Denver among top 5 markets for commercial real estate investment, CBRE survey finds

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A recent survey of commercial real estate investors ranked Denver as a top target among Americas metros. Denver advanced for the third year in a row, jumping two spots to tie with Atlanta at No. 5 in CBRE’s 2019 Americas Investor Intentions Survey.

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The survey, which covers all asset types, found that, in 2019, more investors are prioritizing secondary markets that can offer greater potential for both equity and income growth. Investor interest in secondary assets increased for the fifth consecutive year (33 percent) to gain significant ground on value-add (37 percent) as the most preferred strategy.

The survey also examined how investors view each of the different asset types:

  • Industrial & Logistics is still the preferred property type, cited by 39 percent of investors as the most attractive for investment in 2019.
  • Multifamilyclosely followed in second place, with 37 percent of investors naming it as the next most attractive property type—up from 20% in 2018.
  • Officewas cited by 10 percent of investors as the most attractive for purchase in 2019.
  • Retail’s share of investors (9 percent) has held essentially steady over the past three years, despite competition from e-commerce.

Commercial real estate investment sales were up in metro Denver last year, reaching $12.5 billion at the end of 2018, a 6 percent increase year-over-year, and a three-year high. The multifamily sector continued to lead, representing 42.8 percent of total 2018 sales volume. The office sector was the next most-active making up 25.8 percent, followed by industrial (11.4 percent), retail (11.3 percent) and hotel (8.7 percent).

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“Although Denver’s multifamily sector continues to lead the pack in overall sales volume, 2018 was a notable year across the board for local commercial real estate investment. The Denver industrial market saw its single largest industrial transaction ever recorded with the sale of the 1.93 million-sq.-ft. PAULS portfolio to Clarion Partners. Office sales volume surpassed $3.2 billion with half of that volume focused on the downtown market exclusively, and retail investment rose year-over-year despite store closures and the threat of e-commerce,” said Pete Schippits, Senior Managing Director, CBRE’s Mountain States. “In the end, all of our commercial real estate sectors are benefitting as Denver becomes more prominent on the global capital stage, and we continue to welcome new investors to our market.”

Overall, the survey shows that investors will remain active in commercial real estate markets this year, with 98 percent of respondents intending to make acquisitions. There has been a pronounced shift toward greater caution, with the share of investors planning to either maintain or increase spending in 2019 falling to 75 percent (from 88 percent in 2018).

“Continued strong real estate fundamentals, combined with historically deep debt and equity capital markets, provide good momentum for 2019. Investors are reducing risk and protecting income streams through diversification. Pricing is at or near the previous peak for most asset types in prime locations, so investors are seeking yield in secondary markets and alternative asset types,” said Chris Ludeman, Global President, Capital Markets, CBRE.

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Read about CBRE’s take on the Denver’s industrial investment market in CREJ’s April 3-17, 2019, issue.

Edited by the Colorado Real Estate Journal staff.