Statistics show that Denver’s economy is recovering in leaps and bounds. Last year, the metro area saw job growth of 2.5 percent more than in 2011, according to the Metro Denver Economic Development Corporation (EDC). They predict that this year Denver will continue to see at least a 2 percent growth in employment. The retail industry has been keeping pace with this job growth, as well as the increase in population (which is estimated to hit 2.9 million this year), by both expanding existing retail companies and bringing new retailers to the Denver market.

According to Metro Denver EDC, retail trade sales increased by 7.6 percent in 2012 and are projected to increase another 5 percent this year. This indicates both higher demand and the potential for expansion. FasTracks and the Union Station redevelopment are encouraging both construction and retail activity in the downtown area by providing more transportation options to consumers, which create more jobs, attract more shoppers and increase spending potential.

According to a recent CoStar report on Denver’s retail market, in the first quarter of 2013, there were 20 buildings completed (totaling 198,178 square feet) as well as over 900,000 square feet of retail space still under construction. Expanding retail companies include Cabela’s, Walmart and King Soopers, while the most notable new retailers are Trader Joe’s, H&M, and Larrabee’s Furniture + Design. Despite the addition of 767,590 square feet of retail space in the past year, Denver’s retail vacancy rate has dropped to 6.5 percent (a full point below the historical average of 7.5 percent). The high-density submarkets of Downtown and Cherry Creek saw even lower vacancy rates of 2.1 and 3.0 percent, respectively. Lower vacancy rates mean that rents are likely to continue to rise with the high demand for space and increased leasing activity.

In addition to the new construction, Denver has also seen an increase in the sale of retail properties with at least 70 sold in the first nine months of 2012 ($606 million total) compared to 38 sold in 2011 ($165 million total) during the same time frame. Real Capital Analytics estimates that so far in 2013, Denver’s retail market has seen 32 property sales for a total volume of $311 million; however, Cassidy Turley predicts that sales in 2013 will not match 2012 because there is less quality product available on the market this year. This influx of retail combined with dropping vacancy rates is making the Denver metro area increasingly attractive to local, national, and international investors.

Options with Hard Money Loans

Traditional lenders like banks are still cool towards approving loans for acquisition of smaller retail properties.  If a major investor wants to buy a large property with a national anchor they might find a loan. If an investor wants to purchase a smaller retail property – particularly one that may not be 100% leased – then the odds of getting a traditional loan are not good.  Montegra has a long history of funding acquisition loans to buyers where retail properties are not fully leased. In cases like these we can offer to set up an interest reserve from the loan closing proceeds to help with the debt service coverage until the property is stabilized.  Where timing is important, and flexibility of structure is needed then using Montegra, Colorado’s leading hard money lender, may be an option worth considering.

This blog was written by Bob Amter, President of Montegra Capital Resources, LTD., a Colorado hard money lender.  [google_authorship] has been in the private capital lending business for 41 consecutive years.