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Denver’s Retail and Multifamily Markets Thrive, Despite Office Vacancy Surge

Denvers, Markets, Multifamily, Office, Retail, Surge, Thrive, Vacancy

Despite the climbing office vacancy rates, Denver’s retail and multifamily markets continue to display remarkable resilience, making them attractive investment opportunities in the city’s real estate sector.



According to CBRE’s Q3 market reports, the leasing fundamentals for downtown Denver’s office spaces are improving steadily, although the vacancy rate has increased slightly. On the other hand, the sublease space in Southeast Denver’s office market is decreasing, but this translates to an increase in direct vacancy.

Denver’s retail market has remained stable despite economic uncertainty. In Q3 2023, there was positive net absorption of just under 25,000 sq. ft., bringing the year-to-date total to a positive 485,000 sq. ft. The vacancy rate increased slightly to 6.0%, while the total availability rate increased to 6.5%. The average asking rent in metro Denver saw a healthy increase of 1.8% quarter-over-quarter to $19.90 per sq. ft. NNN. The construction pipeline exceeded 486,000 sq. ft. in Q3 2023.

In the multifamily sector, the overall occupancy rate increased to 94.3% in Q3 2023, surpassing the historical average of 94.4% for that quarter. The average asking rent also increased to $1,934 per unit or $2.22 per sq. ft. Development activity seems to have peaked, with 35,300 units under construction spread across 139 properties. Demand remained strong, with positive net absorption of 3,326 units in Q3 2023 and 7,822 units year-to-date.

In terms of transactions, Q3 2023 saw a significant increase in transaction volume to $1.05 billion, up 126.7% quarter-over-quarter. However, this was a 12.4% decrease compared to the previous year. Notable new developments include the rise in total vacancy for downtown Denver office spaces to 30.6%, with Class A vacancy reaching 23.1%. There was negative net absorption of 381,600 sq. ft. in Q3 2023, bringing the year-to-date total to negative 477,300 sq. ft.

In Southeast Denver’s office market, there was negative net absorption of 558,000 sq. ft. in Q3 2023, the highest negative amount since Q2 2022. Leasing activity increased by 36.6% quarter-over-quarter to 433,000 sq. ft., with Class A buildings accounting for the majority of activity. Sublease availability decreased for the second consecutive quarter, reaching 1.8 million sq. ft. The vacancy rate increased to 21.3%, while direct vacancy rose to 17.8%. The average direct asking rent increased to $28.41 per sq. ft. FSG.

Overall, the Denver market is experiencing mixed results across different sectors. While the retail market remains stable and the multifamily sector displays resilience, the downtown and Southeast Denver office markets face challenges with increasing vacancy rates and negative net absorption. However, there are still notable developments and positive signs in leasing activity and transaction volume.

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