Q1 2025 Denver Industrial Market Report

Key Highlights

1. Sales Volume Slows, But Pricing Remains Steady

Sales activity in the Denver metro area experienced a noticeable slowdown in Q1 2025, with a 27.08% decrease in transaction volume compared to Q1 2024. That said, Q4 2024 recorded the highest quarterly sales volume since Q2 2022, reaching just over $477 million, signaling renewed investor confidence going into 2025. Despite this decline in activity, pricing has remained resilient. The average sales price per square foot (PPSF) currently stands at $175, consistent with the five-year average of $172. This stability suggests that while fewer deals are being made, asset values are holding strong.

2. New Construction Wave

The market is witnessing a sharp uptick in new development activity. In Q1 2025, new construction starts increased by 173% compared to the same quarter last year, signaling a renewed wave of development across the region. This surge follows the delivery of over 780,000 SF of new space in Q4 2024, which has opened the door for additional projects and investments to enter the pipeline.

3. Vacancy Still on the Rise

Vacancy rates have steadily increased each quarter since Q1 2024, reflecting a period of softening demand. However, projections for the second half of the year suggest a stabilization in vacancy, driven by expectations of positive net absorption and renewed rent growth. This potential shift indicates a more balanced market environment may emerge as we move through the latter half of 2025.

By the Numbers

• Sales Volume: $432,804,696
• Number of Properties Sold: 83
• Average Sales Price Per SF: $174
• Vacancy Rate: 8.00%
• Rent Growth: 0.4%
• Rent Per SF: $11.74
• Under Construction (SF): 5,080,964
• Construction Starts (SF): 1,368,695
• Net Absorption (SF): 461,153

All Properties | Source: CoStar Group

Focused Metrics

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

Transaction Volume | YoY Change

Source: CoStar Group

Following a historic surge in late 2024, Denver’s industrial sales market entered 2025 with a more tempered pace. Transaction volume fell to approximately $178 million in the first quarter, marking a 27% decline year-over-year. After the exceptional fourth quarter in 2024—which posted the highest volume since mid-2022—the market appeared to take a collective breath as elevated financing costs and cautious underwriting slowed deal activity. Despite this pullback, the resilience shown late last year hints at underlying investor confidence, particularly for smaller, infill assets that continue to attract steady interest.

While the number of transactions moderated, property values have shown surprising stability. The average price per square foot climbed to $175, up 8% from Q1 2024 and closely aligned with the five-year market average. This firmness in pricing suggests that asset fundamentals remain intact, especially for well-located small and mid-bay industrial properties where tenant demand has been less volatile.

Looking ahead, Denver’s industrial investment market is poised for a more gradual rebound over the course of 2025. Although the gap between buyer and seller expectations remains a hurdle, improving sentiment around interest rates and narrowing bid-ask spread could unlock more deal flow later this year. Private buyers and ownerusers are expected to continue dominating activity, especially in the 5,000 to 200,000 SF range where tenant demand remains healthy.

The rapid rise in debt costs and a wide bid-ask spread contributed to the slowdown in 2024 compared to the highgrowth periods of 2021-2022, but buyer and lender sentiment is expected to be more optimistic in 2025. Notable transactions in 2024 included the sale of DIA Logistics Park, a 625,000-SF property that sold for $96.3 million at $154/SF, and Building 1 at 9940 Havana Street, which traded for $72.2 million at a record $258/SF. These significant deals highlight a bifurcation in the market, with investor interest concentrated on high-quality assets despite the overall decline in activity.

Denver’s industrial market in 2025 is expected to see a more balanced investment environment as pricing adjustments and increased availability create opportunities for buyers. Although the average price per square foot has increased from a low of $164.77 in 2023, the increase reflects a stabilization more than anything, as 2024 experienced volatility. The stabilization reflects a narrowing bid-ask gap as sellers adopt more realistic strategies amid growing buyer leverage. This trend, combined with the anticipated effects of rate cuts and improving lender sentiment, sets the stage for increased sales volume as market pricing aligns with expectations.

Vacancy, Rents, and Construction

5,000-200,000 SF | Source: CoStar Group

• Vacancy Rate: 8.0%
• Average Asking Rents: $11.59/SF
• Asking Rent Growth: 0.4%
• Under Construction (SF): 1,685,989
• Construction Starts (SF): 568,695

Denver’s industrial rental market continues to show signs of deceleration as the sector adjusts to elevated vacancy rates and the lingering effects of the recent construction boom. As of Q1 2025, average asking rents across the metro stood at $11.59/SF, reflecting a slight 3.17% decrease YOY. This decline marks a significant shift from the more robust rent growth patterns seen pre-pandemic, with annual growth slowing dramatically to 0.4%–a 91% drop from the five-year average of 4.5%. The oversupply of space, particularly in larger distribution properties, is weighing on rent performance in the near term. However, with a tightening pipeline of new deliveries and strong demand for small-bay and flex spaces, a gradual rebound in rent growth is anticipated to take hold in late 2025 and beyond.

Vacancy rates, meanwhile, continue to climb, reaching 8.0% in Q1 2025—up from 6.9% a year earlier and notably higher than Denver’s historical averages. This marks the fifth consecutive quarter of vacancy increases, largely driven by the glut of space delivered during the construction surge from 2021 to 2023. Despite this softness, market fundamentals are showing early signs of stabilization. Net absorption remained negative at the start of the year (-303,095 SF), but projections point to a return to positive absorption in the second half of 2025, which could help balance the current supply-demand mismatch. Smaller spaces, particularly those under 50,000 SF, are expected to outperform, supporting localized tightening even as the broader market works through its supply overhang.

After a multi-year period of aggressive development, new construction activity has cooled significantly. Just 1.69 million SF remained under construction at the end of Q1 2025, a 41.7% decline compared to the same time last year and the lowest level recorded since 2017. However, new starts surged during the quarter, jumping 173% YOY, signaling selective confidence among developers despite tighter lending conditions. Much of the new activity is concentrated in smaller, build-to-suit projects that face fewer financing hurdles and align better with prevailing tenant demand trends. Speculative big-box developments have largely paused, especially near Denver International Airport where oversupply is most present. The pivot toward smaller footprints is expected to support a healthier balance between supply and demand moving forward into 2026.