Q125 Colorado Springs Industrial Market Report

By the Numbers

• Sales Volume: $23,059,940
• Number of Properties Sold: 18
• Average Sale Price Per SF: $171
• Vacancy Rate: 4.4%
• Rent Growth: 1.6%
• Rent Per SF: $11.62
• Under Construction (SF): 184,750
• Construction Starts (SF): 0
• Net Absorption (SF): 42,429

All Properties | Q1 2025 | Industrial + Flex Properties | Source: CoStar Group

Key Highlights

1. Strong investment demand (5K-200K SF)

Sales volume increased 10.19% YOY, from $20.65M in Q1 2024 to $22.76M in Q1 2025. Price per SF sold rose sharply from $143 to $172—a 20.28% jump, showing increased investor confidence. However, the majority of product sold in Q1 2025 was newer construction and was the main driver for the sharp increase in sale price per SF.

2. Construction activity slows despite absorption rebound (5K-200K SF)

No new construction broke ground in Q1 2025 (compared to 350,000 SF in Q1 2024), and the under construction pipeline shrank by 71.26%. However, net absorption rebounded to +51,424 SF, recovering from negative absorption in Q1 2024—signaling stronger tenant demand despite a tightening pipeline.

3. Newly proposed development in Monument, CO

Falon Commerce Center is a premier Class A industrial development recently announced by VanTrust, set to break ground at the high visibility intersection of I-25 and Baptist Rd. This two-building project will offer a total of 363,955 SF designed for industrial, warehouse, and distribution use. Completion is targeted for Spring 2026.

Focused Metrics

(5,000-200,000 SF) | Industrial & Flex Properties

Transaction Volume | 2024 vs 2025 | Source: CoStar Group

The Colorado Springs industrial market for mid-sized assets posted a 10.19% year-over-year increase in sales volume in Q1 2025, climbing from $20.65 million in Q1 2024 to $22.76 million. This uptick is notable against the backdrop of the broader market’s recalibration and reflects a meaningful return of investor appetite for well-located, functional industrial product. However, when viewed over a longer horizon, the $22.76 million in sales volume in Q1 2025 is modest compared to pandemic-era peaks ($61.8M in Q1 2022), however it marks a meaningful recovery from 2023’s inconsistent transaction pace.

This recovery was particularly concentrated in newer or recently renovated properties, with strong in-place leases or lease-up potential. The average building size sold in Q1 2025 jumped to 64,772 SF, significantly larger than the 16,104 SF average in Q1 2024, signaling a shift in buyer preference toward higher-value, institutional-grade assets within the mid-size segment. Investors are targeting stable, leased assets with minimal near-term rollover risk.

Driven by the quality of assets traded, the average sale price per SF surged 20.28% YOY, from $143/SF in Q1 2024 to $172/SF in Q1 2025—the highest price/SF in the last five years. Similarly, the median price per SF rose from $164.43 to $166.17, indicating that the increase is not solely skewed by outliers but reflects broader pricing momentum.

Another indicator of recovering investor confidence is the average cap rate, which compressed to 8.0% in Q1 2025, down from an average of 9.4% for the overall industrial market in the same period last year. If capital markets stabilize, and leasing demand from aerospace, logistics, and manufacturing users remains strong, the mid-size industrial segment in Colorado Springs is well positioned for further recovery in 2025. Investor appetite is returning, especially for newer or adaptable product that aligns with occupier demand trends.

Vacancy, Rents, and Construction

• Vacancy Rate: 4.90%
• Average Asking Rents: $11.75/SF
• Under Construction (SF): 184,750
• Construction Starts (SF): 0

5,000-200,000 SF | Industrial & Flex Properties | Q1 2025 | Source: CoStar Group

Vacancy in the Colorado Springs industrial market inched upward to 4.9% in Q1 2025, up from 4.5% in Q1 2024. While a 40-basis-point increase may suggest a softening in space demand, the rate remains well below the national average and reflects a generally healthy occupancy environment. This modest rise in vacancy is likely attributable to:

• A small number of second-generation spaces coming back online.
• Developers reaching completion on previously initiated project during the latter stages of the 22-23 pipeline.
• Typical vacancy associated with tenant move-outs and lease transitions, particularly in older Class B product.

Nonetheless, vacancy levels below 5% continue to signal tight market conditions, especially in submarkets with proximity to the Colorado Springs Airport and Northwest corridor where tenant demand remains steady.

The asking rent per SF rose slightly from $11.58 in Q1 2024 to $11.75 in Q1 2025, reflecting an annual gain of 1.4%. However, this is a dramatic slowdown from the 4.3% growth rate observed in the year prior, representing a 67.4% decline in the pace of rent growth. Still, the increase in average asking rents, however moderate, suggests that landlords are holding the line rather than cutting rates, particularly in buildings with updated infrastructure or strategic locations.

Construction activity in Colorado Springs has dropped off significantly to start 2025. No new projects broke ground in Q1, a 100% decline compared to the 350,000 SF of construction starts in the same quarter last year. Additionally, the total space under construction shrank by 71.3%, from 642,900 in Q1 2024 to just 184,750 SF in Q1 2025. This retreat reflects heightened caution among developers, driven by persistent interest rate pressures, difficulty securing financing, concerns regarding tariffs and material costs, and uncertainty surrounding long-term occupier demand.

The current pipeline is dominated by projects already underway or tied to pre-leasing build-to-suit deals, with speculative development nearly frozen. This construction pullback may help rebalance the market in the near term by easing future supply pressures and supporting rent stability. The lack of new deliveries positions well-located, functional space to see greater leasing traction and pricing resilience in the coming quarters.