Denver Among Top Targets for Commercial Real Estate Investment, CBRE Survey Finds

Denver jumped one spot to #7 among Americas metros, as the majority of CRE investors anticipate increased buying activity in 2018

A recent survey of commercial real estate investors ranked Denver as a top 10 target for investment among Americas metros. Denver, which investors ranked at #8 in 2017, jumped one spot to #7 in CBRE’s 2018 Americas Investor Intentions Survey.

The survey, which covered all asset types, shows that 88 percent of investors plan to either maintain or increase spending in 2018—up from 83 percent in 2017.

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

• Industrial: Industrial is increasingly the preferred property type, cited by 50 percent of investors as the most attractive for investment in 2018, up from 38 percent in 2017.
• Multifamily: Cited by 20 percent of investors, multifamily is the next most attractive property types, though its share decreased from last year.
• Office: Fourteen percent of investors said they are planning to invest in office product in 2018.
• Retail: Despite competition from e-commerce, the retail sector improved modestly from last year (10 percent in 2018 vs. 8 percent in 2017).

In Denver, multifamily once again dominated investment sales in 2017, making up 63 percent of the total $10.1 billion in volume. Office came in second, representing 19.8 percent, followed by industrial, which ranked third with 7.7 percent of the investment sales volume for the year.

“The reason industrial came in third in Denver’s total investment sales volume in 2017 is due to a lack of available for-sale product. In line with the national investor sentiment revealed in this year’s survey, we see strong investor appetite for industrial properties in Denver; we simply do not have the inventory to keep up with the demand. However, with 4.0 million square feet of industrial space under construction at year-end, we are catching up with that demand,” said Pete Schippits, Senior Managing Director and Market Leader for CBRE in Colorado.   

Retail investment sales volume ranked fourth in Denver in 2017 at 7.6 percent, followed by hotel investment sales, which made up 2 percent of the total. Overall Denver achieved the 10th greatest investment sales volume among all major U.S. markets in 2017.

The survey also provided insight into how investors view the growing trend of co-working. At 20 percent of a building’s total space, more than 90 percent of investors see co-working as having a positive or neutral effect on a building’s long-term capital value. However, more than half of the respondents said that once co-working space climbs to 40 percent or more of a building’s total space, it adversely affects valuations.

“Despite the possibility of escalating interest rates, the vast majority of investors intend to acquire assets in the Americas in 2018. Risk tolerance is expected to remain unchanged, but investors’ search for yield and asset diversification is pushing them toward value-add assets, secondary markets and alternatives in 2018,” said Brian McAuliffe, President, Institutional Properties, Capital Markets, CBRE.