Research & Forecast Report METRO DENVER RETAIL Q4 2017 s Retail Sector Keeps Rolling Market Overview Net absorption finished the second half of 2017 with strong positive numbers from s Central and Northwest submarkets. Overall total absorption for the fourth quarter totaled nearly 546,000, bringing total annual absorption to more than 1 million square feet. The Northwest submarket contributed a majority of positive absorption for the quarter with more than 345,000 square feet absorbed. Average asking rates remained unchanged from the previous quarter at $17.13 per square foot. However, this is a 10 percent year-over-year increase on overall average asking rates. Retail vacancy decreased by 40 basis points from the previous quarter to 5.0 percent. Investment activity in the Metro retail sector totaled approximately $168 million during the fourth quarter, as 24 properties transacted. This brings total investment sales to more than $768 million for 2017. Two significant shopping centers transacted during the quarter. The Shops at Greenwood Village sold for $24.3 million, and Tamarac Shopping Center sold for $20 million, respectively. Market Indicators Relative to prior period Q4 2017 Net Absorption Projected Q1 2018 Investment Sales $168 MILLION Local Employment Growth HIGHLIGHTED ECONOMIC TRENDS Retail investment activity during the fourth quarter 2017 totaled just over $168 million, across 24 sales. 2.8% The Bureau of Labor Statistics reported an unemployment rate of 2.8 percent for Metro during November 2017, up from 2.6 percent the previous year. The Metro unemployment rate is significantly lower compared to the national unemployment rate of 4.1 percent. Deliveries Rental Rate *Arrows compare current quarter to the previous quarter s historically adjusted figures Metro Summary Statistics Q4 2017 Q4 2016 Rate 5.0% 5.4% Net Absorption YTD 1,062,884 829,506 SF Under Construction 1,085,913 690,295 Asking Rents/SF $17.13 $15.55 Square Feet Retail Market Q4 2016 Q4 2017 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0-50,000-100,000-150,000-200,000-250,000 Q4 16 Q1 17 Q2 17 Q3 17 Net Absorption Deliveries Total Q4 17 6.5% 6.0% 5.5% 5.0% 4.5% 4.0%
Shopping Center Overview The overall shopping center vacancy rate decreased by 50 basis points compared to the third quarter, dropping below the 6.0 percent mark for the first time since Colliers has been tracking the shopping center market. According to the Census Bureau, e-commerce sales accounted for more than 9 percent of all retail sales during the third quarter (most recent available) a 15.5 percent year-over-year increase. However, Metro continues to see an increase in retail development, as current under construction totals have reached and maintained pre-recession levels throughout 2017. Positive net absorption for all shopping centers during the fourth quarter totaled more than 450,000 square feet. Average triple net rents across all shopping centers increased once again during the fourth quarter to $15.16 per square foot. Metro Shopping Center Statistics Center Type Q4 2017 Q3 2017 Q2 2017 Q4 2016 Strip 6.0% 8.1% 8.7% 6.8% Neighborhood 6.8% 8.0% 8.2% 7.4% Community 7.2% 6.8% 6.8% 7.1% Power/Regional 5.5% 5.9% 6.6% 5.5% Malls (Super Regional) 2.0% 2.1% 2.3% 2.0% All Shopping Centers 5.8% 6.3% 6.5% 6.0% * is based off of a 10,000 SF minimum search criteria for retail overall and no minimum for shopping centers Q4 2017 Notable Transactions Retail - Sales Activity PROPERTY SUBMARKET SALES PRICE SIZE SF PRICE PSF BUYER SELLER Shops at Greenwood Village Southeast $24,300,000 213,528 $114 Broad Street Ventures Uhlmann Tamarac Shopping Center Central $20,000,000 68,534 $292 ACF Property Management DDR Green Valley Ranch Towne Center Northeast $13,550,000 100,750 $134 Highpoint Capital Weingarten Realty, GDC Properties (DC) Retail - Leasing Activity PROPERTY SUBMARKET LEASED SF LEASE TYPE TENANT NAME Lowry Boulevard & S. Quebec Street Central 25,000 New Lucky's Market 7621-7685 W. 88th Avenue Northwest 23,200 New Planet Fitness Retail - Triple Net Investment PROPERTY SUBMARKET SALES PRICE SIZE SF PRICE PSF CAP BUYER SELLER 24 Hour Fitness - 5745 New Abbey Lane Castle Rock $10,650,000 41,203 $258 6.3% Orris Family Alberta Development Partners Walgreen's - 750 E. 120th Avenue Northwest $6,050,000 14,490 $418 6.5% Benjamin Armas Sei Park 2 Metro Research & Forecast Report Q4 2017 / Retail Colliers International
