There's no doubt that the Mile High City has been reeling lately from the country’s current economic downturn. At a time when other cities have experienced a significant decline, Denver has held on to a majority of its retail due in large part to business sectors, such as renewable energy and governmental agencies, choosing Denver for their headquarters and the unemployment rate remaining at around 7 percent, which is below the national average.
While vacancy rates also remain below national averages, hovering around 10 to 12 percent, supply for retail space remains higher than demand. Although construction projects are happening downtown and in areas with high residential populations, developments have slowed greatly. Most projects currently under construction started either before the downturn with tenants already committed or were put on hold. One such project in the final stage of completion is the redevelopment of SouthGlenn Mall in Centennial. The entire mall—except for anchor stores Sears and Macy’s—was demolished in 2006 and completely rebuilt as a mixed-use center called The Streets at SouthGlenn. With nearly 1 million square feet of retail space, 140,000 square feet of office space and 200 luxury residences, the first phase of The Streets at SouthGlenn opened in the summer of 2008. This fall, the final phase was completed with the opening of Hollywood Theaters and the specialty lifestyle retail portion of the center. The project is currently more than 70 percent occupied.
While proposed new retail developments in the suburbs have mostly been put on hold or eliminated, downtown Denver continues to offer opportunities for retailers. One such downtown project is the first phase of Union Station, a commercial and residential property development incorporated in and around the operating historic train station. The 1.35 million-square-foot project was slated to begin this fall but now has been delayed until the first quarter of 2010. The retail space will include anchor locations in single and multi-level formats to accommodate some of the larger box discounters and grocers that have not been able to secure downtown locations previously.
Entertainment retail also continues to flourish in Lower Downtown, known as LoDo, because of its successful residential projects and prime location. The opening of Coors Field in 1995 began a steady redevelopment of the areas surrounding it. Leasing activity remains very healthy driven by continued success of the bars and restaurants in the LoDo area. At the other end of downtown, the Denver Pavilions, a 347,000-square-foot open-air retail, restaurant and entertainment complex located on the 16th Street Mall, is currently undergoing a $25 million renovation. Forever 21 has expanded here to create a 32,000-square-foot flagship store that will open in spring 2010.
Denver hasn’t seen many retailers leave or close due to local market conditions; however, some of the national retail failures, including Circuit City and Linens ‘n Things, have created a number of larger box vacancies. Currently, there are more than 60 spaces in excess of 20,000 square feet in the Denver metro area, but a few retailers are vying to gobble up the space. Hermes, the French fashion house, recently opened a 3,000-square-foot store in Denver's Cherry Creek North shopping district. IKEA plans to open a 400,000-square-foot outlet on the Centennial border near Park Meadows. Both Hermes and IKEA are new to Colorado.
Anyone fortunate enough to visit Denver can attest to the physical beauty of the area’s landscape. Scenic locales like Rocky Mountain National Park, Red Rocks, Garden of the Gods, and the many ski resorts throughout the area have long been magnets for tourists. The 2008 Democratic National Convention and the addition of sports venues have raised the profile of the city, which may have helped the retail market of the downtown area remain stable compared to the rest of the country. In comparison to the 1980s recession, Denver has a positive projection and one that will be survivable for strong retailers.
— David Larson is an X Team International partner and Founding Partner of Legend Retail Group in Denver.