Landlords with available industrial product in the central Denver submarket are in prime position to capture tenants being displaced by redevelopment of the National Western Stock Show complex, Interstate 70 reconstruction and the continued exodus of industrial users out of River North.
BSI’s recently signed 117,000-square-foot lease at Hub 25, Westfield Co.’s new project at 601 E. 64th Ave., is a prime example. The food-service equipment company is losing its existing location to the National Western Center project, which will impact an estimated 500,000 to 1 million sf of industrial users, according to CBRE Senior Vice President Tyler Carner.
Tyler Carner
“If it were up to them, they would have continued to stay and operate where they currently are,” said Matt Trone, a managing director at Cushman & Wakefield who represented BSI with Steve Hager, also a managing director in Cushman & Wakefield’s Denver office. “It’s a very tight market, and to find a facility that was ideal for their operations certainly was not an easy task,” he said.
According to Carner, who represented Westfield with partner Jeremy Ballenger, “If you combine I-70 reconstruction, light rail, the National Western Stock Show and the RiNo repurposing of industrial space, we think roughly 2 million square feet of industrial users are being displaced.” Many of those tenants/ users hope to remain centrally located for their customers and employees.
Matt Trone
“(BSI) had employees that were scattered all throughout the Denver metro area. They were very focused on finding a location that would minimize the risk of them losing skilled labor,” said Trone.
“Certainly, a lot of (displaced users) want to stay centrally located, and so they’re struggling to find space because there’s just a lack of central product. Fortunately, there is development taking place, such as Hub 25, that is going to accommodate some of them,” said Carner.
The cost difference between existing space and available space, particularly if it’s new, can be considerable, however.
“Some of these users have been in relatively attractive lease situations for a long period of time. There’s certainly efficiencies gained from new construction that are notable and worth paying for, but the cost for them to relocate their businesses, both from a moving standpoint and from a lease rate position, are challenging,” Carner said. “I think BSI did realize that, while their lease expenses were increasing, they’re certainly gaining some efficiencies.”
BSI is one of the larger relocations to occur as a result of the National Western and I-70 projects, “but there will be others in their size range as well,” said Carner.
“There are a lot of tenants and end users that are getting displaced. We are definitely seeing a number of companies that are in that situation,” said Trone.
There also are companies concerned about congestion expected to occur on I-70 when reconstruction between Brighton and Colorado boulevards gets underway in 2018. That creates additional demand for quality space in the central submarket and, he believes, also will push users north up the Interstate 25 corridor.
“I think with this kind of perfect storm, I really see a big transition into an industrial submarket that didn’t have much of a presence in the past,” Trone said.
In the central submarket, there are a handful of new industrial developments underway, including Hub 25, which has three available buildings totaling 304,499 sf, Crossroads Commerce Park, Center Core and Central 62.
