Colorado Real Estate Journal - June 7, 2017
The Interstate 25 corridor north of Denver is pulling in developers seeking to meet demand for large blocks of industrial space. From U.S. Highway 36 north to Highway 34, “Essentially there are no large blocks of space available in that market,” said Cushman & Wakefield Managing Director Chris Ball. “It’s tight because there’s not a lot of planned, zoned and platted industrial parks. You just don’t have that much that’s teed up, ready to go.” That will begin to change with Conor Commercial Real Estate breaking ground this month on four speculative buildings at Park 12 Hundred Tech Center, fronting I-25 at the southwest corner of 119th Avenue and Huron Street in Westminster. Other developers are “seriously looking” for sites, said Ball. United Properties has a parcel under contract along I-25 south of E-470. “If you look at the demographics around our site – the labor pool, the density and the accessibility – it’s equal to what you find in central Denver,” said Kevin Kelley, senior vice president and regional director for United Properties in Colorado. “It’s a very good site, a lot of challenges. We’ve got a lot of work and due diligence to do,” he said. Access to labor, a growing population, infrastructure and a new view on the part of some municipalities are driving demand on the I-25 corridor, which until now hasn’t seen much industrial development. “The limiting factors are assembling enough land at the right price, and all the other issues: zoning, infrastructure,” said Kelley. “There are just not that many zoned sites that are at the price point that makes these developments worthwhile. But there are enough, so I think we’ll see some more development in that corridor,” he said. “It’s going to be larger spaces. There are some users that are looking in that area, so it’s not without justification, in my opinion.” Only within the last couple of years has Thornton allowed concrete tilt-up construction, said Cushman & Wakefield Director Matt Trone. “You can’t build a Class A industrial project without doing tilt-up.” “Westminster didn’t even have industrial design guidelines,” said Ball. “This project with Conor is really their first true new Class A industrial development in Westminster. It’s a product type that now is seen as an employment center.” IBC Holdings’ redevelopment of the former Avaya campus into Park 12 Hundred proved up demand for industrial space, drawing DigitalGlobe as its largest user. “If you look at the tenants that are in the industrial portion of that development now, they are a mix of Boulder County companies that relocated because they couldn’t find space in Boulder County – that’s not going to change,” said Ball. “The other users in the park were consolidations from multiple locations,” he said, adding that’s an indication of the I-25 north corridor’s metrowide appeal. “What draws us to that area is there’s a very strong labor pool close-by that can access our site and other sites along I-25 in the north area,” said Kelley. “There is good access to the site. There’s great transportation linkages with I-25 fully improved, E-470, and just the growth of the Boulder and Fort Collins markets,” he said. J.M. Smucker’s decision to build a factory just west of I-25 in Longmont, initially employing 250, also validates the ability to attract labor. Agilent Technologies is building 130,000 sf in Frederick, and United Power also just bought a building on I-25 in Longmont. “We know a number of tenants/users up in this area that, because there’s such a lack of supply of quality space, they’re spread among a number of different buildings and operating in a number of different locations,” said Trone. “With Conor Commercial’s project, I would not be surprised if half of the tenants are consolidating. When you’re in multiple buildings like that and you consolidate, your occupancy costs might end up being pretty much the same.” “We’re talking already to companies in the neighborhood that want to expand and consolidate as well as people in Boulder County who can’t find suitable locations,” said Ball. Park 12 Hundred Tech Center will consist of three front-park, rear-load buildings with ESFR fire sprinklers, clerestory windows, large truck courts, skylights and other features, and divisibility to 15,000 sf. The largest building, 172,200 sf, and two buildings of 58,500 sf each will be available for lease. There also will be a 36,270-sf flex building to be available for sale. Ball and Joe Krahn of Cushman & Wakefield are marketing the project, which will deliver in first-quarter 2018. Denver’s Interstate 70 east corridor is and will remain the region’s most important industrial submarket, containing around half of the metro area’s 240 million sf industrial space. But a couple of factors – the upcoming reconstruction of Interstate 70 from Brighton to Colorado boulevards and redevelopment of the National Western Stock Show complex – are influencing some industrial tenants to consider other locations. “I’ve been surprised by how much tenants and users are bringing that up. They’re very aware of the impact it’s going to have,” Trone said of the I-70 project. E-commerce also will drive industrial development throughout the metro area, including the northern I-25 corridor, which Trone noted has housing and amenities for employees. “I think our industrial market has a fair amount of runway left, just because Denver’s at a population size now that attracts a lot of companies like the Smuckers of the world that find it easier to produce their product here than to ship it from some other locations. Plus, you’ve got the e-commerce. That’s not going to go away,” Kelley said.