CREJ - page 44

Page 4AA —
COLORADO REAL ESTATE JOURNAL
— August 19-September 1, 2015
Industrial
by Jill Jamieson-Nichols
A Class A office/warehouse
building in Concord Business
Center sold to a Boulder investor
in a $5.22million, off-market deal.
Cary St. Onge bought the
54,280-square-foot building at
8530 Concord Center Drive at a
7.5 percent cap rate. Case Con-
cord LP, a user/investor, sold the
property just after Lewan and
Associates inked a lease for the
last available 24,080 sf.
Listing broker Peter Beugg of
JLL said the seller planned to
begin market-
ing the prop-
erty once the
Lewan lease
was signed,
but the inves-
tor surfaced
before that
o c c u r r e d .
“There
are
very
few
opportunities
to buy southeast,” said Beugg,
who added that the opportunity
to purchase a property at a 7.5
percent cap in the tight southeast
submarket was very attractive.
The price per sf was $96.20.
Technitix LLC and Elevation
Volleyball are tenants at the prop-
erty, which is just off Peoria Street
and E-470, near Centennial Air-
port. The building offers 24-foot
ceiling height, ESFR fire protec-
tion, and dock-high and drive-in
loading.
Tyler Reed andDominic DiOrio
of JLLwere the co-listing brokers.
Other News
n
CrossDevelopment LLC
paid
$2.95 million, or $132 per square
foot, for a 22,414-sf office/ware-
house building on 2.63 acres at
6691 Colorado Blvd. in Com-
merce City.
Caliber Collision
will use the property for an auto
body shop.
GEP Investments Inc.
sold
the property, which consists of
19,396 sf of clear-span ware-
house space and 3,018 sf of
office build-out. The building
has radiant heat and six drive-
in doors. The yard is fenced and
paved.
John Segelke
of
Segelke
Real Estate LLC
was the list-
ing broker.
Tyler Carner
and
Jeremy Ballenger
of
CBRE r
ep-
resented the buyer.
n
Tenbar Inc.,
a local indus-
trial property investor, paid
$1.35 million, or $135 per sf,
for a 10,000-sf, fully occupied
building at 201 S. Rio Grande
Blvd. in Denver.
“The high price of $135 per
square foot is an indication of
the central market value,”
Rus-
sell Gruber
of
Newmark Grubb
Knight Frank,
who represented
the buyer, said in an announce-
ment. “Sale activity for indus-
trial buildings has been robust
in recent years, driven by the
owner, user and investment
sales. Increasing rental rates
attract investment buyers and
prompt users to purchase their
own buildings. The continua-
tion of historically low vacancy
in the central submarket will
push prices and rental rates up
in the coming months.”
Longtime owner
201 Rio
Grande LLC
sold the build-
ing. Tuff Shed will remain at
the property, as will subtenant
Brekhus Marble and Granite.
Murray Platt
of
CBRE
was the
listing broker for the property,
which reportedly received mul-
tiple offers.
n
Aramark
leased the last
space in a 91,961-sf building at
9600 E. 40th Ave. in Enterprise
Business Center in Denver. The
company signed a 10-year lease
for 30,588 sf, which will be used
by its refreshment services divi-
sion, according to
Drew McMa-
nus
of
Cushman & Wakefield
of Colorado Inc.,
who repre-
sented the tenant.
Mike Wafer
and
Tim
D’Angelo
of
Newmark Grubb
Knight Frank
represented the
landlord,
United Properties,
in
the transaction.
n
RMIP 7281 54th 1 LLC
purchased a 15,000-sf industrial
building at 7281 E. 54th Ave.
in Commerce City for $1.28
million.
JLL’s Peter Beugg
and
Tyler Reed
secured a seven-
year lease with Acuren prior to
selling the property for owner
Fleet Direct.
s
The last space in the building at 8530 Concord Center Drive was leased
while the property was under contract.
by Jill Jamieson-Nichols
Tenants are paying 20 to 25
percent more for Class A and
B industrial space in Denver
than they did prior to the reces-
sion – if they’re lucky enough
to find it.
Overall vacancy for ware-
house/distribution
space
dropped to a record low 4.3
percent at the end of the second
quarter. New development is
being leased up before it can be
delivered – a phenomenon that,
while not unique to Denver,
hasn’t occurred here in previ-
ous cycles.
“It’s a period of time in
Denver like we’ve never seen
before,” said Mark Bowen,
senior vice president for DCT
Industrial Trust.
“When the market gets below
6 percent vacancy, it really war-
rants
new
c o n s t r u c -
tion, and it’s
been below
6 percent for
some
time
now. There
has been new
construction,
but it hasn’t
kept up with
demand
and a lot of it is new demand.”
DCT, a Denver-based indus-
trial real estate acquisition,
development, leasing and man-
agement company with approx-
imately 73.3 million square feet
of properties, owns just under
1.7 million sf in Denver’s largest
(Interstate 70 east) and tightest
(central) industrial submarkets.
“In our (Denver) portfolio, we’re
100 percent occupied. We don’t
have any vacancy,” said Bowen.
The company’s tenants are
staying put, as are tenants
throughout the market. “They
go out and explore the market,
thinking you’re crazy with your
rental rates, and they see that
is the market. They have no
place to go, so there’s very little
movement,” Bowen said.
