DENVER-The Denver-area industrial market remains flat, according to industrial broker Mitch Zatz, a director in the Denver office of Cushman & Wakefield. In fact, flat may be a bit generous, as Zatz notes there's not a whole lot to get excited about when it comes to the overall industrial market.
Indeed, the overall industrial market is expected to rise to 14.1% by year-end, compared with 13.6% in 2004. The 14.1% vacancy rate is the highest in more than a decade. However, the market's vacancy rate as been rising every year since 2000, when it stood at 5.9%. In 2000, the average rental rate was $9.09 per sf, 20.5% higher than today's rate of $7.54 per sf. Last year, the average rate was $7.57 per sf.
However, the good news is that absorption, which hit a low point in 2003 when it actually showed negative absorption, has steadily been climbing since then, with slightly more than two million sf of positive absorption expected this year, according to Zatz. Construction completions have remained consistently around two million sf of new product every year since 2003, low by historical standards. In 1998, four million sf was added to the market and about 3.5 million sf in 2002.
Other good news can be found at warehouse distribution space, where the vacancy rate fell to 8.8% from 9.3% from last year. Last year's vacancy rate for warehouse space was the highest in recent memory and this is still the second highest vacancy rate since at least 1998, although it is moving in the right direction. And the average lease rate for warehouse/distribution space is flat at $4.02 per sf, compared with $4.08 per sf last year.
Where the market is ailing is still in the flex space. The flex space vacancy rate has steadily been rising since it was at 8.5% in 2001. At the end of the year, Zatz is projecting it will hit 14.1%, the highest it has been in more than a decade. Like the warehouse sector, the flex space rental rates will be virtually unchanged from 2004, ending the year at an average rate of $7.54 per sf, compared with $7.57 per sf in 2004.
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