Denver Industrial Market Overview
Overview
Denver's industrial market stabilized in the past year as a slowdown in new construction completions coincided with an uptick in tenant demand. Still, the market remains more in tenants' favor due to the development surge between 2021 and 2023 that led to the sharpest vacancy expansion of the last decade. While the vacancy rate is not expected to rise much higher, at 8.6%, it is among the highest of any major U.S. market. Tenant demand accelerated in the past year along with key positive economic data, including an uptick in consumer confidence and wage growth rising above inflation. Most recent leases are in the East I-70 corridor, an area of Denver that offers convenient access to major highways, rail, and Denver International Airport, as well as proximity to a skilled labor force. Roughly 5.9 million SF is under construction, the lowest figure dating back to 2017. Following national trends, developers have pulled back on construction starts amid higher rates and tighter lending requirements for construction loans. This is setting the stage for fewer completions in the year ahead. Denver's industrial market will need to contend with an excess of available space before rent growth can recover to pre-pandemic norms. With vacancies expected to remain elevated in the near term, rent growth is projected to decelerate. However, the pullback in construction activity should limit additional supply pressure from hitting the market this year. With space availability likely to begin to tighten again in 2026, there's potential for rent growth to accelerate. Small bay properties are set to outperform, as the market remains dominated by small and midsize distribution tenants that serve the local population. With developers focused on bulk distribution centers in recent years, less new construction has been built to serve smaller tenants, and small bay properties remain in high demand with space listings that typically only last less than five months.
Vacancy & Lease Rates
Denver's vacancy rate stabilized in the past year as tenant demand came closer to matching new supply. Developers completed 1.9 million SF of new industrial product in the past year, compared to the trailing 12month absorption total of -160,000 SF. The vacancy rate increased by just 10 basis points in 2024, compared to the 170 basis point increase experienced in 2023 during the height of the building boom. Still, at 8.6% as of 25Q4, vacancy remains well-above Denver's 10-year average of 5.7%. Growth among tenants tied to renewable energy and electrification is playing a key role in powering the market's emerging recovery. In June 2024, Amprius Technology began its roughly 774,000-SF lease at a former Kmart distribution center in Brighton, where it is building out a factory for lithium-ion batteries for use in electric vehicles, drones and wearables. Additionally, Kratos Industries, a company that manufactures switchboards and other power control equipment, doubled its Denver-area industrial footprint by moving into a 1978-built manufacturing plant in Arvada. Market participants note that tenants are displaying a lack of urgency in securing industrial and flex space, and potential deals are taking longer to close. This can be attributed to an abundance of available space, but lease negotiations are also increasingly complex. Most tenants currently have the leverage to negotiate for larger tenant improvements and in some cases, discretionary allowances. As both landlords and tenants invest more to build out industrial space, lease terms have gotten longer and a 10-year lease term is not uncommon anymore. For example, BroadRange Logistics, a third-party logistics provider specializing in servicing the green energy sector, leased 1.1 million SF of modern distribution space within the 76 Commerce Center in a 10.5-year deal. Similarly, Quality Electrical Distribution leased 220,000 SF in a 2023-built distribution building within the Stafford Logistics Center in a 10-year deal. The majority of big box tenants continue to choose the East I-70 corridor, which has long served as Denver's traditional industrial node due to the area's convenient access to major highways, rail, and Denver International Airport. This area also has an abundance of available space offered at lower rental rates compared to denser areas in the market. Most of Denver's recent new inventory delivered to the market in the past year fell within the 100,000-SF to 250,000-SF range. Roughly 54% of logistics space added since 2023 in this size range remains available for lease.. More landlords are opting to subdivide spaces in this category to capture demand from Denver's typical small bay user. Demand for space at Denver's small-bay properties remains elevated, with 96% of deals signed within the past year totaling less than 50,000 SF. Availability in logistics space added since 2023 is notably lower lower, averaging 18.7%. Competition for this space will likely remain high in 2025 with limited new supply in this category. Denver's vacancy rate rose to a decade-high in early 2024 due to a major supply expansion. The vacancy increase was felt more acutely in buildings larger than 100,000 SF, which made up 85% of the construction pipeline. One silver lining for the market's outlook is that new construction starts have fallen off dramatically, which should limit additional supply pressure this year.
Rents
Industrial rents in Denver haved moved by -1.1% annually, lagging behind the prepandemic five-year annual average of 6.8%. The vacancy rate will likely remain high through 2025, causing rent growth to decelerate further in the near term to potentially to the lowest level recorded in more than 10 years. Average industrial rents across the Denver market are $11.60/SF, as of the fourth quarter of 2025. However, that figure includes rents for flex spaces and small bay properties, which typically rent for significantly higher rates on a per-SF basis. Flex rents currently average $16.50/SF, while the average advertised rent for spaces within properties smaller than 25,000 SF is currently $13.30/SF. Property owners typically offer lower rents for larger distribution spaces. Near Denver International Airport, an area that serves as Denver's primary logistics hub, rents are on the lower end of the spectrum due to an abundance of developable land that has allowed for outsized inventory expansion. A number of leases for early 2000s vintage spaces have been signed for rents between $6 and $7/SF recently. LockedIn Logistics LLC signed a 30,000-SF lease in Upland Park in May for $6.99/SF NNN. In November, Flexpax signed an 80,819SF lease for $6.95/SF NNN in the same park. Both buildings were constructed in the 2000s and feature 24foot clear heights with immediate access to I-70. New construction in the area can fetch over $9/SF. Lone Star Logistics leased 23,400 SF in a 2023-built distribution building with 30-foot clear heights just off Peña Boulevard for $10.75/SF NNN, and nearby The Lawless Group leased 26,460 SF for $9.50/SF NNN in a 2021built distribution building. Rents are highest closer in to central Denver and in suburban areas where developers face hurdles, limiting new construction. Broomfield, in northwest Denver, has some of the most stringent zoning laws aimed at protecting open spaces, and the limited amount of modern industrial space that is available comes at a premium. Park 36 built two warehouses totaling 67,500 SF each with 28-foot clear heights in 2024 and currently lists rents of $15.50/SF NNN. Also in Broomfield, grocery wholesaler The Feed recently leased 75,290 SF at a 2023-built distribution center with 28-foot clear heights for $13.25/SF NNN in starting rent. There is potential for rent growth to pick back up in 2026, when space availability will likely tighten given the limited number of speculative developments on track to complete mid-decade. However, Denver will be entering this recovery with a significantly higher vacancy rate than most major markets, which could still cause rent growth to trail the national average.
