In BSW Blog, BSW News, Economic Outlook

Cloudy, with a chance of sun…

…was the overarching theme in NAIOP’s (the Commercial Real Estate Development Association) Mid-Year Real Estate Market Forecast for the Denver Metro area.  NAIOP is the country’s leading organization for commercial real estate developers, owners and related professionals.  Tina Ottersberg, BSW’s resident expert in real estate matters, attended the July 19th NAIOP event to meet with Denver’s top real estate professionals and hear their thoughts on the area’s commercial real estate market.  Keeping up-to-date on market dynamics enables Tina, and BSW, to better assist clients in managing their own real estate assets, whether they be a primary residence or various investment properties.

NAIOP’s Mid-Year Forecast for the Denver metro area featured the opinions of this year’s top real estate brokers on each of their respective commercial sectors and the outlooks varied widely.  So where is the sun expected to peak through?  Eyes are still on multi-family  as an area of opportunity for increasing performance of existing properties, and the consensus seemed to be that new office development is risky business for today (see chart).

Office space absorption in the Denver downtown and surrounding core is generally expected to be slow for the coming years.  Of concern for Denver is the age of downtown office space and the lack of Leed certified buildings, making it difficult for Denver to attract new corporations when competing with other U.S. cities.  However, office space located next to light rail is seeing improved absorption rates and increased rental rates over comparable space without light rail access.

Industrial space in the Denver Metro area has seen very little new construction in recent years; this lack of new construction has largely contributed to stabilization of rents in the market.  While some desire exists for “new generation product” (flexible space, energy efficient, etc.), demand for new construction will remain limited until businesses begin to grow again.

Of the four commercial real estate sectors, one of the more interesting was the retail sector and the insights into the future of this segment.  Over the past ten years, retailers nationwide have been slow to accept the changes brought about by the internet and online purchasing, particularly how a more virtually connected world affects their approach to brick and mortar locations.  Complicating these shifting forces is the influence of smart phone technology.  How will retailers respond to a smart phone user’s ability to access multiple purchasing options instantly, either at physical locations or online?  How will retailers access and use demographic data gathered through smart phones, including how often someone goes to a shopping center and their patterns of movement while there?  The future development of retail real estate will face these challenges, not only in Denver but the broader U.S. as well.

To sum up NAIOP’s Denver Mid-Year Forecast, the commercial real estate market for the metro area is fairing the economic recovery relatively well compared to the broader U.S.  Denver is currently ranked in the top ten cities with respect to recovery of its real estate market, a better position than in previous post-recession recoveries.  Hurray for Colorado’s 300 days of sunshine!

Tina Ottersberg (formerly Stenquist), Planning Associate

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