DENVER-The area industrial market is improving, but much like the metro area economy, is lagging the national economy. That is the word from Steve M. Hager, an industrial broker and director at Cushman & Wakefield, who has been involved in more than nine million sf in the sale, lease and build-to-suit transactions worth more than $250 million in his career.

In his mid-year forecast, Hager says the metro-area warehouse and distribution space vacancy was 8.9% in the second quarter, compared with 9.2% in the first quarter of 2004 and 7.1% in the second quarter of 2003. The average rental rate in the second quarter fell to $4.06 per sf from $.26 per sf in the first quarter and $4.96 per sf in the second quarter of 2002.

For flex space, the direct vacancy rate is 12.4% compared with 12.7% in the first quarter and 12.5% in the first three months of 2003. The average rental rate for flex space is $7.55, unsightly from the $7.45 in the prior quarter, but down from $7.84 per sf a year earlier.

“Lease rates continue to deteriorate, but are stabilizing,” Hager says. “Leasing activity is healthy with slight increase. And we still had good, positive absorption in the second quarter.”

Hager says tenant retention remains the No.1 priority of landlords. Indeed, tenants continue to enjoy strong negotiating power, Hager notes.

“Tenants will remain in control of negotiations for the remainder of 2004,” Hager says. “Vacancy rates will begin to fall and will decline gradually. But rental will remain flat with limited rental rate growth until 2004.”

However, Hager says the year will end with positive absorption, and user and investment sales will remain strong until interest rates rise. He says that there is 1.2 million sf of spec development on tap this year, a moderate amount. The spec space will provide the class A warehouse product with high ceilings, state-of-the-art sprinkler systems and multiple docks, Hager says. Class A warehouse space will outperform older products, as the flight to quality will continue, according to Hager.

“Denver is emerging as a regional distribution hub that needs larger warehouse requirements,” he says. He notes that under “just in time” delivery systems, products are expected to be delivered within a day or two after they are ordered. Local demand drivers will include suppliers to residential and commercial developments; vendors to public improvement projects; and consumer spending along the Front Range.

The key to recovery, Hager says, will be continued growth in national and local economies; increased consumer confidence; and an increase in manufacturing.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

 

GlobeSt Net Lease Spring 2024Event

This conference brings together the industry's most influential & knowledgeable real estate executives from the net lease sector.

Get More Information
 

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2024 ALM Global, LLC. All Rights Reserved.