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DENVER-Increasing job growth and decreasing construction activity bodes well for the metro-area industrial market next year, according to a Grubb & Ellis Co. analysis of the market. These two factors should increase the rate of absorption, although rental rates will be somewhat constrained because of the still large amount of vacant space, the report notes.

Value-priced space will see heightened interest from tenants seeking bargains, Grubb & Ellis predicts. However, large-user spaces will be the last to recover, the company notes, because it is heavily reliant on significant expansion or new large corporations entering the market, neither of which appear to be trends in the Denver area.

In fact, the number of large, single-user vacant spaces has been increasing in recent quarters, Grubb notes. This is a trend that will continue. It points to the Denver Post newspaper printing facility that will be vacated as the Post and the Rocky Mountain News build new presses, as one project that will add industrial space to the market.

Leasing activity, the report notes, will show continued reliance on small- to mid-size tenants. In the late 1990s, it was a different story. At that time, larger tenants entered the market, soaking up space.

On the bright side, the “long suffering R&D/flex” market will finally get some relief, as the resurgence of biotech and bioscience firms are again in a growth mode and receiving significant venture capital funding, the report notes. “However, these sub-types may be hindered by numerous companies that purchase space with Small Business Administration or other similar loans and occupied 51% of the space, intending to lease the remainder,” Grubb & Ellis notes.

Overall, rental rates will increase, although at a slower pace “due to the specter of increasing energy prices,” the report notes. Grubb& Ellis also points to the purchase of Catellus this year by Aurora-based ProLogis, as a significant move. It “places Denver on the map in terms of major developers in the market, thus staging the market for future growth,” the report says.

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