Leasing Strong, Absorption Weak for Industrial Market

"During that same period, the market experienced just over 270,000 sf," according to CB Richard Ellis. "Such a high level of leasing activity, parlaying into so moderate a level of net absorption, stands as a classic indicator of the intra-market movement that comprised a bulk of the transaction activity in Denver's industrial market during the last two quarters." Expansion by existing tenants provided the primary fuel that drove the quarter's net absorption, according to the report.

CB notes that a recently published study by Torto Wheaton Research reports that, in its size range, Denver's Airport/Montbello submarket in the northeast corridor ranked seventh in the nation for net absorption during the past year. "Not surprisingly, like a strong first-string running back, it lead the market in leasing activity, accounting for slightly more than a third of the transaction volume and experiencing approximately half of Denver's net absorption for the quarter," CB says in its report.

Vacancy rates dropped another 10 basis points to 5.4% from 5.5% last quarter. The average asking rate for triple net leases continued the march toward equilibrium dipping to $5.15 from $5.49. One newly constructed building was delivered in the Airport/Montbello submarket, and another 500,000 sf of construction broke ground during the quarter, the report goes on to say.

Separately, Randy Hertel, VP of Majestic Realty Co., speaking at the recent Rocky Mountain Commercial Real Estate Expo and University of Denver Fall Economic Forecast, described the local industrial market to about 1,200 of his peers with one word: "Deflated."