While most of the country's manufacturing sector continues to struggle, the Denver market is thriving in 2017. New residents are moving to Denver at a fast pace, driving much of the growth in manufacturing. Over 10,000 manufacturing jobs have been created in the Denver metro area since 2010.
Beverage production in the Denver metro area has taken off in recent years and continues to grow at a fast pace. According to the Metro Denver Economic Development Corporation, the region ranks third among the 50 largest metropolitan areas for employment concentration. In the past five years, the sector has grown by nearly 30 percent.
Denver's unemployment rate ticked up in the first quarter, but it still remains incredibly low at 3.5 percent. The historically low unemployment rate indicates that finding qualified labor could be an obstacle for Denver manufacturers. According to a survey conducted by Denver-based EKS&H, labor continues to be a challenge for manufacturers as 67 percent of survey respondents expect labor costs to increase in this year.
Our market statistics indicate that vacancy in manufacturing space increased slightly in the first quarter to 2.4 percent. Previously, the vacancy rate held steady at 2.0 percent for three consecutive quarters. Of the existing 50.5 million square feet (msf) of manufacturing space in Denver, only 1.2 msf is vacant. Vacancy is expected to remain incredibly low in 2017.
Denver's manufacturing market ended the first quarter with 60 sf of negative net absorption. However, due to a number of active deals in the market, absorption is expected to pick up later in the year. Asking rates for available manufacturing space dropped slightly in the first quarter, decreasing by $0.15 per square foot (psf) from year-end 2016 to $7.80 psf NNN. Even with the decrease, asking rates are up by 11 percent from the previous year. Limited availability in the market, coupled with strong demand, indicates that rates will rise in 2017, albeit at a slower pace than was previously experienced.
Activity in Denver's manufacturing market is picking up. The J.M. Smucker Company is considering locating a $340 million factory in Longmont. The factory would be Smucker's only location in Colorado and is expected to create 500 jobs in the area.