Through second quarter 2018, the Denver manufacturing market continued to exhibit positive market trends. While Denver's population influx has begun to slow from its extremely high levels, it still drives growth in manufacturing and provides a steady labor supply. Nearly 11,000 manufacturing jobs have been created in the Denver Metropolitan Statistical Area (MSA) since second quarter 2010.
The aerospace industry is well established in the region and growing, ranking second in employment concentration among the 50 largest metro areas, according to the Metro Denver Economic Development Corporation. Lockheed Martin Space Systems completed the foundation for its $350 million 266,000-sf satellite factory southwest of Denver, which should deliver in 2020. Clean technology and beverage production are increasingly important drivers of local manufacturing, with employment growing 21 percent and 32 percent respectively over the past five years. The Denver MSA ranks fourth in clean technology employment and second in beverage production.
Denver's unemployment rate increased 10 basis points in second quarter 2018, and the rate remains incredibly low at 2.9 percent (the second lowest of the large MSAs). Like construction, the low unemployment rate indicates that finding qualified skilled labor will continue to be an obstacle for Denver manufacturers. However, employment growth in manufacturing was strong, 3.4 percent from June 2017 through June 2018.
Our market statistics indicate that vacancy in manufacturing space decreased slightly in the second quarter to 3.6 percent, from 3.7 percent in first quarter 2018. Of the existing 49.9 million square feet (msf) of manufacturing space in Denver, only 1.8 msf is vacant. Vacancy is expected to remain below 4 percent throughout 2018, but might experience a slight uptick. Denver's manufacturing market ended the second quarter with 123,705 sf of negative net absorption. However, due to limited supply, absorption will likely turn positive in third quarter 2018.
Asking rates for available manufacturing space increased in the second quarter by $0.35 per square foot (psf) from first quarter 2018 to $8.65 psf NNN, eclipsing the previous high sent in 2016. Limited availability in the market, indicates that rates will continue growing in 2018. Development activity in Denver's manufacturing market is starting to accelerate. The J.M. Smucker Company is building a $340 million factory in Longmont, that will add 500 jobs and 380,000 sf to the market in early 2019. Ball Aerospace is developing its 145,000-sf Ball Tactical Solutions expansion of its Westminster facility, which will be completed in spring 2019. Currently there are nearly 1.3 million sf under construction, a high going back to 2010.