New Openings, Relocations, Expansions & Closures Retailers Opening Locations in the Face of Retail Collapse Retailers closing locations does not appear to be anything new; however, when retailers announce they plan to open new locations, it is generally worth looking into. Dollar General recently announced it would be opening as many as 900 stores in 2018. A majority of retailers opening new locations in the upcoming year are discounters including Dollar Tree, Family Dollar, Aldi, Five Below, and Hobby Lobby. According to Business Insider, US shoppers started gravitating toward discount stores and most have never returned to shopping full-price. Additionally, consumers are also more inclined to shop online for the best discounted prices. The downfall of full-price department stores has led to significant decline in the performance of traditional shopping malls. Retailers Filing for Bankruptcy Before Going Broke? According to USA Today, an emerging trend in the retail industry has arisen as companies have been filing for Chapter 11 bankruptcy reorganization while they re still profitable. It s a survival strategy that several national chains have adopted in order to pre-emptively take action in the face of financial hardships. Chains such as Rue21, Payless ShoeSource, and True Religion have all implemented this strategy in 2017. Ultimately, the main goal is to reorganize into a smaller, better-functioning company in order to get a fresh start. Macy s Announces More Job Cuts & Store Closures Macy s is planning another round of layoffs and store closures, this time cutting approximately 5,000 jobs and closing seven stores: two in Florida, one in California, Indiana, Michigan, Ohio, and Vermont. During this announcement, there were no indications that Macy s would be closing any Colorado locations at this time. The company noted they have been struggling with its massive real estate footprint and traditional retail model in comparison to e-commerce models. Development News Major Mixed-Use Development Proposed at Coors Field In December 2017, architects released renderings of an outdoor plaza at 19th Avenue and Wazee designed specifically for the Colorado Rockies. The mixed-use project is anticipated to bring restaurants, office space, a hotel, and residences to an area currently utilized as a parking lot immediately southwest of Coors Field. The main attraction of this development will be the future Rockies team hall of fame. The Rockies recently secured a 99-year lease for the lot as part of a $200 million agreement to keep Coors Field the home of the Rockies for the next 30 years. The potential cost for development is unknown at this time. Officials hope to start pulling permits in summer of 2018. Mixed-Use Project Planned for RiNo Plans are in the works for a 220,000 square-foot mixed-use development in s growing River North neighborhood. Mass Equities of Santa Monica, CA acquired the 7.8-acre site along Brighton Boulevard and 31st Street in September 2017 for $38 million. The project is proposed to include 85,000 square feet of retail space, a 480-unit apartment complex, and an art creative space consisting of an estimated 62,000 square feet. Construction is scheduled to begin during Q2 2018. 3 Metro Research & Forecast Report Q4 2017 / Retail Colliers International
