Big industrial deals have more real estate investors taking note of Denver market

Competition for homes in the Denver metro area has been fierce for years. Early activity in 2018 demonstrates the local commercial real estate market could be a battleground in its own right.

The Pauls Corp. recently sold 14 Class A buildings in its DIA-area Gateway Park industrial development to real estate investment firm Clarion Partners for $206.1 million. The sale, totaling 1.93 million square feet of space, was the single largest industrial deal on record for the Denver metro area, according to real estate services firm CBRE.

It was hardly the only industrial transaction to close in the first three months of 2018. CBRE tracked 49 properties that changed hands over the period. The sales totaled $402.2 million. Dating back to April 2017, $966 million has been spent acquiring industrial buildings in the metro area, according to CBRE research, a 22 percent increase over the prior 12 months.

“What that sale did is it had enough scale and size to it that it made a bunch of groups underwrite Denver and get comfortable with the Denver demographics,” Tyler Carner, a senior vice president with CBRE said of the Pauls portfolio deal. “So what you ended up having is a huge new class of people — investors, capital — from truly around the world that said, ‘Wow, there are really good fundamentals, there are really good things happening in Denver.'”

CBRE recently released the results of its Americas Investor Intention Survey for 2018. Participants ranked the Denver metro area the seventh most desirable investment market in the Western Hemisphere, just behind Washington, D.C., and ahead of cities including Miami, Boston, Toronto and São Paulo, Brazil. Denver is the 19th biggest market in the country by population, Carner said. It tied for eighth in last year’s investor survey.

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Twenty-two office properties were sold in the metro area over the first three months of the year, according to CBRE. Those sales, highlighted by a $152 million deal for One Belleview Station in the Denver Tech Center, totaled $977.9 million. Sale prices averaged $316.58 per square foot, a 29-percent jump over office deals made in the final three months of 2017.

Matt Vance, CBRE’s director of research and analysis for Colorado, said the office market is off to an “incredibly strong start” to the year.

When it comes to retail real estate, 20 properties changed owners in metro Denver in the early going of 2018, adding up to $271.1 million in transactions. CBRE does not expect that volume to continue in the retail realm due to a lack of for-sale inventory.

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