Despite the job losses that continue to plague many sectors of the Denver market, the forecast for the industrial market looks positive. According to Marcus & Millichap’s 2003 Industrial Report, Denver’s industrial market was able to avoid a crash as the economy slowed down because the city’s economy is diversified among the service, tourism, domestic trade, high-technology, aerospace and government sectors, which provides support for industrial demand despite weak employment. The industrial vacancy rate in Denver has remained below 9 percent during the current market correction, but Marcus & Millichap expects the rate to return to 7 percent vacancy by the end of 2004, due to the rebounding economy and developer restraint.

In the Denver area, investors favor the Centennial and central/downtown submarkets. The central industrial market’s vacancy rate is less than 4 percent, according to Marcus & Millichap. The DIA/Montebello area is another that is attracting both tenants and investors. This submarket has access to major highways, DIA and rail systems, as well as the supply of newer product, according to the report. One submarket where many tenants are relocating is along Interstate 70 and E-470. ProLogis is currently developing ProLogis Park 70, a 182-acre distribution park located at the intersection of I-70 and E-470. General Motors Service and Parts Operations is planning to relocate to a new 404,000-square-foot facility in the park. Other significant developments are Gateway Park and Majestic.

Despite these current projects, construction in Denver has dropped from more than 4 million square feet in 1998 to less than 2 million square feet in 2002, according to Marcus & Millichap. The report adds that construction will continue to drop to around 1 million square feet per year over the next 2 years. Of the existing properties in Denver, most properties are trying to attract companies that are involved in manufacturing and warehousing distribution, says Wayne Barrett, vice president and marketing director at ProLogis. One tenant that is absorbing a majority of space is ECHOSTAR. Current rental rates in the Denver market range from $3.07 to $5 per square foot NNN, adds Barrett.

Marcus & Millichap believes that the excellent geographic location and solid market fundamentals of the city of Denver will continue to fuel industrial investment and drive sales price growth in the market. Barrett of ProLogis agrees and expects the Denver market to stabilize and improve. He adds, “Job and population growth in the West will drive future demand for industrial space in Denver.”

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