Commercial Investors See Denver Industrial Property Headed Up

In a lecture at the Denver Metro Commercial Realtors Association (DMCAR), Paul Kluck of Trammel Crow shared his views on the current Denver Metro industrial property market.

The net absorption (demand) of industrial properties in this market in 2006 is increasing significantly from the downturn of 2002 through 2005. This is an increase of approximately 1 million square feet net absorption in 2005 to 4 million in 2006. Correspondingly, vacancy rates have been declining. Even though demand is increasing, speculative building has not created any significant supply in 2006 to fill that demand. This year has seen only 1 million square feet added in new construction.

In Klucks’ view, Denver experiences cycles in the Denver industrial property market every 8 to 10 years, moving through 4 cycles: Phase 1 Recovery, Phase 2 Expansion, Phase 3 Hypersupply and Phase 4 Recession. He believes we are at the end of Phase 1 and starting to move into the Phase 2 Expansion which is indicated by declining vacancies, new construction and growth in rents. This would give the local market another 4 years of upside investment potential. Major developers - ProLogis, Majestic, Pauls Corp, Lauth, Mountain West, Panattioni and Opus - have plans in 2007 to add 2.2 million square feet in speculative building to take advantage of the increasing demand.

If you wish to contact Paul Kluck, you may email me at stevehewson@comcast.net . See our Website.