The three main commercial real estate food groups – office, industrial and retail – this year added what is believed to be a record 12.8 million square feet.
Those are the preliminary numbers crunched by economist Patty Silverstein.
“That is huge, absolutely huge,” said Silverstein, president and chief economist of Development Research Partners.
Silverstein, who is also the chief economist for the Metro Denver Economic Development Corp. and the Denver Metro Chamber of Commerce, will provide an economic update next month at the 2019 Development & Construction Forecast.
CREJ conference on tap
The halfday conference will run from 7 until 11:45 a.m. Jan. 14. The conference, sponsored by the Colorado Real Estate Journal, is expected to be the largest conference of its kind in Colorado.
The conference will be held at the Hyatt Regency Aurora-Denver Conference Center.
Most of the commercial real estate growth last year came from the industrial market.
The Denver area industrial market added about 7 million sf.
“To my knowledge, yes,” it would mark an all-time high for industrial construction in a single year, according to Silverstein.
To put that in perspective, it is about a 32 percent increase from the 5.3 million sf of industrial properties added in 2017, shows Silverstein’s research.
And from 2006 to 2015, the industrial market added an average of 1.2 million sf each year, Silverstein noted.
Marijuana not driving warehouse construction
In recent years, marijuana stoked the industrial market, but that is now simmering.
“Marijuana had been one of the big triggers for industrial space growth, but that has slowed,” Silverstein said.
E-Commerce, especially Amazon, also drove the demand for more warehouse space, she added.
The office market also experienced “pretty substantial growth” this year, although it was not a record, Silverstein said.
“Our expectation is that there is a greater risk of a recession in 2020 or beyond,” Silverstein said.
“Certainly, during the next economic slowdown, we would expect a slowdown in the construction of all property types. For one thing, it will be more difficult for developers to get financing.
Office growth changing Denver’s skyline
The vast majority of the new office space has been in Denver, particularly in downtown.
For example, 1144 Fifteenth Street, the Hines trophy office tower, is changing Denver’s skyline. It also adds another 671,120-sf to the office market.
Silverstein said she would be a little more concerned about the possibility of overbuilding in the industrial sector than in the office market.
Retail, meanwhile, continues to be the Steady Eddie of Denver commercial real estate.
Retail added about 1.2 million sf this year, which is “pretty consistent” with historic increases, according to Silverstein.
Unlike real estate investor Marcel Arsenault and others, Silverstein is not predicting a recession in 2019. “During the Great Recession, we saw almost no new construction in 2009 and 2010. Things really didn’t pick up again until 2015.”
CREJ conference topics
In addition to Silverstein’s economic update, other topics at the CREJ Development & Construction Forecast, will include:
- Construction Costs and Industry Trends (current challenges in commercial construction, new technology improving costs and timelines);
- An office forecast;
- An industrial forecast;
- A multifamily forecast;
- A condo forecast;
- Data center development opportunities; and
- A construction leadership panel.
Cast of experts at CREJ conference
In addition to Silverstein, other experts scheduled to participate in the CREJ conference include:
- RJ McArthur, partner, Plante Moran;
- Peter Knowles, executive vice president, Rider Levett Bucknall;
- Jay Despard, senior managing director, Hines;
- Tim Kretzschmar, vice president, division manager, Swinerton;
- Chad Kollar, managing principal, Cresa Denver;
- Jon Gambrill, principal/managing director, Gensler;
- Matt Mitchell, vice president of industrial, Westfield Company Inc.;
- Joel Scott, CEO, Murray & Stafford Inc.;
- Drew McManus, managing director, Cushman & Wakefield;
- Marshall M. Burton, president & CEO, Confluent Development;
- Paul J. Ruff, managing partner, Triumph Capital Group;
- Jessica Ostermick, director, Industrial & Logistics, CBRE;
- Cory Palmeiro, chief operating officer, Martines/Palmeiro Construction;
- Terrance Hunt, vice chairman, Newmark Knight Frank Multifamily;
- Donna Blair, chief operating officer, Continuum Partners;
- Kevin Brinkman, chief executive officer and co-founder, Brinkman;
- Bryce Hall, principal, Kephart;
- Mike Rinner, senior vice president – advisory, Meyers Research;
- Pat Lynch, managing director, Data Center Solutions, CBRE;
- Jim Johnson, chairman & CEO, GE Johnson Construction;
- Greg Schmidt, president, Saunders Construction;
- Gene Hodge, vice president & general manager, Denver Operating Group, Mortenson;
- Matt Huelskamp, president, Hyder Construction;
- Allan Bliesmer, Plains District manager and vice president, Hensel Phelps Construction; and
- Shane Brown, audit partner, Plante Moran.