Denver Retail Market to Remain Strong

"The metro area's vacancy rate will improve during the year, and the return of economic growth will help retailers' bottom lines, allowing owners to realize a small increase in asking rents in 2004," he adds. "Strong market performance will prompt several local and national developers to team up to start construction on regional and super-regional projects in the metro area."

Highlights of the report include: • Denver's economy is expected to improve in 2004. • After three years of job losses, the local employment market is forecast to expand by 1.9%, or 21,300 jobs, by year's end. This will help consumer retail sales increase by an additional 3.9% this year. The majority of the employment gain will be in the service sectors, particularly health and education, and professional and business services. • Construction activity is expected to decrease by 30% to 2.3 million sf of retail space in 2004, the lowest level since 1999.

The slowdown is in response to developers filling the majority of space with committed regional and national retailers. The scene will change in 2004 as major retail projects are completed that alter shopping patterns for thousands of metro-area residents. The largest development scheduled for delivery this year is the one-million-sf Belmar redevelopment project in Lakewood.

Owners of retail properties can look forward to a decrease in vacancy and a rise in rents, according to Marcus & Millichap. Increased retail sales and limited speculative retail construction will help push vacancy down by 40 basis points, to 7.7% by year-end 2004. The overall average asking rent will continue to inch upward, from $17.09 per sf in 2003 to $17.40 per sf in 2004.

The report goes on to say that investors will continue to seek single-tenant opportunities throughout the Colorado Front Range, particularly those with strong credit tenants. During the second half of 2003, buyers' pushed prices higher, to a median of $169 per sf, a 37% jump from the prior year. Investors will continue to seek grocery-anchored shopping centers in 2004, which will put additional upward pressure on prices in the sector.