“I get calls daily asking, ‘Do
you have anything?’ and ‘Are
you building anything?’”
DCT Industrial Trust, looking
to grow its Denver portfolio,
has a small piece of land under
contract with a goal of acquir-
ing more property around it.
The company only buys land it
expects to develop and lease up
within 24 months, and Bowen
doesn’t expect a problem in
today’s market.
It’s also targeting Denver
acquisition
opportunities,
which don’t come around often
and meet with fierce compe-
tition from national investors.
DCT bought the 689,557-sf Air-
port Distribution Center near
Interstate 70 and Chambers
Road in Aurora earlier this year.
Unlike Houston, Southern
California or some of the other
markets in which DCT is active,
“Denver is still, and in my opin-
ion will always be, a regional
market that supplies and dis-
tributes up and down the Front
Range region. We’re a regional
market that is getting bigger
because more people want to
be here.”
It’s also a diverse market,
fueled by residential construc-
tion, companies that service the
energy industry and technol-
ogy, Bowen said. “Denver’s
really learned to diversify bet-
ter than a lot of markets that I
see, and it means when we do
fall, we don’t fall quite as hard
as we did in the past. That’s evi-
denced by our last recession.”
Admittedly, “It’s good that
land prices are little higher, it’s
good that the (entitlement) pro-
cess is a little harder to get
through than in other markets
because we’re holding supply
in check, and yet it’s not shut
off,” said Bowen.
Bowen, who also oversees
DCT Industrial Trust’s Seattle
and Phoenix markets, said he
wouldn’t mind doubling the
size of the company’s Denver
portfolio, but said growth will
be deliberate and based on a
long-term view.
“You can’t get too comfort-
able with where we are right
now. Supply will catch up, and
demand will waver at some
point. We just don’t know
when.”
s
Peter Beugg
Mark Bowen
W
e had a client tell us
recently, “I made one
mistake during the
Great Recession and that is that I
actuallyunderwrotethedealsand
did not buy everything I could.”
Since the depths of the Great
Recession, the Denver industrial
market has experienced 21 quar-
ters of positive absorption, 7.6
percent rent growth year over
year and vacancy has reached a
historic low. While this statement
is meant with a little sarcasm, it
also begs the question, “Where
are we in the cycle?”
Past the halfway point of 2015,
the Denver industrial market
continues to fire on all cylinders
with both continued improv-
ing property fundamentals and
equally strong capital markets
results.
The list of positive statistics
for the Denver industrial market
could read like the announce-
ment of a future champion boxer
entering a ring. “In the Denver
corner, com-
ing off 21 win-
ning quarters
of absorption,
k n o c k i n g
down 628,434
square feet
of space this
quarter alone,
d e l i v e r i n g
fully leased
specul at ive
buildings at
ease and with
ametrounem-
ployment rate of 4.2 percent, the
future is bright for this rising star
that PricewaterhouseCoopers
rated a top five city to invest
in nationally.” We are all aware
that the market is strong and
that Denver is receiving a lot of
national notoriety. There is a rec-
ognized pulse and energy that is
being observed and this is mak-
ing everyone act a bit differently.
Predicting exactly where we are
at is not something that we have
the courage to
put in writing,
but we do see
that there is
opportunity
for both sell-
ers and buy-
ers in the Den-
ver industrial
market.
The
case
for Denver
is intriguing
as the aver-
age cap rate
nationally for Class A industri-
al space is 5.9 percent with an
average rental increase last year
nationally of 4.8 percent. In com-
parison, Denver has only expe-
rienced one sub-6 percent trade
(partially due to not one mult-
itenant Class A trophy asset trad-
ing this cycle in Denver) and has
experienced rental rate increases
of 7.6 percent year over year and
over 20 percent in some mar-
kets. If you couple these attrac-
tive real estate
statistics with
the 4.2 per-
cent Denver
un emp l o y -
ment
rate,
the
61,300
expected new
jobs in 2015,
a population
increase
of
84,000 people
last year alone
and the story
for capital being in Denver, the
case becomes clear.
Capital is increasingly aggres-
sive in our market and coming
from an increasingly diverse
set of buyers. Foreign capital
accounted for 20 percent of the
industrial asset volume last year,
up from an average over the 6
percent from the years prior. We
have witnessed foreign groups
purchasing and bidding on
assets from the likes of Germa-
ny, Canada, Mexico and Singa-
pore. Further, private capital has
been the most active buyer type,
accounting for 43 percent of activ-
ity nationally. There is a trend of
institutional groups assembling
smaller assets piece by piece and
combining them into a portfolio.
The most significant trans-
action of the first half of 2015
was the GLP (Government of
Singapore) purchase of the Ind-
cor portfolio. This was a nation-
al portfolio sale that we were
involved in, of which the Denver
piece was eight buildings repre-
senting about 1.4 million sf in this
market. Also significant was the
sale of the W.W. Reynolds Fort
Collins portfolio, which consisted
of 20 buildings and 507,112 sf for
$53 million and with which we
also were involved.
Themarket has opportunity for
buyers to capitalize on the strong
market trends and for sellers to
realize strong gains. Heading
Tyler Carner
CBRE Industrial
Services, Denver
Jim Bolt
CBRE Industrial
Services, Denver
Jeremy Ballenger
CBRE Industrial
Services, Denver
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