Porteos blazes trail for industrial development at DIA

A business park that initially received little notice within the Denver industrial real estate community has proven itself worthy of national attention.

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Walmart, Kärcher North America, Costco and Ryder are among companies that have acquired land for industrial development at Porteos, a 1,287-acre commercial mixeduse site 2 miles south of Denver International Airport’s main terminal.

“Porteos was the pioneer of all the other industrial development north of the I-70/E-470 quadrant, and it was a very successful gamble,” said Mitch Zatz of JLL.

“The northeast portion of Aurora is the next frontier in terms of development, and Porteos has been in on the ground floor of this,” added Yuriy Gorlov, vice president of the Aurora Economic Development Council. “From an economic development perspective, it has been a strong asset in attracting primary employers, and commercial and industrial development.”

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Bill Wichterman of Phoenix based A&C Properties, which is developing Porteos, said six years ago, few brokers were willing to list the development because of the perception that it was too far from the Interstate 70 corridor.

“There was no development going on up there – you couldn’t see a structure from the site,” recalled Zatz, whose team accepted the challenge.

At the time, the nearest industrial developments were at Interstate 70 and E-470, 5 miles away. Then three years ago Walmart bought 169 acres at Porteos, located at East 56th Avenue and Jackson Gap Parkway.

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“Walmart validated this site in terms of an industrial distribution site, and that had to do with different access points and quicker drive times to their points of delivery,” said Zatz. “We’ve been growing from that point forward.”

While Walmart has yet to break ground, Kärcher, a German company that makes cleaning equipment, is well under way on construction of its North American headquarters at Porteos. It acquired 23 acres within the development.

“Kärcher was exciting because of the types of jobs that are going to be there,” said JLL’s Jason White. “You’re going to have office users, you’re going to have manufacturing users.” And, while Walmart has yet to break ground, “The biggest thing is there’s development activity on a large building. That’s a big stamp of validation,” White added.

Kärcher’s 280,000-sf warehouse/manufacturing building, wrapped with 100,000 sf of three-story office space, will be completed this month, with approximately 450 people working there by November. It will generate an estimated 2,500 visitors annually, boosting demand for hotel rooms in the airport area.

“It’s a stunning building,” said Wichterman.

Ryder, which recently closed on 23 acres, will build a truck leasing and maintenance facility for its own fleet and third-party customers. Costco just bought 72 acres for what city of Aurora records indicate initially will be around 330,000 sf of warehouse/distribution space – with potential expansion to more than 600,000 sf.

Other companies at Porteos include Park DIA and JAG Logistics Center, an industrial development geared specifically to freight forwarders. Proximity to the airport benefits those users, and Kärcher, but is not a factor for distribution companies like Walmart and Costco.

While it is zoned for a wide variety of commercial uses, Zatz said Porteos originally was viewed less favorably within the Denver industrial market because of the distance to I-70 and because a main access point, E-470, is a toll road. But as tolls have become “normalized,” E-470 and East 56th Avenue provide “great alternative routes” for distribution users.

“A national distribution company’s transportation costs average about 50% of their overall operating budget, so being able to get to their points of delivery quicker is a huge cost savings,” said Zatz.

Although more options for industrial development near Porteos have come along, Zatz said, “Four or five years ago, this was it. The Porteos ownership really had something that nobody else had.” Plus, with Denver and e-commerce growing, “We had a great synergy on this site where we were able to sell over 600 acres in four years, which is quite a feat,” he said.

Also, other industrial parks were, and in many cases still are, controlled by developers uninterested in selling land.

“A lot of other parks wanted to do their own development. If we wanted to, we could, but some of these users had their developer in tow, and we would happily sell to a developer and not insist that we build a building,” said Wichterman.

“It was a perfect meld of population growth, and the need for groups wanting to come into the market and control their opportunity, and we could offer that,” added JLL’s Carmon Hicks, who markets Porteos with Zatz and White.

There are three groups looking at the remaining 150 acres of land available for big-box industrial development, two of which are speculative developers, according to Zatz. Land prices have doubled within the past four years, from about $2 to $4 per sf, but are about 25% less than competing parks, he said.

“The great thing about this property is it’s in Aurora, which generally has a reputation for being more business friendly than a lot of the other municipalities,” said Wichterman, who added that zoning in place allows a streamlined entitlement process. Aurora Economic Development Council has been “extremely supportive of this project,” commented White.

With a large base of industrial development underway, A&C Properties now is looking to bring other commercial uses to the site, including at least one select-service hotel that will break ground later this year, said Wichterman. Retail development also is being considered.

“Porteos offers unique value in the market, being directly adjacent to Denver International Airport, a powerful economic engine. Commercial development surrounding major airports is a significant trend in virtually all major metro areas, and the Front Range is no exception,” commented Gorlov.

“The Aurora Economic Development Council recognized that attracting catalytic projects in the area would mean offsetting hurdles like the lack of infrastructure and surrounding amenities early on. Over the last five years and in strong partnership with the developer and local jurisdictions, we proactively ensured that Porteos was part of a foreign trade zone, an enterprise zone and a federal opportunity zone. That in combination with a lower cost of land has made it highly appealing to investors.”

Featured in CREJ’s Feb. 5-18, 2020, issue

Jill Jamieson-Nichols has been an Editor with the Colorado Real Estate Journal for more than 15 years, providing coverage of office, industrial, hospitality and mixed-use development news in the Denver metro area, plus all property types in Northern Colorado, Boulder County and along the Highway 36 corridor. Prior to joining CREJ, Jill was Editor of…