FRONT RANGE INDUSTRIAL MARKET STATS

Analysis

As we pass the halfway mark of Q4 2022, there seems to be a tale of two cities — investment and owner user. On the investment end of the spectrum, things have slowed down big time. With interest rates having essentially doubled since the beginning of the year, investment property valuations have taken a hit. According to Green Street, industrial property valuations are down 17% year to date nationwide. What we are seeing is primarily a slow down in activity and transaction volume because of this. Seller’s for the most part still want premium pricing, while buyers are insisting on price cuts because they are not willing to accept a lower return on their capital. Seller’s are not willing to accept a lower number either, so the result is that fewer investment transactions in particular are getting done.

That being said, it’s a tale of two cities because there are still bright spots. The leasing market and the owner-user sales market remain strong, especially on the lower to mid-market side of the pricing spectrum. By and large, industrial businesses remain resilient and business is good. When there is a business case for it, many local and regional businesses especially are still in expansion mode. Inventory for owner-user for sale buildings remains low, especially for a quality property. Industrial properties with good parking and/or yard space can often still fetch the same price or more that they did a year ago. When it comes to leasing, the business case for leasing is stronger than ever because the monthly payment is likely significantly cheaper than buying. As a property owner who is potentially considering leasing or selling, leasing looks like a strong option too because it is not dependent on the debt markets and vacancy is still quite tight.