Denver Ranks Sixth on CBRE’s Inaugural U.S. Development Opportunity Index

New CBRE Report Identifies Which Markets Most Ideal for Overall Construction, Coming Off Pandemic-induced Slowdown

Denver offers one of the most favorable development markets for commercial construction in the U.S., according to CBRE’s U.S. Development Opportunity Index. Denver secured the sixth overall spot on the inaugural list and scored well at the individual property level, ranking third for multifamily development opportunities, fourth for retail, 11^th for industrial and 16^th for office.

The report, which analyzed the top 50 U.S. markets by population, scored markets based on four performance categories: construction costs, fundamental strength of existing supply, prior cycle performance and property forecast.

“Denver stands out for its balanced performance across the board, ranking among the top 20 markets in each of the four property types. Years of strong population and employment growth have triggered steady demand for additional capacity within nearly all facets of local real estate,” said Pete Schippits, president of CBRE’s Mountain-Northwest division. 

Denver ranked in the top 15 for previous cycle performance in the multifamily, office, retail, and industrial sectors. Denver’s multifamily and office supply have grown substantially since 2010, ranking highly for both total construction employment and construction employment growth from 2010-2019. The strong market fundamentals, such as job growth and relative low land costs, contribute to top-10 forecasted rental rate growth in both multifamily and office properties. Denver was also a top market for retail construction spending, with an increase of 61.4% from 2010-2019. For industrial & logistics construction, Denver benefited from low land costs, an overall large population and high population growth from 2010-2019.

U.S. construction activity is expected to pick up in 2021, after a slowdown in 2020 due to challenges brought by COVID-19, including temporary work stoppages and difficulty sourcing various materials from abroad. Since the start of the pandemic, momentum has varied among commercial real estate sectors – development progressed in the multifamily and industrial & logistics sectors, but activity slowed—and in some cases stalled—for retail, hotels and speculative office development.

“We expect to see a significant uptick in tenant fit-out projects in 2021 as employers redesign and reconfigure spaces to accommodate new standards in health, wellness and safety,” said Jim Dobleske, CBRE global president of Project Management. “Costs, however, aren’t likely to change much; markets with high costs of land and labor won’t get much cheaper, if at all.”

CBRE’s Development Opportunity Index ranks markets based on development conditions including property performance in each of the major commercial real estate sectors, construction costs, strength of supply, prior performance and forecast performance.

CBRE Development Opportunity Index Top Markets of 2020

To download the report, click here.

Listen to CBRE’s Jim Dobleske and James Millon discuss this report and related topics in more depth on the latest episode of CBRE’s The Weekly Take podcast with Spencer Levy, available on the Weekly Take website, Apple and Spotify.