Retail Market Slips Here, But Poised for Rebound

Denver didn't rank as well because of relatively high construction compared to household creation and employment growth.

"Sellers continue to hold the upper hand in 2004," says Adam P. Christofferson, regional manager of Marcus & Millichap's Denver office. "Investors prefer the southern portions of the metro, where values are supported by the enviable demographics created by the presence of huge master plans, such as Highlands Ranch, The Denver Tech Center, Inverness and Meridian, not to mention the housing explosion in Parker."

Marcus & Millichap is predicting the Denver economy will turn the corner and post job growth of 1.5% this year and retail completions will ease to about 2.3 million sf this year. The majority of the pipeline for planned projects will be in the northern suburbs and east Aurora.

Marcus & Millichap is projecting a 40-basis-point improvement in retail vacancies this year to 7.7%. Vacancies will be the lowest among infill properties and those in high-income neighborhood, and those in the southern suburbs.

The average asking rent will rise by 2% this year to $17.35 per sf., with the northern and northwest portions of the MSA expected to out-perform the market by growing 3.5% or more.

"Retail investors have traditionally been drawn to central and west Denver, Cherry Creek and the Southeast I-25 corridor, but there is a heightened awareness of the growth in the northern portion of the metro in areas such as Westminster, Thornton and Northglenn," according to the report.

The northern region is poised to be the fastest growing in the metro over the next several years with the number of residents forecast to exceed 600,000, according to the report.

"Throughout Denver, single-tenant properties are expected to be in the highest demand, which will keep cap rates in the low-7% range for new drugstores and low-8% range for restaurants," according to Marcus & Millichap.