Trends driving commercial real estate lending in Denver

Areas surrounding multifamily and mixed-use developments throughout the metro offer promise for investment, particularly in the trending experiential retail subcategory – such as Aurora’s Stanley Marketplace.

Matthew Marker
Regional manager, commercial
real estate, UMB Bank

Four years ago, our commercial real estate group was just getting started. Fast-forward to today, and we have seen tremendous growth, thanks in large part to Denver’s burgeoning commercial real estate activity. It’s easy to see what makes this market so appealing. As multifamily and industrial developments remain strong nationally, Denver is enduring as one of the best markets for these asset classes.

According to CBRE’s 2019 Americas Investor Intentions Survey, Denver entered 2019 tied as the fifth-most attractive investment market in the country across all asset classes, continuing its gradual improvement since ranking ninth in 2016. Similarly, Denver ranked second in DLA Piper’s survey of cities in which commercial real estate investors will make investments in the year ahead.

Following are key commercial real estate trends in the Denver metro.

Rockin’ the suburbs. While Denver’s central business district continues to be the epicenter of office investment, multifamily and industrial investment in suburban areas showcase the Mile High City’s dynamic commercial real estate climate.

Downtown and the central business district, or Upper Downtown, afford little space for new development, but investment opportunities abound for many asset classes as the greater Denver area continues to be a hub for relocated talent and corporations. As such, multifamily developments, one of the most popular asset classes across our eight-state footprint, remain an attractive investment – even as the class begins to reach saturation in other markets.

In fact, census data shows that the metropolitan’s population has increased by more than 15% since 2010, and along with population growth comes an opportunity for future office investment throughout the metropolitan area.

The well certainly hasn’t run dry in the central business district, despite nearly half of office investment in 2018 occurring in the district. Meanwhile, the greater Denver metro remains fruitful, especially if the region keeps attracting talent at its current rate.

Unique retail opportunities remain. Denver continues to boast a strong economy and is considered one of the country’s most desirable places to live. As such, the city’s retail sector hasn’t experienced as drastic of a downturn as other like-sized markets, in terms of vacancy rates.

However, that doesn’t mean brick-and-mortar retail is immune to disruption from e-commerce. Power centers and big-box retail centers will need to be repositioned, neighborhood centers with needs-based retail and service retail will continue to be utilized, and grocery and other same-day delivery services will continue to transform the retail landscape in Denver. Areas surrounding multifamily and mixed-use developments throughout the metro offer promise for investment, particularly in the trending experiential retail subcategory – such as the Dairy Block or Aurora’s Stanley Marketplace.

While the commercial real estate industry can be very unpredictable, Denver has shown itself to be a prosperous commercial real estate investment hub for the near term.

Featured in CREJ’s March 4-17, 2020, issue

Edited by the Colorado Real Estate Journal staff.