DENVER-The area industrial market continues to strengthen, with absorption reaching more than a million sf, according to the latest report from CB Richard Ellis. The report says the increase in demand pushed down the overall vacancy rate to 8.5% in the fourth quarter of 2005 from 8.9% in the third quarter.

The market is moving closer to stabilization, where supply and demand are in equilibrium, according to CBRE. The brokerage firm attributes this to developers maintaining a disciplined approach and keeping construction to historically low levels.

"However, the best news for landlords is that lease rates are finally trending upward again," the report notes. "As a lagging indicator, lease rates usually follow the trends in absorption and vacancy. After declining two quarters in a row, lease rate ticked in the fourth quarter to [an average] of $5.09 per sf." Rates had dipped to about $5 per sf in the third quarter.

The industrial market is benefiting from continued growth in national and local economies. "In addition, as interest rates continue upward, activity among buyers should lessen, shifting additional activity to the leasing market," the report notes.

The CBRE report shows that the southwest market, with 24.9 million sf, has the lowest vacancy rate at 3.4%. Not far behind it is Commerce City, with 15.9 million sf, with a 3.9% vacancy rate. Central Denver, with 15.7 million sf, also has little open space, with a 4% vacancy rate.

The highest vacancy rate is the Longmont market in Northern Colorado, where the vacancy rate stands at 28.9%. In the more immediate Denver area, the highest vacancies are found along the 16-million-sf southeast corridor, where 14% of the space is vacant, according to CBRE. The DIA/Montbello market, the largest market, with 53.16 million sf, shows a 10.9% vacancy rate.

As far as lease rates, Boulder has the highest, with an average of $7.23 per sf. It is followed by the southeast corridor at $6.71.