New Construction
Construction activity continues to decelerate across the Denver industrial market with 5.9 million SF underway, the lowest figure dating back to 2017. Construction starts have fallen off dramatically in the past year as developers face difficulties in obtaining financing for new projects. Big box speculative developments have been most impacted by tightening lending standards due to this segment's oversupply risks. Developers had been undertaking increasingly larger speculative projects across Denver during the supply wave spanning from 2021 to 2023, largely concentrating on the East I-70 corridor and the area surrounding Denver International Airport (DIA), where developable land is readily available. Hurdles, including permitting delays and labor shortages, impacted developments of all sizes, and building bigger became a more efficient use of time and capital. Properties 500,000 SF and larger have an availability rate of 10%, up from just 1% in late 2017. However, no speculative projects in this category have managed to get off the ground in the past year, signaling that the big box segment should find relief from rising availabilities in the near term. Meanwhile, new groundbreakings have largely shifted to build-to-suit developments. PepsiCo broke ground on its 1.2 million-SF manufacturing facility near DIA in 23Q2, which will be its largest plant in North America when it opens this year. Smaller projects are also getting off the ground because they don't require the significant financing that larger projects do, and many are owner-financed. They're also attractive from a leasing perspective because Denver's industrial market remains dominated by small and midsized distribution tenants, and industrial spaces smaller than 50,000 SF tend to lease quickly. While big box activity is largely concentrated near the airport, smallbay development is able to disperse across the metro due to the smaller footprint required.
Sales
Trailing 12-month investment volume in Denver's industrial market totals $2.2 billion as of the fourth quarter of 2025, approximately 30% below the market's 10-year annual average and 67% below the recent peak of $3.2 billion achieved in 21Q4. The rapid increase in the cost of debt is weighing heavily on overall industrial deal flow as the gap between buyer and seller expectations remains wide. However, quarterly investment volume likely troughed in mid-2023. Since then, investment volume has climbed in each successive quarter. Investment amounted to about $600 million in 24Q4, the highest quarterly volume recorded since early 2022. Investors nationwide have adopted a cautious approach, but Denver's high availability rate and ongoing construction boom have added another layer of uncertainty and large institutional buyers have largely exited the market for the time being. Institutional buyers, REITS, and private capital represented 16% of transaction volume in the past year, down from 47% in 2022. Private buyers and owner-users executing smaller deals partially filled the gap in the past year. Investors sought to limit exposure to new supply by targeting Denver's small bay assets which have tight availabilities and steady tenant demand. Only 5% of deals in the past 12 months exceeded a sales price of $13 million. Most recent deals fall within the $1.5-$4.5-million range in assets that total less than 50,000 SF. Pricing has leveled off in the last year after accelerating during the booming 2021 and early 2022. Over the past 12 months, sales prices averaged $175/SF, down from the record $186/SF achieved in 22Q3. In many recent cases where the asking price is known, the transacted price has been 10-20% lower.
Economy
With a population of 3.07 million, Denver is the largest metropolitan area in Colorado and a key economic hub for the Rocky Mountain region. The city is centrally located in the U.S., giving residents and businesses direct flight access to all major cities across the country. The Denver International Airport ranks as the thirdbusiest airport in North America and has become a major economic driver, generating over $47 billion annually. Denver's outdoor recreational lifestyle, combined with high-paying job opportunities in technology, advanced manufacturing, and aerospace, have attracted new residents to the market. Denver's population is younger and more educated than the national average. Corporate relocations and expansions accelerated in the 2010s, shaping the region into a diversified and dynamic economy. However, economic growth has slowed following the coronavirus pandemic, tempered by Denver's high cost of living and doing business. Denver has fallen in recent job and GDP rankings relative to other major markets, ranking 48th and 46th, respectively. Population growth in the Denver metropolitan area has moderated compared to the rapid expansion of the 2010s when the region's economic diversification into higher paying industries attracted talent from across the country. The region has grown 0.8% over the past year, compared to the pre-pandemic 10-year annual average of 1.6%. Population totals 3.07 million people, ranking Denver as the 18th- largest metropolitan area in the U.S. While population growth has slowed in recent years, the region attracts a younger demographic, largely due to the area's outdoor and recreational lifestyle. Roughly 23.2% of Denver's population is between 24 and 34 years old. A younger demographic has supported continued natural population growth as this segment of the population tends to drive higher levels of family and household formation. Denver's economy is diverse, with strong representation in technology, aerospace, financial activities, and energy. The region's labor force is highly educated, with nearly 50% of the population holding a bachelor's degree or higher, well above the national average of 36%. While corporate relocations and expansions have slowed in recent years, Denver's educated workforce has attracted smaller startups, particularly in technology, advanced manufacturing, and aerospace. Denver's slowing population and job growth are notable headwinds for the local economy. However, the region's highly educated workforce, diverse mix of industries, and growth tied to high paying jobs should support the region's long-term economic outlook.
Source: Costar
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