Economy: Denver Remains Stable Amid Uncertain Conditions
Denver’s labor market continued to outperform national trends in the third quarter of 2026, with unemployment increasing to 3.9%, a 10-basis-point (bps) increase quarter-over-quarter (QOQ). Job growth remained concentrated in professional services, transportation & warehousing, healthcare, and construction, reflecting ongoing demand for both knowledge-based employers and logistics operators. Though economic sentiment in late 2025 suggested the Federal Reserve might cut rates in 2026, persistent inflation driven by higher energy prices, led the Fed to raise the Fed Funds rate by 25 bps while signaling at the possibility of future increases by the end of 2026.
Supply: Vacancy Decreases, Led By Airport And I-76
Despite just over 950,000 square feet (sf) of deliveries reported in Q3 2026, overall and direct vacancy decreased QOQ, ending Q3 2026 at 7.5% and 7.1%, respectively, its lowest since Q1 2024. Compared to Q3 2025, vacancy was down on both a direct and overall basis year-over-year (YOY), with direct vacancy decreasing 60 bps and overall decreasing 60 bps. Following the 470,200-sf move-in by two short term tenants at Mile High Logistics Center, the I-76 Corridor submarket experienced the greatest QOQ drop in vacancy, falling 370 bps QOQ to end Q3 2026 at 14.0%. With several move-outs exceeding 20,000 sf, Southeast recorded a 90 bps increase in vacancy QOQ, ending Q3 2026 at 8.4%. With nearly 1.4 million square feet (msf) of speculative space slated to deliver by year-end, it is possible metro-wide vacancy may increase in the near term.
Pricing: Asking Rates Increase Due to New Construction
Metro-wide asking rates increased $0.26 per square foot (psf) QOQ on an overall basis, ending Q3 2026 at $10.23 psf triple net (NNN) metro-wide. Direct asking rates experienced a similar increase QOQ, growing $0.32 psf compared to Q2 2026. Reported rent growth in recent quarters has been driven largely by the addition of new Class A inventory rather than strengthening demand. Although Metro-wide asking rents have edged upward over time, landlords remain increasingly flexible on rates and concessions when competing for quality tenants.
Activity: 100-250k SF Buildings Remains Sound
Just over 2.1 msf of new leases were signed during the third quarter 2026, a 38.0% decrease QOQ and 23.5% YOY. The Airport submarket remained the focal point of leasing activity, led by more than 355,100 sf of space at 11275 East 40th Avenue. After an exceptionally strong Q2 2026, leasing in the North submarket declined 80.0% QOQ to just over 140,000 sf in Q3 2026. However, this still represented a 44.8% increase YOY from a sluggish 2025. Overall, Metro Denver leasing activity in Q3 2026 was 75.2% of the five-year quarterly average, remaining well below the historical benchmark.
Absorption: Airport Sees Continued Strong Demand
The industrial market recorded more than 1.5 msf in Q3 2026, up 284.4% compared to Q2 2026. Occupancies in the Airport and North Central submarkets contributed heavily the increase. Despite Alan Ritchey’s move-out from Stafford Logistics Center, which accounted for more than 594,000 sf of negative absorption, Philip Morris’ 800,000 sf BTS move-in and several other move-ins exceeding 80,000 sf resulted in positive net absorption in the Airport submarket, underscoring continued demand. In the I-76 market, notable move-ins included Kuehne & Nagel and Symbia Fulfillment, which together occupied 470,000 sf at Mile High Logistics Center. Net absorption in Q3 2026 exceeded the five-year average of 1.1 msf, underscoring the market's underlying resilience.
Construction: Deliveries Bounce Back
Q2 2026 recorded zero new construction deliveries, while 950,000 sf of new supply was added in Q3 2026, led by the Airport and Southeast submarkets. The delivery of HUB Arapahoe added 150,000 sf to the Southeast submarket. Though the project was 73.5% leased at the time of completion, the delayed move-in of Pacific Automation (32,286 sf) in building two and the remaining vacant space contributed to the QOQ rise in vacancy within the Southeast submarket. With these deliveries, projects under construction metro-wide totaled just under 3.5 msf, down from 4.2 msf in Q2 2026, well below the five-year average of 6.2 msf.
Sales: Activity Flat QOQ As Investors Remain Cautious
Industrial sales volume reached $364.7 million in Q3 2026, a 6.3% decrease from the revised Q2 2026 total of $389.3 million and an 80.5% increase YOY from $202 million in Q3 2025. Blackstone’s sale of North Central Logistics Center as part of a 38-property national portfolio to PCCP LLC and Stonemont Financial for $117.0 million was the largest transaction of the quarter. Berkeley Partners also acquired a five-property, 604,429-sf portfolio from Prologis for $73.0 million ($121 psf). Despite continued interest rate pressure, institutional capital remained selective, focusing on well-located, stabilized assets.
