election. We expect investment sales velocity to remain quite strong throughout the year and into 2017. Denver will remain a top 10 investment market with CBD office, suburban office near light rail, grocery-anchored retail and high-cube industrial remaining the most sought after by domestic and international investors.