Introduction
Historical and projected retail market trends in the Denver Metropolitan Area (DMA) and the Colorado Blvd/Cherry Creek (CC) market are discussed, through the end of 3rd Quarter 2016. Figures below were given by CoStar.
Inventory of Retail Space
Overall DMA Market: 196.25 million square feet
Colorado Boulevard/
Cherry Creek Submarket: 5.37 million square feet, 2.7 percent of the total market
New Inventory: In the overall, DMA market 23 buildings and 362,448 square feet of retail space was brought to market in the 3rd Q 2016. Year to date delivery of retail space in the DMA was 1,071,831 square feet. For the CC submarket, in 3rd Q 2016, 1 building and 15,840 square feet of new retail inventory was brought to market 41,313 square feet of retail inventory has been brought to market year to date.
Comments: 100 percent of retail space delivered in the CC market year to date has been general retail space.
Vacancy Rates
Overall DMA Market: 9,142,154 square feet of total retail, or a vacancy rate of 4.7 percent. Of which, 1,953,699 square feet is general retail space, representing a general retail vacancy rate of 2.4 percent.
Colorado Boulevard/
Cherry Creek Submarket: 93,176 square feet of total retail, or a vacancy rate of 1.7 percent. Of which, 33,905 square feet is general retail, representing a vacancy rate of 1.8 percent for the general retail category.
Comments: The DMA has been experiencing consistently lower vacancy rates in the total retail category from 2006 (7.4 percent) to 3rd Q 2016 (4.7 percent). There were significant deliveries of retail space in the years leading to the great recession (2006-2008), but since that time, annual deliveries have fallen sharply with only 1,674,052 square feet in 2015, compared with 6,643,629 square feet delivered in 2006.
Net Absorption
Overall Market: Net absorption for the total retail market in the DMA was 414,201 square feet in the 3rd Q 2016, and 1,574,769 square feet year to date. For the general retail category, net absorption was 176,698 square feet in the 3rd Q 2016, and 685,895 square feet overall.
Colorado Boulevard/
Cherry Creek Submarket: Net absorption in the 3rd Q 2016 was 15,818 square feet with a year to date total of 14,580 square feet in the total retail category. General retail in the 3rd Q 2016 saw a net absorption of 2,243 square feet.
Comments: 2016 net absorption of total retail in the CC submarket experienced quarters of negative and positive net absorption, leaving a year to date total lower than the net absorption in the 3rd Q 2016.
Rental Rates
Overall Market Average: Total retail market $15.99 PSF, which is up 12.2 percent since 4th Q 2012. The general retail market was $17.62 PSF in the 3rd Q of 2016.
Colorado Boulevard/
Cherry Creek Submarket: Total retail market $27.15 PSF, up 17.0 percent since 4th Q 2012. General retail is currently $33.56 PSF in the CC submarket.
Comments: The CC submarket is home to many high-end retail destinations and thus rental rates have tended to be higher historically in the CC submarket compared to the DMA overall.
Summary of Retail Market Trends
Overall, rental rates for retail space in the CC submarket are historically higher than the DMA overall. Despite the higher rental rates, vacancy for retail, and general retail in the CC submarket remain lower than the DMA overall. Furthermore, in the CC submarket, there is currently 132,882 square feet of retail space under construction, of which 100 percent is fully leased.
General retail space, like the subject property, has seen an increase in demand all throughout the DMA since 2006, when vacancy rates were 6.3 percent. While there was an uptick in vacancy rates through 2009, general retail vacancy has been steadily declining from 7.4 percent in 2009 to 2.4 percent in the 3rd Q 2016.
As total retail inventory has been brought to market more slowly in the years 2010 to 3rd Q 2016 than in the years 2006 to 2009, and rental rates have shown modest increases in the years 2012 to present, we anticipate vacancy rates to remain low, and rental rates to show modest gains year over year if development continues at the current pace.