Colorado Real Estate Journal - July 6, 2016
With the lowest vacancy rate in 18 years and more than 353,000 square feet of positive net absorption, the start of 2016 painted a bright picture for Denver’s retail scene. The current vacancy rate is hovering around 5.8 percent. While we anticipate the vacancy rate will rise due to the bankruptcy of Sports Authority and some of the office supplier big-box stores, the turnover will create opportunity for junior box retailers looking to enter the market. In terms of locations, the retail cores of Cherry Creek and Park Meadows, both with vacancy rates of 1.8 percent, and downtown Denver continue to dominate the headlines, but other sites in Denver are seeing an evolution in retail activity as well. There is a push for authenticity in the areas of River North, the Highlands, South Broadway and the surrounding areas as millennials and Gen X’ers desire social options right outside their front doors. Retail brands with an urban edge are being strategic in selecting these locations. For instance, Kit and Ace – a retailer with historic ties to Lululemon – is an example of a retailer that understands the blend of urban grit with lasting street wear and has been a hit not only in RiNo but also in similar nontraditional urban settings around the country. Cherry Creek is gaining a strong identity as a top destination for national luxury brands looking to establish billboard locations. Second Avenue in Cherry Creek is at the epicenter of the transformation. The opening of RH (previously Restoration Hardware), Arc’teryx and Peter Millar represent only the beginning of what is planned. The redevelopment of the Sears building into a quality mixed-use development will provide more opportunities for the best of national and international concepts. Looking at retail industries, Denver now is officially a foodie destination with several expanded chef-driven and local/regional concepts looking for the perfect location. The fast-casual segment is the hottest among food retailers with newer-edge concepts striving to round out the demand. In the suburban markets, expect continued expansion of both traditional grocery concepts and alternatives as the trend to healthier living has expanded from Trader Joe’s, Whole Foods and Sprouts to more traditional grocers, including King Soopers. We also are seeing a trend toward more specialized and experiential retailers. Older concepts from the last decade, such as Sports Authority, are giving way to more specific and well-branded concepts that appeal to an educated customer base. Specialty skiwear, running shoes and yoga wear stores are examples, where shoppers expect a personalized and knowledgeable customer service experience. This is a tactic for differentiating an in-store experience from e-commerce options as well. E-commerce is growing in Colorado, but brick and mortar definitely has its place, especially in hand with a well-planned, omni-channel media strategy. In terms of the remainder of the year, demand for quality retail space remains high. As more than 684,000 sf of new retail space currently under construction delivers, we expect to see the space absorbed quickly. Denver’s tremendous population growth – rising by more than 100,000 people last year, according to the latest U.S. Census Bureau numbers – is continuing to fuel the retail segment’s growth. Overall, we expect to see Denver’s retail scene remain vibrant throughout 2016.