When Toys R Us went under this spring, the Denver area lost eight retail anchor stores spread across six cities. The once-iconic chain gave almost 250,000 square feet of space back to the local market after it sold its last Barbie.
Enough doom and gloom, though. Geoffrey the Giraffe may be no more, but the last three months were a period of growth for Denver’s retail real estate scene.
The total amount of retail space soaked up by grocery stores, restaurants, gyms and other tenants grew by 65,000 square feet between the beginning of April and the end of June, Toys R Us closures included, commercial real estate firm CBRE found in its most recent market report. The long-awaited King Soopers store in Arvada’s Candelas neighborhood opened. Some big-time leases — including a 50,000-square-foot Murdoch’s Ranch and Home Supply in Castle Rock and a 26,000-square-foot Dollar Tree in Brighton — were signed. Overall vacancy ticked up to 7.3 percent from 6.9 percent, but that is largely because of 62,000 square feet of new space being completed without a tenant in place, CBRE said.
The growth comes after vacancy went up by about 111,000 square feet in the first quarter of 2018, but overall Denver’s market has been on the upswing since 2013, CBRE has found. At least 339,000 square feet of space has been absorbed every year over than period. In an era when e-commerce is making it less necessary to enter a physical store and once-powerful big box retailers are either folding up or shrinking, Denver’s strong growth begs the question, what gives?
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“Retail chases the housing growth and the population. It’s there to service the people,” Michael Kendall, a vice president with CBRE advisory and transaction services, said this week. “That’s probably been one of the mainstays for retail is just the health of Denver and that people want to be here.”
Kendall’s comments echo a recent CBRE special report called “Denver Retail Insights.” That report found that between 2010 and 2017 Denver was the eighth fastest growing market in the country, adding roughly 334,000 people. When compared with “peer cities” like Austin, Texas, San Diego, Salt Lake City, Phoenix and Las Vegas, the median household income of $72,977 as of April of this year was second only to Seattle’s $80,594.
Factor in one of the nation’s lowest unemployment rates — sub 3 percent at the end of 2017, according to CBRE — and forecasts calling for 30,000 new housing permits to be issued in the metro area in 2018, and you have a market with the right ingredients to attract national retailers and support and grow local brands.
As department stores wane, the food and beverage industry is growing and taking up ever more space.
“Denver is getting to be a lot bigger food scene. On a national level, it’s getting a little more notoriety,” Kendall said.
He cited Death and Co., the highly regarded New York City-based cocktail bar that opened only its second location in Denver this spring, as an example. CBRE’s Retail Insights noted trendy retailers like eye-ware brand Warby Parker, fast-fashion seller Zara and In-N-Out Burger either came to the metro area in 2017 or are on their way.
James Dixon, who heads up leasing for AmCap Properties Inc., said people worried the Front Range is in the throes of the “retail apocalypse” probably aren’t paying attention to the full picture. AmCap runs the Gardens on Havana shopping center on South Havana Street in Aurora. It lost a nearly 47,000-square-foot Toys R Us-Babies R Us combo store when the chain closed. Dixon said he has fielded plenty of calls on the space already and expects to have a lease in place by the end of the year. On top of that, the Garden will soon expand its nearly 500,000-square-foot center with a 25,000-square-foot addition.
“We have centers from Fort Collins to Colorado Springs, and they’re all doing well,” Dixon said.