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Denver - Demand Outpaces Supply

by Joe Monzon, Denver, August 2013

 

If the predictions of local brokers are correct, commercial property values will rise across-the-board in Metro Denver.

 

Local experts appearing at the mid-year forecast meeting of the NAIOP Commercial Development Association said it's a case of a lot of capital chasing a very limited supply of product.

 

Office

 

"Job growth is fueling companies leasing space. And Denver has one of the highest job growth rates in the nation," according to Doug Wulf of Cassidy Turley Colorado. Wulf said there are no big blocks of office space more than 100,000 square feet left on the market and very little Class A space.

 

Metro Denver showed the largest first-quarter decline in office vacancy rates among the nation's 12 largest markets, according to a survey by CBRE. The office market is seeing a marked increase in activity from tenants in both technology and business services.

 

Retail

 

Brad Lyons, CBRE's investment broker of the year said the retail investment market in Denver and surrounding areas has been on fire for the past 18 months. "There's a wall of capital pursuing limited supply," Lyons said.

 

As an example, Lyons pointed to a pending deal for the South Denver Marketplace, a power retail center expected to close for as much as $250 square foot with a cap rate nearing 5%. "We've never seen a power center trade at sub 6% in Denver," he explained.

 

Industrial

 

"While the industrial sector isn't sexy, it's the only one enjoying speculative development with 1.5 million square feet being delivered this year and another 2.2 million square feet in the pipeline," reported T.J. Smith of Colliers International.

 

Investment sales have also been strong. Smith said industrial investor demand in Denver is unprecedented because there's simply not enough supply.

 

More Time to Appeal

 

As Denver's commercial real estate markets recover and grow, property owners will have more time to challenge an overstated tax assessment from this year's revaluation.

 

Under a new pilot program, the appeal deadline has been pushed back to November 15th for the City and County of Denver. In addition, the appeals system has been streamlined into a single hearing before the Denver Board of County Commissioners.

 

If Denver's pilot program is a success, it could eventually be adopted statewide.