Future Cities
Emerging Industrial Markets: Denver
June 19, 2020 5 Minute Read
Metro Denver continues to post robust fundamentals, as national occupiers and investors are increasingly attracted to the region. A boom in e-commerce and population growth has contributed to robust industrial demand and positions the market for continued growth. Denver’s diverse economy has kept it relatively insulated from the COVID-19 economic downturn and creates a dynamic industrial market that can capitalize on rising growth in cold storage and flex offerings.
Key Strengths
Metro Denver’s central location, demographics, diverse business climate and emerging development corridors make it an attractive market for major distributors, e-commerce companies and national investors. Occupiers continue to close new deals for warehouse space, as distributors look for nationally central locations to serve more customers. Investors and developers have turned to formerly unused corridors as viable sites for new development. Historically, the east-west corridor through the city, particularly the farthest east portion near Denver International Airport, has been the hub of industrial activity. While this market has the largest share of Denver’s total industrial space, developers have been building new facilities along the city’s north-south corridor and farther west near Boulder, where technology and aerospace companies need more specialized industrial space than existing warehouses to the east can provide.
Demographics
Of the 3.7 million people who live within a 50-mile radius of Downtown Denver, nearly a quarter of them are in the 18-to-34-year-old Gen Z and millennial demographic. These population cohorts are among the biggest consumers and do the most online shopping. Denver has recorded net migration of nearly 300,000 people from 2010 to 2019, representing approximately 9% of its total population. Despite having a relatively young population, Denver’s median annual household income is just over $80,000—more than 30% higher than the national average. This makes Metro Denver one of the fastest growing last-mile industrial markets in the country.
Figure 1: Denver Population Analysis Distance from Downtown Denver
Source: CBRE Labor Analytics.
The influx of distribution occupiers has increased the number of warehouse workers in the region. According to CBRE Labor Analytics, 35,210 people work in the local distribution industry, with a forecast increase of 18.9% over the next 10 years. The average salary for non-supervisory warehouse workers is $14.14 per hour, 5.2% higher than the national average.
Figure 2: Warehouse & Storage Labor Fundamentals
Source: CBRE Labor Analytics.
Logistics Driver
Denver International Airport (DIA) is the fifth-busiest airport in the U.S. by passenger count, with 64 million travelers using it each year. The airport’s 24-hour cargo operation handled more than 302,000 tons of cargo from January through November 2019, up 9% from the same period in 2018. At 25 years old, DIA is also one of the newest international airports in the country and is currently undergoing an expansion that will increase its capacity by adding 39 gates. An overhaul of the airport’s common areas to improve passenger experience and flow also is underway. A commuter rail line connecting DIA to downtown Denver was completed in 2016. Freight service is provided to the metro by the BNSF and Union Pacific railways, as well as smaller regional rail systems. Colorado’s two major highways, I-70 and I-25, connect metro Denver to neighboring states.
Supply and Demand
While new industrial construction totaling 8 million sq. ft. is at its highest level since the late 1990s, the metro’s overall industrial vacancy rate remains relatively low. About 66% of the year-end 2019 construction pipeline was speculative space and about one-fifth of the 5 million sq. ft. of completions last year were preleased. Direct vacancy rates decreased 10 basis points in Q1 to 6.5% but increased 180 basis points over the past five years because of new construction. Notwithstanding, the direct average triple-net asking rent rose by nearly 20% over the same period to $8.78 per sq. ft.—well above the national average. Despite the COVID-19 downturn, a 10-year-run of positive net absorption should continue as warehouse, distribution and e-commerce users capitalize on higher rates of online shopping.
Figure 3: Denver Historical Data
Source: CBRE Research, Q1 2020.
Figure 4: Denver Size Range Comparison
Source: CBRE Research, Q1 2020.
Emerging Industrial Markets
Spotlighting markets across North America that offer demographic, logistics and incentives advantages for industrial investors and occupiers
Contacts
Spencer Levy
Global Client Strategist & Senior Economic Advisor, CBRE
.jpg)
James Breeze
Vice President, Global Industrial and Retail Research
John Morris
President, Americas Industrial & Logistics, Advisory Services
