Construction timelines and development costs continue to hinder the viability of the Denver construction pipeline
Limited construction pipeline as many anticipate an increase in construction costs
Limited construction pipeline as many anticipate an increase in construction costs.
- Industrial space under construction in Denver has significantly decreased to 2.5 million square feet, highlighting a slowdown in new development. This reduction reflects a more cautious approach as the market works through existing supply.
- Contributing to this shift is the steady climb of construction costs since 2020, as evidenced by the Mortenson Construction Cost Index now reaching 186. This upward trend continues to directly impact project budgets and overall feasibility within the industrial sector.
- Furthermore, with Denver’s long and arduous entitlement and permitting process, as compared to other leading US industrial markets, developers are focused on other markets where they can deliver product in half the time.
- Finally, daily fluctuations in the 10-year Treasury, to which lending rates are tied, are making it challenging for developers to achieve their target goal of a 200-basis point spread between their initial investment costs and exit returns, further hindering the viability of projects in Denver.
May 8, 2025
US-CO-DEN Denver