Denver commercial real estate continues to improve in Q2. All three submarkets of Denver commercial real estate showed stronger numbers both in vacancy and increased lease rates. Denver office space market showed the lowest Q2 direct vacancy rate at 13.7% which was the lowest in any quarter since 2008. The average lease rate for Denver office space for Q2 came in at $21.61 per square foot. All three submarkets show steady improvements partly because of the continued growth in the energy, technology and health care sectors.
Denver office space:
More than 398,836 square feet of Denver office space was leased than vacated which brings the total net absorption to 1.1 million square feet year to date which is 53,233 square feet more compared to 2012’s Q2. The majority of the absorption occurred in downtown and southeast submarket with a total of 723,448 square feet absorbed with an additional 925,632 square feet of office building being constructed in those two submarkets. On the investor side, more than 3 million square feet of Denver office space traded hands in Q2 totaling $592.2 million which is more than double the amount sold in Q2 2012. Most of the sold office buildings were in the downtown and northwest submarket. The downtown was the leader again with an average lease rate of $29.15 (full service), followed by the northwest market at $24.16 per square foot.
Denver industrial space:
Direct vacancy rate for Denver industrial space inched slightly down a little to 4.8% vacancy while average lease rates increased slightly to $6.07 per square foot, up marginally from Q1’ $5.98. Speculative development continues to strengthen with 1.6 million square feet under construction with the majority coming from two large developments: Highfield Business Park in the southeast area and the other in the Majestic Realty industrial campus in the Airport/Montbello submarket. Aurora had the highest average lease rate at $8.39 while the Airport/Montbello submarket came in at an average of $3.88 per square foot.
Denver retail space:
Denver retail space continued to show improvement, dropping to 7.2%, slightly down quarter-over-quarter. More than 32,000 square feet of Denver retail space was leased than vacated in Q2 with the majority of leasing activities led by grocery retailers. Furniture, electronics and appliance stores also showed strengthening because of the elevated demand in residential real estate. The Colorado Boulevard – Midtown submarket which includes Cherry Creek continued to be the leader of the pack posting the highest average lease rate at $23.14 per square foot and the lowest vacancy rate at 4.9%. Average lease rates for Aurora stood at $13.02 while the northeast submarket posted the highest vacancy rate at 14.9%.