Retail Overview EXISTING PROPERTIES ACTIVITY ABSORPTION CONSTRUCTION RENTS SUBMARKET/ CLASS BLDGS TOTAL INVENTORY SQ FT DIRECT SUBLEASE CURRENT PRIOR QTR LEASING ACTIVITY SF NET ABSORPTION CURRENT QTR SF NET ABSORPTION YTD SF DELIVERIES CURRENT QTR SF DELIVERIES YTD SF UNDER CONSTRUCTION SF AVG RENTAL (NNN) AURORA 249 10,186,769 5.8% 0.4% 6.1% 6.6% 140,945 46,022 128,997 - - - $13.95 BOULDER 249 8,577,312 4.4% 0.3% 4.7% 4.1% 45,990 (48,852) (113,945) - 40,736 - $20.56 CENTRAL 452 13,856,478 4.0% 0.0% 4.0% 4.4% 97,106 61,161 151,941-127,097 235,000 $19.61 COLORADO BLVD/CHERRY CREEK 108 4,702,641 2.4% 0.2% 2.6% 2.5% 20,437 (1,520) 100,059-71,875 - $29.50 DOWNTOWN 76 2,462,894 2.9% 0.4% 3.4% 5.7% 20,156 120,700 152,522 68,000 102,258 - $25.92 NORTHEAST 280 11,327,619 5.5% 0.0% 5.5% 5.5% 46,884 3,212 109,332 10,000 130,608 350,400 $15.40 NORTHWEST 439 19,750,771 6.9% 0.1% 7.0% 8.2% 128,930 345,469 509,313 114,000 353,142 324,980 $14.36 SOUTH 331 15,366,245 3.6% 0.6% 4.2% 4.1% 41,675 (5,293) 46,446 - - - $17.89 SOUTHEAST 308 12,468,042 4.5% 0.5% 5.1% 5.3% 43,128 32,467 (40,284) - 26,500 36,614 $21.77 SOUTHWEST 195 9,072,530 4.6% 0.4% 5.0% 5.3% 26,276 38,032 (33,792) 10,000 10,000 - $13.93 WEST 476 17,109,847 4.0% 0.2% 4.2% 3.9% 59,288 (45,403) 52,295-90,681 138,919 $15.88 MARKET TOTAL Total 3,163 124,881,148 4.7% 0.3% 5.0% 5.4% 670,815 545,995 1,062,884 202,000 952,897 1,085,913 $17.13 DENVER MARKET QUARTERLY COMPARISON AND TOTALS Q4 17 3,163 124,881,148 4.7% 0.3% 5.0% 5.4% 670,815 545,995 1,062,884 202,000 952,897 1,085,913 $17.13 Q3 17 3,158 124,679,148 4.7% 0.5% 5.3% 5.4% 693,604 408,309 516,889 317,882 750,897 1,139,110 $17.13 Q2 17 3,149 124,415,799 4.8% 0.5% 5.4% 5.2% 780,940 (115,146) 109,080 218,945 433,015 1,080,172 $16.45 Q1 17 3,140 124,311,448 4.8% 0.4% 5.2% 5.4% 798,244 224,226 224,226 214,070 214,070 1,018,409 $16.05 Q4 16 3,135 124,324,054 5.0% 0.4% 5.4% 5.5% 1,078,527 238,180 829,506 139,907 672,186 690,295 $15.55 The information contained in this report was provided by sources deemed to be reliable, however, no guarantee is made as to the accuracy or reliability. As new, corrected or updated information is obtained, it is incorporated into both current and historical data, which may invalidate comparison to previously issued reports. 4 Metro Research & Forecast Report Q4 2017 / Retail Colliers International
for best cities to be a homeowner in the U.S. -SmartAsset, 2017 ranked the best place to live in America -U.S. News, 2017 for most recession-recovered large cities -WalletHub, 2017 for best cities for job seekers -NerdWallet, 2017 #4 best place to retire in America -Bankrate/Gallup-Sharecare, 2017 #7 best cities for foodies -SmartAsset, 2017 #7 for healthiest U.S. cities -American Fitness Index, 2017 has experienced ninestraight months of unemployment below 3.0 percent -Bureau of Labor Statistics, Nov. 2017
by Submarket 76 MANAGING DIRECTOR: Brad Calbert, ULI, NAIOP President +1 303 283 4566 brad.calbert@colliers.com NORTHWEST 7.0% 36 25 76 270 NORTHEAST 5.5% REGIONAL AUTHOR: Tyson Price Research Director +1 303 283 4561 tyson.price@colliers.com Claire Anhalt Research Analyst +1 720 833 4628 claire.anhalt@colliers.com 70 WEST 4.2% 6 DOWNTOWN 3.4% 25 CENTRAL 4.0% CO BLVD/ CHERRY CREEK 2.6% 225 70 AURORA 6.1% RETAIL TEAM: Jay Landt Senior Vice President +1 303 283 4569 jay.landt@colliers.com Jason F. Kinsey Vice President +1 303 283 4598 jason.kinsey@colliers.com SOUTHWEST 5.0% 470 SOUTH 4.2% 25 SOUTHEAST 5.1% Lisa Vela Senior Broker +1 303 283 4575 lisa.vela@colliers.com Brady Kinsey Broker Associate +1 720 833 4618 brady.kinsey@colliers.com Jawara Partee Broker Associate +1 720 833 4634 jawara.partee@colliers.com About Colliers International Colliers International is a global leader in commercial real estate services, with more than 15,000 professionals operating out of 396 offices in 68 countries. A subsidiary of FirstService Corporation, Colliers International delivers a full range of services to real estate occupiers, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and insightful research. Colliers International has been recognized and ranked by the International Association of Outsourcing Professionals Global Outsourcing 100 for 10 consecutive years, more than any other real estate services firm. Colliers International 4643 South Ulster Street, Suite 1000, CO USA +1 303 745 5800 colliers.com Copyright 2017 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.