DENVER-The Denver-area industrial market boasted 1.74 million sf of positive net absorption in the first half of the year, according to a recent report by the Staubach Co. That is substantially higher than the 669,557 sf absorbed in the first half of 2004, according to the tenant rep firm.

The overall vacancy rate also dropped, but not nearly as dramatically. The overall vacancy rate stands at 9.6%, putting it is back in single digits. A year earlier, the overall vacancy rate was 10.4%.

Despite the improving fundamentals, tenants are still getting good deals. The overall lease rate for research and development/flex space is $8.35 per sf, down slightly from the $8.35 per sf mid-year 2004. And the overall average rate for warehouse space is only up slightly to $4.90 per sf, from $4.80 per sf.

Staubach tracked 18 submarkets, finding the highest office vacancy rate in Longmont, in Northern Colorado. In Longmont, the overall vacancy rate is 23.8%. It absorbed only 40,423 sf in the first half of the year. Its R&D/flex space leases for $8.47 per sf, while the warehouse industrial space goes for $6.48 per sf. However, many brokerage firms would not even consider Longmont part of the Denver market, but rather part of the Northern Colorado market. The 1.35 million sf of vacant space in the Longmont market accounts for 5.67% of the 23.72 million sf of vacant space on the market.

Excluding Longmont, the next highest vacancy rate is found in the small Broomfield market along the US 36 Corridor. That market has 835,795 sf of vacant space for a 21% vacancy rate. It absorbed 28,060 sf in the first half of the year. The average quoted rental rate for R&D space is $7.61 per sf, while the warehouse space average rent is$5.08 per sf.

The lowest rates were found in the Southwest market, another tiny industrial enclave. There, the vacancy rate is only 3.6%, with 325,124 sf of vacant space. The southwest market absorbed 60,497 sf in the first half of the year, with R&D/flex space leasing for $10.08 per sf and warehouse space leasing for $6.96 per sf.

The largest submarket, the East Interstate70/Montbello Corridor, has 6.07 million sf of vacant space. Its vacancy rate is 9.6%, exactly the same as the overall average for the entire market. That market absorbed 297,017 sf in the first half of the year. The average quoted rental rate for the Montbello market is $5.61 per for R&D/Flex space and $3.77 for warehouse space.

The most expensive R&D space is fund in the North industrial submarket, where the average quoted rental rats is $11.14 per sf. The most expensive warehouse space, by a wide margin, is in the tiny parker/Castle Rock submarket. That is the only market where the warehouse space is in the double digits. The average quoted rental rate in that market is $10.90 per sf.