Colorado-Real-Estate-Journal_435994

December 2024 — Office & Industrial Quarterly — Page 19 www.crej.com D espite facing challenges in rent growth and occu- pancy rates during 2024, the industrial real estate market shows promising signs of stabilizing, with expectations for a measured recovery in 2025 nation- ally and locally in Northern Colo- rado. According to CoStar, the U.S. industrial market has had nine consecutive quarters of vacancy rate increases leading to the cur- rent national average vacancy rate of 6.9%, and the net absorption over the last year has been at its lowest in over a decade (CoStar, Novem- ber 2024). This can be attributed partially to lower home sales due to higher mortgage rates, lower demand for furniture, lean build- ing supplies, and declining or flat retail inventories. Due to the pre- viously mentioned factors, the national industrial rent growth has cooled to an average of 2.6% year over year. However, as the year has progressed, we have seen positive improvements in tenant demand, specifically for available space that is under 50,000 square feet. In Larimer County, we have con- tinued to see cooling net absorp- tion, and, contrastingly, we have also seen continued industrial development project completions. This combination of factors has pushed the industrial vacancy rate in Larimer County up over a full percentage point in the last 12 months to 6.4%, which is just below the national average (CoStar, November 2024). The annual market asking rent growth in Larimer County peaked at 7.4% in the middle of 2022 but has since decelerated to an average annual growth rate of 1.4%. The current average asking rent in Larimer County is $12.50 per sf. However, we have started to see industrial developers in the market pull back, and there is significantly less industrial product under con- struction today than there has been in the past few years. According to CoStar, approximately 32,000 sf is under construction in Larimer County, which is down from the 200,745 sf that was under construc- tion a year ago. I believe it is likely that if we have less supply hit the market, as expected, and con- tinue to see an increase in tenant demand, the vacancy rates in Lar- imer County’s industrial market will begin to stabilize or decline steadily. With vacancies declining and tight- ening the market, the opportunity for rent growth increases will likely prevail. In Weld County this year, a bright- er story has emerged. This is largely due to increased demand for indus- trial product in recent years that has created lower vacancy rates and greater opportunities for new development. The apparent recent growth of this industrial market is largely driven by the continued robustness of e-commerce and con- sumer spending, creating favorable market fundamentals. Quantifying this, the industrial market in Weld County is historically tight and has a current vacancy rate of 3.8%, which is well below the national average (CoStar, November 2024). While Weld County has seen the industrial inventory increase drasti- cally over the last decade, vacancies are anticipated to stay low as the strengthened demand continues. A large amount of the new supply in the Northern Colorado market can be seen along the Interstate 25 corridor in Frederick and Mead, as well as in Greeley along Highway 34. NAI Affinity, along with Newmark, is representing Roche Constructors to lease new construction industri- al/flex units within the Highpointe Business Park, near the southeast corner of Highway 34 and Highway 257 in Greeley. After delivering an approximately 34,000-sf building in mid-2023, there is approximately 10,600 sf remaining. Plans for the next, approximately 24,000-sf build- ing are in place with an anticipated delivery in late 2025 to early 2026. Rents in Weld County have also continued to appreciate over the last 12 months, albeit at a slower pace than the national average and Larimer County, at approximately 0.4% year over year, with the aver- age asking rent currently at $12.80 per sf (CoStar, November 2024). While Larimer County’s indus- trial market experienced a general slowdown in 2024, tenant demand picked up toward year’s end. The combination of rising tenant demand and constrained new con- struction could help stabilize vacan- cy rates and potentially drive rent growth in 2025. Meanwhile, if Weld County maintains its robust indus- trial demand and low vacancy rates into 2025, that market is expected to remain relatively strong. s laurenl@affinitycre.com Northern Colorado industrial market is stabilizing INDUSTRIAL — MARKET UPDATE Lauren Larsen Managing broker, NAI Affinity We have started to see industrial develop- ers in the market pull back, and there is sig- nificantly less industrial product under con- struction today than there has been in the past few years.