Denver Industrial 2024 Year-End Summary
Market Overview
- While sales volume for Denver industrial fell below the 10-year average in 2024, it surpassed the figures recorded in 2023. Transaction volume increased by 74% and transaction velocity rose by 73% YOY.
- The debt market in 2024 presented challenges for investors due to high interest rates and strained financing, yet industrial emerged as a bright spot. With the lowest CMBS delinquency rate (0.3%), industrial assets have shown consistent growth and remain a top investment choice.
- Denver’s high availability rate and construction boom have widened the bid-ask spread. However, with an improved economic forecast for 2025, the spread is expected to narrow as buyers and sellers realign on pricing.
By the Numbers
- Sales Volume: $1.6B
- Number of Properties Sold: 469
- Market Sale Price per SF: $157.35
- Vacancy Rate: 8.01%
- Rent Growth: 1.24%
- Average Rent per SF: $12.27
- Under Construction SF: 4,975,437
- Construction Starts SF: 2,603,031
- Net Absorption SF: 3,944,718
Sales Activity
Denver’s overall industrial market recorded $1.6 billion in 2024, marking a 32% decline compared to the 10-year annual average and a 67% drop from the peak of $2.9 billion in 2021. However, for the 5,000 to 200,000 SF range, property sales steadily increased in 2024, recording $447M in Q4 2024 alone, a record-high quarter for the past 3 years.
The rapid rise in debt costs and a wide bid-ask spread contributed to the slowdown in 2024 compared to the high-growth periods of 2021-2022, but buyer and lender sentiment is expected to be more optimistic in 2025. Notable transactions in 2024 included the sale of DIA Logistics Park, a 625,000-SF property that sold for $96.3 million at $154/SF, and Building 1 at 9940 Havana Street, which traded for $72.2 million at a record $258/SF. These significant deals highlight a bifurcation in the market, with investor interest concentrated on high-quality assets despite the overall decline in activity.
Denver’s industrial market is expected to see a more balanced investment environment in 2025 as pricing adjustments and increased availability create opportunities for buyers. Despite the average price per square foot increasing from 2023 to $164.77, it stabilized from the highs and lows experienced the year prior, reflecting a narrowing bid-ask gap as sellers adopt more realistic strategies amid growing buyer leverage. This trend, combined with the anticipated effects of rate cuts and improving lender sentiment, sets the stage for increased sales volume as market pricing aligns with expectations.
Vacancy, Rents, and Construction
Denver’s industrial market is undergoing a significant shift as developers pull back amid rising interest rates and tighter lending conditions following a construction boom that peaked in 2022. New starts have declined by 83% YOY totaling just 565 million square feet in 2023-79% below the pre-pandemic five-year average. Despite this slowdown, the construction pipeline remains robust, with over 4.5 million SF scheduled to be delivered in the near term further pressuring vacancies. The vacancy rate rose to 7.6% in Q4 2024, well above the 10-year average of 4.7%, with the big-box segment particularly impacted by oversupply. Availability rates for properties larger than 500,000 SF have climbed to 13.1%, and vacancy rates in the 5,000 to 200,000 SF segment remain elevated at 7.61%.
Rent growth has also softened, with average industrial rents rising by just 1.24% annually in 2024, a significant drop from the pre-pandemic five-year average of 6.8%. In the 5,000 to 200,000 SF segment, rent growth declined to 1.4% but is forecasted to rebound in 2025 and stabilize at around 5%. Smaller properties, particularly in the need small-bay segment square footage, continue to outperform due to strong tenant demand and limited new supply, with availability rates at just 3.7% and rental rates commanding premiums. Flex spaces and properties under 25,000 SF also remain resilient, averaging $16.75/SF and $15.06/SF, respectively. As developers shift focus toward build-to-suit projects and smaller developments that cater to small and midsize tenants, the slowdown in speculative construction is expected to help stabilize vacancy rates and balance market fundamentals. By 2025-2026, tightening space availability and decelerating new supply could create conditions for a gradual recovery in rent growth.
