Navigating Retail Landscape of Colorado

 Evolving Colorado Retail Landscape

The Colorado retail market has seen significant shifts in recent years, according to the comprehensive report generated Q4. Let's dive into the key highlights and insights that investors and industry professionals need to know.

Steady Decline in Vacancy, But Forecasted Increase Ahead

The Colorado retail market has experienced a steady decline in vacancy rates, from 11.9% in 2009 to 7.5% in 2023. 1 However, the report forecasts a gradual increase in vacancy, reaching 10.4% by 2029 under the "downside scenario 2" (Y-S2). 1

Stable Asking Rents in Denver, Outperforming Regional and National Trends

The asking rent in the Denver market has remained relatively stable, with a modest increase from $22.50 per square foot in 2009 to $23.50 per square foot in 2023. 1 In comparison, the Western region and the United States have seen more fluctuations in asking rent over the same period.

Submarket Performance: Varied Dynamics Across Colorado

The report provides detailed data on the performance of different submarkets within Colorado. For instance, the Northwest submarket has a vacancy rate of 7.5% and an asking rent of $16.38 per square foot, while the Midtown/CBD submarket has a higher asking rent of $24.50 per square foot and a matching vacancy rate of 7.5%. 

Construction and Absorption Trends: Volatile Dynamics

New construction has been limited, with only 15,000 square feet of new space added in 2022. 1 Absorption rates have fluctuated, reflecting the market's response to new developments and the balance between supply and demand.

Transactions and Trends

The report provides insights into the sales trends and recent transactions in the Colorado retail market. For example, in Q4 2023, there were 100 sales with an average sales price of $250,000, a decrease from the previous quarter's 120 sales with an average price of $275,000. 1The 10 largest transactions in Q4 2023 ranged from a 10,000 square foot property in the Northwest submarket that sold for $1.5 million to a 5,000 square foot property in the Midtown/CBD submarket that sold for $1.2 million. 

Scenarios and Forecasts: Potential Risks and Opportunities

The report presents several scenarios for the Colorado retail market, including "downside scenario 1" (Y-S1) and "downside scenario 2" (Y-S2). 1 These scenarios provide insights into potential future trends in asking rent, vacancy, and inventory growth.Under the Y-S2 scenario, the Midtown/CBD submarket's vacancy rate is forecasted to reach 8.5% by 2026, while the Denver market as a whole is expected to see a vacancy rate of 8.9% by 2024. 1 The report also includes projections for inventory growth, with the Northwest submarket expected to see a 0.0% change in inventory under both the Y-S1 and Y-S2 scenarios from 2024 to 2026. 1In conclusion, the Colorado retail market appears to be navigating a period of change, with a mix of positive and challenging dynamics. The detailed data and insights provided in this report can be invaluable for investors, developers, and industry professionals looking to make informed decisions in this vibrant market.1 Moody's Analytics, MA-CRE-Denver-Report, April 4, 2024.