2010 Forecast for Denver Commercial Retail space

September 22, 2009

The Denver Commercial Retail space market forecast for 2010 and beyond does not look very good. 

According to CB Richard Ellis, the demise of Circuit City and Linens n things has left over 50 big box retail spaces vacant.  Cyberhomes Denver Commercial Market forecast takes a look at both office and retail space in September, 2009 and finds the outlook for sales and leasing to be very slow.  To make matters worse, there is 1.2 million square feet of commercial retail space currently under construction.

Current CoStar statistics

However, according to CoStar analysis of the Denver retail market there is, as of September, 2009, 133 million square feet of retail space in the Denver area with 12.9 million vacant and 15.7 million square feet becoming available.  This implies a vacancy rate of 10% currently with a soon to be available vacancy rate of 12%.  Yet, the forecast from CoStar is for a 2011 vacancy rate dropping to 9.5%.  Considering that the net absorption rate is currently zero, there will have to be a significant recovery in demand to fill that much space and that is not even accounting for the 1.2 million square feet that is under construction. 

One Commercial Broker Opinion

I find it difficult to believe the rosy forecast coming from CoStar, unless landlords suddenly drop their asking lease rates dramatically.  Many of these vacant retail properties will become REO's or go into default and be sold (or have their notes sold by the banks).  These distressed properties will certainly create a downward pressure on lease rates and property sales prices going forward.  As always marketing an REO property is more important than the pricing of the property.  We are not saying that lease rates and price points are unimportant, simply that pricing is secondary to marketing.  Currently the average lease rate in the Metro Denver area for commercial retail space is $16.5 dollars NNN, with a low of $5 and a high or $55.69.