In the Denver area, shopping centers are frequently changing hands, new construction or redevelopment projects are emerging and restaurant owners continue to grapple with rising costs.
However, within the broader commercial real estate landscape, Denver’s industrial market has picked up speed.
After a brief slowdown last quarter, recent third-quarter reports from national real estate companies CBRE and JLL stated more than 2 million square feet of warehouse and industrial space was leased in the third quarter, driven by major tenant deals and a growing demand for custom-built industrial facilities. However, the amount of industrial space under construction is the lowest it has been in a decade.
At the same time, innovative opportunities for single-tenant warehouse spaces are emerging to meet the growing demand for smaller businesses to enter the market.
“Things can change very quickly in the world and quarter two, kind of when tariffs were announced and everything came out, it was a little slower from the leasing front. During quarter three, we saw that pick back up,” said Brandon Rosely, senior research analyst at JLL.
“There’s a lot of positive momentum behind leasing. At the moment. We have yet to see some of those larger leases, but that was made up for with some of these owner-users, purchasing buildings. I think our market metrics are going to tighten slightly over the next quarter to two and overall move Denver in the right direction when it comes to industrial space.”
The rebound was primarily driven by PepsiCo, which occupied 1.2 million square feet at its newly completed bottling facility near Denver International Airport.
In addition to the growth, two sizable vacant buildings were acquired by Trader Joe’s, which purchased the Lovett 76 Logistics Center, and CEMCO in Commerce City along I-76.
Denver’s industrial development pipeline has reached a five-year low following the completion of major projects like Pepsi’s bottling facility and other speculative developments, the JLL report said.
This tightening supply is expected to benefit landlords aiming to fill recently finished spaces. At the same time, tenants are gaining leverage and increasingly eyeing upgrades as their lease renewals approach.
Supporting this trend, CBRE noted that year-over-year construction activity has dropped nearly 23%, reaching the lowest total amount of industrial space under construction since the fourth quarter of 2015. However, despite the completion of PepsiCo’s facility, a significant portion of construction, 41.8%, consists of build-to-suit or preleased projects.
The amount of space under construction ended the third quarter at 3.3 million square feet, decreasing 1.5 million square feet quarter-over-quarter.
Notable projects under construction include the Aero 70 industrial complex, which plans two speculative warehouses in Aurora; Catalyst Industrial in Centennial; and Food Bank of the Rockies’ new distribution center in Aurora. All are estimated to be completed in the first quarter of 2026.
In addition, Tobacco giant Philip Morris International is expected to complete an 800,000-square-foot manufacturing plant sometime in the fourth quarter of this year.
Seven buildings broke ground for a combined 565,000 square feet, while nine buildings delivered 2 million square feet with a preleasing rate of 59%.
Notable projects breaking ground include two build-to-suit developments for undisclosed tenants, one near the airport, and another in the southeast, along with Hub Arapahoe Buildings 1 and 2 by Jordan Perlmutter & Co.
Additionally, two projects broke ground in the northwest part of the metro area, including a 54,000-square-foot building for Restaurant Depot in Broomfield and a speculative project in Louisville at 517 S. Arthur Ave.
The overall direct vacancy rate for the Denver metro area in the third quarter was 7.6%, slightly down from 7.7% in the same quarter last year, according to CBRE data.
Evolving tenant needs
Rosely said during the pandemic, industrial development was all speculative, meaning that properties were constructed with the intent of immediate sale or lease upon completion. However, the demand has since shifted.
“Everyone wanted to get in on the industrial craze that was kind of going across the United States,” Rosely said.
“I would say, now, a lot of these groups, when they’re thinking big-scale projects here in Denver, they want the customizability of the project, and so they’re going to the build-to-suit route.”
A build-to-suit development refers to the approach where a tenant collaborates with a developer or landowner to create a customized facility for lease.
According to Rosely, Denver has a broad tenant base, but emerging industries like health, aerospace and professional services are steadily climbing.
These industries create varied space demands and lease arrangements, which not only help stabilize the market against single-industry swings but also highlight Denver’s appeal to a broader range of tenants pursuing regional opportunities.
Projects completed this quarter were speculative, including Arista 36 Buildings 1-3, Deer Creek Commerce Center Buildings 1 and 2 and Innovate 25 Buildings 1-3.
JLL Senior Managing Director Carmon Hicks said he observed a shift in tenant behavior, with tenants asking for more improvement allowances for their build-outs. He said landlords are responding by offering more creative incentives, including more funding for renovations and improvements, or providing months of free rent, to encourage occupiers to make leasing decisions.
“I think it speaks to some of the uncertainty that we’re seeing, you know, across the country with tariffs, with interest rates being what they are,” Hicks said.
Addressing this growing diversity, Maryland-based WareSpace has identified a gap in industrial real estate options for smaller businesses in Denver.
WareSpace Founder and CEO Levi Cohen said massive, big-box industrial buildings have been built over the past 10 to 15 years to cater to large users like Amazon or Wayfair.
Smaller, older industrial buildings near population centers are often converted into multifamily housing or retail spaces to make better use of the available area, leaving fewer options for growing companies in between.
WareSpace fills this gap by converting large, single-tenant warehouses into multiple smaller units. Founded in 2018, the company has 21 locations spread across several states, including Arizona, Colorado, Florida, Georgia, Illinois, Minnesota, New Jersey, North Carolina, Pennsylvania, Texas, Utah and Washington.
“Most typical real estate developers like to go after the big, you know, Amazons of the world — for us, I see that people are starting to wake up and realize just how big the small-business segment is within the industrial market right now,” Cohen said.
This year, the company acquired a 129,000 square-foot industrial property in Denver’s Park Hill neighborhood, marking the company’s second location in the Denver area.
These spaces come equipped with amenities, office areas and short-term leases, providing flexible industrial facilities tailored to the needs of smaller tenants.
The Park Hill location is expected to be ready for tenants by spring 2026, with a Centennial facility opening in December. Cohen said the company aims to grow in Denver once both locations launch, and is also eyeing Colorado Springs as a potential market.
“We have 1,000 tenants. You know, that’s 1,000 small businesses, 1,000 people that run their business out of our buildings. It’s an honor to be a partner with them, and I’m hoping that we could have thousands of companies working with us in the coming years.”
Cohen said they plan to keep their spaces as affordable as possible, with prices ranging from $500 to $3,500 per month, depending on the market and unit size.
In Denver, the overall average rent reached $10.05 per square foot, a 3.3% increase compared to last quarter and a 5.2% increase year-over-year.
The most significant increase was seen in the southwest part of the metro area, rising 11.3% quarter-over-quarter to $11.84 per square foot.
Leasing volume in the third quarter of 2025 totaled 2.2 million square feet, while year-to-date activity has declined 25.3% compared to the third quarter of 2024, a CBRE report stated.
The average lease size this quarter was 41,200 square feet across 48 deals. The largest lease of the quarter was RK Industries renewing for 279,000 square feet near the airport.
The two largest move-outs of the quarter were OneTouchPoint vacating 84,000 square feet that they made available for sublease at 5280 Joliet St., and Whole Foods Market vacating 70,000 square feet at Clarion Gateway Building 3.
Rosely doesn’t expect there will be many more speculative projects to break ground this year, while Hicks said there would be development in the northern and southern parts of Colorado.
“Keep in mind that the cost of living in Denver is getting expensive. You’ve seen a move north and you’ve seen a move south with residential, and I think development on the industrial side is following suit,” he said.
Hicks said markets such as Loveland, Fort Lupton, Johnstown and Monument are starting to see more activity and growth, where there’s a need for new development.
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