Colorado Real Estate Journal - December 7, 2016
It’s shaping up to be a record year for Denver industrial sales, with a large number of investment deals trading and others set to close by year-end. More than $582 million in industrial assets over $2.5 million changed hands as of the third quarter, putting the market on track to surpass its 2015 record-high volume of $839 million, according to CBRE’s Denver Industrial Capital Markets Group. Investment deals accounted for 72 percent of the volume heading into the fourth quarter, with investors buying 60 assets at prices in excess of $2.5 million vs. 23 acquisitions by users, which accounted for 28 percent of the volume. “This has been a very active year for investment sales and will be through the end of the year as there’s a handful of additional transactions that are in the pipeline,” said CBRE Executive Vice President Jim Bolt. The biggest deal to date was the $57.65 million sale of 17 Class B industrial buildings in Montbello Industrial Park. Stockbridge Capital Group, on behalf of the Los Angeles Employees’ Retirement Association, bought the 856,013-sf portfolio from TA Realty for $68.41 per square foot, $27.72 per sf more than TA paid for the buildings less than two years ago. Pricing for industrial assets is higher than ever, with investment deals averaging $82.45 per sf, according to CBRE. A 106,424-sf warehouse leased to FedEx at Enterprise Business Center set a high-water mark at $178.53 per sf. Denver industrial market fundamentals continue to be strong. There’s been positive absorption for 26 straight quarters, direct vacancy is 4.8 percent and 40 percent of the 3.5 million sf of industrial product under construction is preleased. In addition, investors are drawn to Denver because cap rates for like-kind properties are around 100 basis points higher than in coastal markets, according to Bolt. “Attractive industrial investment markets in the West Coast have seen cap rates, in some cases, sub-4 percent,” he said. According to CBRE’s Capital Markets Pulse report, cap rates for stabilized Class A properties in Denver have declined 175 basis points since 2011. Among peer markets, only Portland recorded more cap-rate compression. Denver also has seen a flurry of investment activity in Class A multitenant space, which doesn’t frequently come to market. “Generally owners of multitenant, particularly Class A product, in the Denver area want more property, not less,” said Bolt. “So it’s very rare to see multitenant Class A. “We had a number of sellers that were very market savvy waiting for market conditions to be right,” he said, explaining owners of multitenant properties that signed leases at below-market rates during the recession were waiting to renew leases at today’s rates before selling or refinancing. “Now that’s happened, and some have decided to sell.” Whether the Denver market can keep pace with 2016 volume in 2017 is uncertain. “There’s just a finite number of owners that are candidates to sell,” said Bolt. “You look across the list of all the big developers here in this market, and really without exception none of them are sellers. So there’s just a really small group of potential sellers, and the majority of those are going to sell now. “This year will turn out to be a pretty good year,” he said. Other News Lam Ho Investments LLC paid $2.4 million for the Lehrer’s Flowers/Associated Wholesale Florist retail/warehouse property at 2100 W. Mississippi Ave. and 1120 S. Zuni St. in Denver. The seller was 2100 W. Mississippi LLC. The 2.6-acre property has two buildings totaling approximately 32,494 square feet. Justin Krieger, senior adviser at Pinnacle Real Estate Advisors LLC, handled the off-market deal. “The area is undergoing tremendous growth, which is evident by the fact that the property sold for almost four times what it sold for 2.5 years ago. This is the third deal I’ve closed with my buyers in the area this year and they are extremely bullish on the area’s long-term prospects and see our latest acquisition as a phenomenal development site,” Krieger said. Livingston Real Estate Holdings LLC bought a 14,346-sf industrial building at 999 Tejon St. in Denver from Denver Barnes LLC for $1.55 million. The buyer plans a major remodeling of the property, according to Russell Gruber of Newmark Grubb Knight Frank, who represented the seller. The building, located on the east side of Interstate 25, received several offers, Gruber said. Mike Statter of Cresa represented the buyer in the transaction. Gruber also represented Good Spirits Development Company I in the $555,000 sale of a 1,875-sf industrial building at 1445 S. Broadway in Denver, near the Gates redevelopment. The property received multiple offers within days of being listed for sale, Gruber said, adding the buyer was able to pay cash and perform quickly on the transaction. Tyler Ryon and Steve Serenyi of Colliers International represented the buyer, Liminal Developments LLC. The Lands LLLP, headed by Ojala Family Limited Holdings LLC, purchased a 2.48-acre lot in NorthRidge at Park Centre in Westminster for $500,000. The property is located near 120th Avenue and Tejon Street. The buyer plans a build-to-suit flex building on the property, according to Eric Rutherford of WK Real Estate. Rutherford, along with WK Real Estate’s Tom Hill and Bill Thompson of CBRE, represented the seller, David Noel. Rabani Holdings LLC paid $485,000 for a 4,690-sf industrial condominium at 14697 E. Easter Ave., Units A, B and C-ICO, in Centennial. Eric Gold of Sheldon-Gold Realty Inc. represented the buyer. Mark Pyms of Re/Max Commercial Alliance represented the sellers, Michele Cushman and Terry Taylor.