Trends driving CRE lending in the Mile High City
Denver is enduring as one of the best markets for these asset classes
In the recent years, Denver’s commercial real estate (CRE) activity has experienced tremendous growth.
It’s easy to see what makes this market so appealing. As multifamily and industrial developments remain strong nationally, Denver is enduring as one of the best markets for these asset classes.
According to CBRE’s 2019 Americas Investor Intentions Survey, Denver entered 2019 tied as the fifth-most attractive investment market in the country across all asset classes, continuing its gradual improvement since ranking ninth in 2016. Similarly, Denver ranked second in DLA Piper’s survey of cities in which CRE investors will make investments in the year ahead.
The following are some of the key CRE trends in the Denver metro area.
Rockin’ the suburbs
While Denver’s central business district continues to be the epicenter of office investment, multifamily and industrial investment in suburban areas showcases the Mile High City’s dynamic CRE climate.
Downtown and the central business district, or upper downtown, afford little space for new development, but investment opportunities abound for many asset classes as the greater Denver area continues to be a hub for relocated talent and corporations. As such, multifamily developments remain an attractive investment — even as the class begins to reach saturation in other markets.
In fact, Census data shows that the metropolitan’s population has increased by more than 15% since 2010, and along with population growth comes an opportunity for future office investment throughout the metropolitan area.
That well certainly hasn’t run dry in the central business district, despite nearly half of office investment in 2018 occurring in the district. Meanwhile, the greater Denver metro remains fruitful, especially if the region keeps attracting talent at its current rate.
Unique retail opportunities remain
Denver continues to boast a strong economy and is considered one of the country’s most desirable places to live. As such, the city’s retail sector hasn’t experienced as drastic of a downturn as other like-sized markets, in terms of vacancy rates.
However, that doesn’t mean brick-and-mortar retail is immune to disruption from e-commerce. Power centers and big box retail centers will need to be repositioned, neighborhood centers with needs-based retail and service retail will continue to be utilized, and grocery and other same-day delivery services will continue to transform the retail landscape in Denver. Areas surrounding multifamily and mixed-use developments throughout the metro offer promise for investment, particularly in the trending experiential retail subcategory — such as the Dairy Block or Aurora’s Stanley Marketplace.
While the CRE industry can be very unpredictable, Denver has shown itself to be a prosperous CRE investment hub for the near-term.
Matthew Marker is the regional manager of commercial real estate at UMB Bank. In his role, he oversees UMB’s commercial real estate business in Colorado. Marker has more than 20 years of industry experience and has managed real estate portfolios throughout the Denver metropolitan area since 2003.