Colorado-Real-Estate-Journal_499210

Page 16 — Office & Industrial Quarterly — December 2025 www.crej.com INDUSTRIAL B y the third quarter of 2025, Colorado’s industrial mar- kets found themselves navigating a moment of collective reset. The Front Range didn’t move in unison, but it did move with a shared sense of recalibration in an environment where high borrowing costs, mac- roeconomic uncertainty, disciplined developers and cautious stakehold- ers converged to shape a new, more measured phase of the cycle. n A statewide repricing trend comes into focus. In 2025, the Colorado industrial commercial real estate market was defined not by contrac- tion, but by a deliberate slowdown. A continuation of elevated interest rates, federal uncertainty, and per- sistent global trade friction pushed both occupiers and CRE investors into longer, more analytical deci- sion cycles. Deals didn’t quite fall apart, but they stretched out, leas- ing slowed, and development pulled back to the lowest levels seen in years. Developers across the Front Range trimmed speculative ambitions and shifted toward build-to-suit and preleased opportunities. As such, Denver’s pipeline fell over 40% year over year, Northern Colorado’s shrank considerably, and Colorado Springs saw new starts virtually evaporate for the quarter. Against this backdrop of cau- tion, pricing across all markets began settling into a “new normal.” While price adjustments weren’t dramatic, they were consistent. Cap rates adjusted upward, bid-ask spreads tightened, and deal volume decreased from the high pace seen in years prior. n Denver: Adapting and rebalanc- ing. Denver became the clearest illustration of what repricing looks like in practice. Industrial/flex sales volume for 5,000- to 200,000-square- foot assets reached roughly $274.8 million in the third quarter, a mod- est 1.1% year-over-year gain but a sharp 42% decline from the second quarter, illustrating a more selec- tive investment climate under the pressure of high borrowing costs and other macroeconomic factors. Deals that penciled in 2021 simply won’t today, and Denver’s numbers reflected that. Vacancy climbed to 8.9%, the high- est level in a decade, and up 4.7% quarter over quarter and 21.9% year over year, as tenants slowed expansion plans and favored renewals over relo- cations amid eco- nomic instability. Smaller unit sizes, between 5,000 sf and 20,000 sf, notably outperformed in terms of vacancy, with a rate of 5.1%, 370 basis points lower than the general average for Denver. Asking rents eased from their 2024 peak but still averaged $11.49 per sf, only 2.5% below year-ago levels, as landlords leaned more on conces- sions, such as tenant improvement packages, longer abatements, and broker incentives, to better preserve occupancy levels. n Northern Colorado: Selective strength amid leasing volatility. North- ern Colorado’s industrial sales vol- ume totaled approximately $68.24 million in the third quarter, up 3.5% year over year but down 56.8% from the spike seen in the second quarter, underscoring a recalibra- tion after a midyear surge in trades fueled by a growing pool of active participants across both private and institutional capital sources. Average pricing settled at $145 per sf, 8.8% below the second quarter but 4.3% above third-quarter 2024, reflecting a measured multiyear cooling trend and a narrowing bid- ask spread as sellers continue to align with market reality. Northern Colorado offered a dif- ferent lens on the same regional themes. Headline vacancy reached 9%, matching the cooling seen elsewhere, but similarly to Denver, smaller unit sizes continue to out- perform the broader market. Prop- erties with unit sizes in the 5,000- to 20,000-sf range reported vacancy at 6.5%, 250 basis points lower than the broader square-foot range, and a testament to the demand from service based and light-industrial users that drive the submarket. These smaller unit sizes are more versatile and cater to a broader range of tenants and industries. n Colorado Springs: Resilient fun- damentals despite slower leasing. If Denver showed the mechanics of a recalibrating market and North- ern Colorado highlighted selective strength, Colorado Springs demon- strates how consistent demand and restricted supply can shape market performance. Colorado Springs recorded about $31.51 million in third-quarter industrial sales in the 5,000- to 200,000-sf range, a 14.9% year-over- year increase even as volume fell 56.3% from the second quarter’s elevated total. Average sale pricing corrected to $120 per sf, down 5.5% from the prior quarter and 7.7% from third-quarter 2024, even after a first-quarter spike to $180 per sf that was driven by outlier trades. This has ultimately reinforced how the deal mix continues to influence quarterly averages. Vacancy ticked up to 5.1%, 15.9% above the second quarter but still 3.8% lower than a year ago, and well below both Denver and North- ern Colorado, supported by limited new supply and steady population growth. Despite slower leasing, landlords pushed average asking rents to a record $12.02 per sf, up 4.3% quarter over quarter and 8% year over year. Months to lease, however, stretched to 6.6, roughly 20% above the second quarter and nearly 30% higher than third-quar- ter 2024, as tenants take a more cautious approach when evaluating expansion or relocation costs. n Construction and development posture. Development pipelines across all three markets showed clear signs of restraint by the third quarter. In Denver, indus- trial projects under construction fell to about 1.33 million sf in the 5,000- to 200,000-sf range, a 40.5% year-over-year decline, even as new starts rebounded to roughly 534,500 sf for the quarter, with a strong bias toward smaller, subdivided buildings and precommitted ten- ants. Northern Colorado’s under- construction volume slid to roughly 381,900 sf, also down 40.5% year over year, with new starts of just 16,294 sf for the quarter, signaling an almost complete pause in specu- lative projects. Colorado Springs mirrored this cautious stance, with about 381,613 sf under construction, down 21.3% from a year earlier, and third- quarter starts collapsing to a mere 7,250 sf for the quarter, a staggering 90% year-over-year drop. Across the region, developers pivoted to build- to-suit and preleased schemes, as they adjust to slowed growth in order to reduce risk amid expensive construction costs and tempered demand. n Conclusion. By the third quar- ter, Colorado’s industrial market entered a period of recalibration rather than retreat, as elevated borrowing costs, macroeconomic volatility and longer decision cycles tempered momentum across the Front Range. Denver showed the clearest signs of repricing, dem- onstrating selective strength in smaller units, similar to Northern Colorado, and Colorado Springs maintained resilient fundamentals supported by tight supply. Develop- ment pipelines contracted state- wide as builders shifted away from speculative projects toward pre- leased and build-to-suit opportuni- ties. Together, these trends mark a more disciplined, measured phase of the cycle, one that resets expec- tations and positions the market for healthier, more sustainable growth ahead. s spencer.mason@matthews.com Colorado industrial markets are at a crossroads Spencer Mason Vice president, Matthews Vacancy comparison: 5,000-200,000 sf industrial and flex properties. Source: CoStar Group Inc. Construction starts: 5,000-200,000 sf industrial and flex properties. Source: CoStar Group Inc.