Q225 Denver Industrial Market Report

Market Overview

By the Numbers

All Properties | Q2 2025 | Industrial + Flex Properties | Source: CoStar Group, Inc.

Sales Volume: $589,897,680
Number of Properties Sold: 119 (Up by 36 from Q1 2025)
Average Sale Price Per SF: $160
Vacancy Rate: 8.50%
Rent Growth: -0.3%
Rent Per SF: $11.47
Under Construction (SF): 5,473,157
Construction Starts (SF): 609,678
Net Absorption (SF): -1,041,179

Key Highlights

5,000-200,000 SF | Industrial + Flex Properties

1. Massive Spike in Sales Volume

In Q2 2025, the Denver market experienced a massive spike in sales volume, reaching $452.2 million—an impressive 73.63% increase year-over-year and 144.20% increase quarter-over-quarter. This surge reﬂects signiﬁcant market momentum, driven by strategic pricing adjustments and sellers becoming more responsive to current market conditions. As sellers met buyer expectations, transaction volume grew substantially compared to Q1’s modest $185.2 million, marking a strong upward trend in overall market activity.

2. Rent Growth Bottoming Out

Asking rents have remained relatively steady, with a slight year-over-year decrease of 4.12% and a marginal decline from $12.48/SF in Q1 to $12.32/SF in Q2—still above the ﬁve-year average of $11.88. Rent growth has eﬀectively stalled, dipping to -0.3% in Q2 compared to 0.4% in Q1, well below the ﬁve-year average of 4.4%. This suggests that Denver may approach the bottom of the rent cycle. That being said, there’s growing optimism that rental growth could strengthen in the second half of the year as the construction pipeline continues to taper.

3. Vacancy Starting to Plateau

Vacancy rates have continued to rise year-over-year, increasing by 20% and reaching 8.4% in Q2 2025—well above the ﬁve-year average of 6.40%. However, the pace of increase has slowed compared to previous quarters, suggesting that vacancy may be approaching a plateau. With Q1 at 8.0% and only a modest uptick in Q2, the market appears to be stabilizing. Looking ahead, vacancy is forecasted to level oﬀ in the second half of the year as supply and demand continue to rebalance.

Focused Metrics | 5,000-200,000 SF | Industrial & Flex Properties

Transaction Volume | 2025 vs 2024

Source: CoStar Group, Inc.

	Q2 2025	Q2 2024
Sales Volume	$452,230,680	$260,462,577
Sales Price Per SF	$156	$168

Sales Volume & Sales Price Per SF

Source: CoStar Group, Inc.

Sales Activity

Although the metro recorded a slowdown in sales to start the year, transactions signiﬁcantly picked up in the second quarter with a total $452 million in deal volume. A ﬁve-property portfolio accounted for the highest trade this quarter at $153 million. The ﬁve properties are part of the Mile High Business Center in the Cent E I-70/Montbello submarket. In total, the transaction was made up of 1.2 million square feet, with a sale price of $129.67 per square foot. It was sold by Clarion Partners to Principal Real Estate Investors.

Private capital and institutional buyers aided transaction volume throughout the past year, accounting for 51% and 24% of sales, respectively. In the second quarter, private capital recorded a total $90 million in sales volume. The majority of investments from the private sector were for properties under 50,000 square feet, which follows the national trend of investors seeking smaller properties.

Sales prices averaged at $156 per square foot this quarter, down from prior peaks. A contributing factor to this decrease is the bid-ask spread between buyers and sellers, which continues to narrow. Moving forward, the gap is expected to narrow throughout the rest of the year as sellers continue to adopt more realistic pricing expectations that are aligned with today’s environment.

The stabilization in pricing suggests that the underlying asset fundamentals in Denver’s industrial market are strong. Smaller properties under 50,000 square feet will continue dominating sales activity and leasing. In the second quarter, these facilities recorded a vacancy rate of 4.3%, compared to 8.5% for the broader market.

The outlook for Denver’s industrial investment market suggests a gradual uptick in sales throughout the rest of 2025. The current hurdle of diﬀering buyer and seller price expectations is likely to continue decreasing as expectations of rate cuts remain optimistic and the bid-ask spread tightens. This trend could potentially lead to more transactions in the second half of the year. The bulk of this activity is projected to continue coming from private capital and owner-users, particularly for spaces between 5,000 and 200,000 square feet, a size range that continues to entice buyer interest in today’s environment.

Vacancy, Rents, and Construction in Denver

Vacancy Rate: 8.4%
Average Asking Rents: $12.32/SF
Asking Rent Growth: -0.3%
Under Construction (SF): 1,358,068
Construction Starts (SF): 241,054

Denver’s vacancy rate recorded a consistent uptick over the past three years. At the end of Q2 2025, vacancy reached 8.4%, which is well above the 10-year average of 5.6%. The elevated level is largely the result of the 2021-2023 development surge, when a wave of new supply far outpaced tenant demand and pushed availability to a decade high. While completions have since slowed and absorption has inched closer to equilibrium, the market is still working through the excess space. Larger logistics facilities above 100,000 square feet continue to drive the bulk of vacancy. Meanwhile, properties under 50,000 square feet remain tight and competitive as the majority of newly-signed leases are focused on smaller facilities.

Industrial rents in Denver have softened over the past year, declining by 0.3% annually compared to the 6.8% average annual growth recorded in the ﬁve years leading up the pandemic. Average market rents stand at $12.32 per square foot, although that ﬁgure varies by property type and location. For example, Central Denver notes rents ranging from $12 to $14 per square foot on average. Meanwhile, properties near Denver International Airport have been as low as the $6-7 per square foot range, dependent on the product and location. Rent growth is likely to remain muted through 2025, with the expectation for this metric to rebound in 2026 as market fundamentals continue to improve.

Vacancy Rate

Source: CoStar Group, Inc.

Asking Rent per SF

Source: CoStar Group, Inc.

Asking Rent Growth (YOY)

Source: CoStar Group, Inc.

Construction activity has slowed sharply, falling to its lowest level since 2017, with just 1.8 million square feet underway in the 5,000 to 200,000 square foot range. There are many contributing factors, including the already high vacancy rate, but zoning challenges, increased regulations, and ﬁnancing diﬃculties have also played a role in declining construction across the metro. Speculative big-box developments have decreased, leaving new groundbreakings concentrated in build-to-suit or pre-leased facilities. Smaller, often owner-ﬁnanced developments, are also becoming more common as developers continue to adapt with demand and today’s realities.