The Denver industrial real estate market stopped its 2008 free-fall and stabilized in the second half of 2009. A recipe of back-to-back quarters of positive absorption and no new speculative construction caused the vacancy rate to hold steady at 8.6 percent. Tenants are still vacating blocks of space as leases expire, and the weak economy continues to take its toll, but statistically this has been somewhat offset by the lack of new product coming to market and a handful of tenants relocating or expanding.
The renewable energy sector had a dramatic impact on the Denver industrial market in 2009 as solar-panel and wind-turbine manufacturers continued to make large investments in the Front Range. As a result, the area is experiencing a ripple effect as smaller tenants are entering the market to fulfill the raw-material requirements and installation needs of these manufacturers. In addition, the U.S. Department of Energy recently awarded more than $75 million in advanced energy manufacturing funds through the Recovery Act to six Colorado clean-tech companies. Hopefully these tax credits will be the foundation for continued job creation and reinforce the Colorado manufacturing industry in 2010-2011.
The major development projects currently underway are two buildings totaling 660,000 square feet for Vestas Wind Systems just north of Denver in Brighton, Colorado. All new speculative construction remains on hold, while the only new buildings getting the green light are build-to-suit projects for solid credit users.
The Colorado Springs industrial market is showing signs of stabilization, but it finished 2009 with a total negative absorption of 381,700 square feet and a total vacancy rate of 14.6 percent. The majority of that negative absorption came in the first and third quarters with flex space having the highest vacancy rate at 16.5 percent. Almost all new construction has come to a halt in the Colorado Springs market, and as quoted lease rates continue to decrease expect the vacancy rate to stabilize in all sectors.
Vestas Wind Systems is also making a significant investment in southern Colorado. The company is currently under construction on a wind-turbine tower manufacturing facility in Pueblo, which when completed should create a significant number of jobs.
After a challenging 2009, the latest numbers show that Colorado's Front Range industrial market is poised for a steady recovery in 2010 and 2011.
— Brady Welsh is in the industrial properties group at Bitzer Real Estate Parters/CORFAC International.