Low availability a top storyline for Denver's retail market in 2025

Denver’s retail market is ending 2024 on a strong note, as steady leasing and a lack of new construction pushed available space down to historic lows.

From construction trends to evolving consumer behaviors, here are five key trends shaping the Denver retail market’s performance heading into 2025:

Construction hits record low

Denver’s retailers will likely face mounting challenges in securing the right type of space in the right location in the year ahead as they contend with a dwindling supply pipeline and an availability rate that is already hovering near a record low.

Around 188,000 square feet is currently under construction, representing just 0.1% of the market’s current inventory, according to CoStar data.

A combination of high borrowing costs, tighter lending standards and rising construction costs have resulted in a sharp pullback in groundbreakings. Year-to-date groundbreakings — representing the square footage that began construction — are on track to be among the lowest since 2010 at least.

Retail tenants remain active

While construction has pulled back, retailers across Denver continue to expand. Roughly 3 million square feet has been leased year to date, according to CoStar data. That number is expected to rise as CoStar researchers confirm additional deals.

As tenants continue to take down space, available options have become increasingly limited. The market has maintained a sub 5% availability rate since late 2022, and current availability is roughly 4.7% of inventory as of December, near a decade low. Some market brokers have noted these are the tightest conditions they have seen in their careers.

Experiential retailers drive leasing

Experiential retailers continue to capture the largest leases, a trend that has held since Americans emerged from the pandemic lockdown and began prioritizing experiences over physical goods.

One experiential retailer driving leasing has been pickleball, with retail landlords taking advantage of the game's rise in popularity. Epic Pickleball Club leased space in two locations, including 26,462 square feet in Plaza at Highlands Ranch in Highlands Ranch and 35,000 square feet in Bowles Village Center in Littleton. Utah-based The Picklr, which offers year-round pickleball, took 30,000 square feet in Thornton Town Center. Finally, Mile Hi Pickleball leased 35,000 square feet at Havana 37 in Denver.

Retail space per capita keeps falling

Retail inventory nationally is expanding at a much slower rate than the U.S. population. Over the past decade, the average amount of retail space per capita in the nation’s 75 largest retail markets decreased 1.9%, falling to 58.9 square feet per person. More than 60% of major markets have experienced population growth outpacing retail inventory growth.

The national retail market market has been shaped by the aftermath of the Great Recession and a significant wave of store closings in the mid-2010s. These events led to fears of oversupply and a substantial reduction in new store construction. Consequently, most retail development have focused on build-to-suits and smaller ground-floor spaces within larger mixed-use developments.

Rental performance varied across market

While availability and new construction remain minimal, retail rents in the Denver area have barely risen over the past year, up by just 2.7%.

This trend runs counter to the tight fundamentals that should support robust rent growth, but a large concentration of the space that is available is either obsolete or stale space, limiting landlords' potential to push rates. Additionally, downtown Denver continues to struggle with vacant storefronts, and rents have contracted in the area, dragging down market-level performance.

However, there is significant variation in rental performance across the market. Retailers in vibrant neighborhoods such as RiNo, Cherry Creek and Uptown are tapping into Denver's multifamily construction boom and leasing ground-floor retail sites. These types of spaces are experiencing the most pricing power.

In Cherry Creek, average rents of $45 per square foot are nearly double the Denver market average. By Jeannie Tobin. Costar Analystics