Understanding what record-low retail vacancy means for investors, tenants, and the market outlook.
Historic Tightness in Denver Retail
Denver’s retail availability rate has declined to 4.7-4.8%, representing a record or near-record low for the market. This extraordinary tightness reflects years of minimal new construction combined with steady tenant demand. For a sector that many predicted would be decimated by e-commerce, retail real estate has proven remarkably resilient—and in Denver, it’s thriving.
What’s Driving Record-Low Vacancy
Construction Discipline
New retail construction represents just 0.3% of existing inventory—an extremely low level that has persisted for several years. Developers have been reluctant to build speculative retail given the challenges of the sector during the 2010s, high construction costs, and cautious lender attitudes toward retail development. This supply discipline has allowed demand to absorb existing space without competition from new buildings.
Tenant Expansion
Despite concerns about retail’s future, many categories continue expanding:
Quick-service restaurants: Chipotle, Chick-fil-A, Dutch Bros, and other QSR concepts continue aggressive expansion.
Fitness and wellness: Gyms, yoga studios, medical spas, and wellness concepts are growing.
Medical and dental: Healthcare services increasingly locate in retail settings for visibility and convenience.
Discount retailers: TJ Maxx, Ross, Dollar General, and other value retailers continue opening locations.
Grocery: New grocery concepts and existing operators expanding or relocating to better sites.
Limited Closures
While national retail bankruptcies continue to make headlines, the impact in Denver has been manageable. Most closures have been quickly backfilled by waiting tenants, particularly for well-located spaces. The tenants expanding today have proven business models that have survived the e-commerce disruption.
Investment Implications
For Buyers
Compressed cap rates: Record-low vacancy and strong fundamentals have compressed cap rates for quality retail. Investors should expect to pay premium pricing for well-located, well-tenanted properties.
Limited availability: Few owners want to sell in a strong market, reducing transaction volume. Investors may need to be patient or consider off-market approaches.
Underwriting confidence: Low vacancy provides confidence in rental rate assumptions. Mark-to-market opportunities exist when below-market leases roll.
Defensive positioning: Retail’s stability makes it attractive for investors seeking defensive positioning amid economic uncertainty.
For Sellers
Optimal timing: Record-low vacancy creates favorable selling conditions. Owners considering disposition should evaluate whether current pricing justifies a sale.
1031 exchange challenges: Sellers completing 1031 exchanges face the challenge of finding quality replacement properties in a tight market.
For Landlords
Pricing power: Landlords have leverage in lease negotiations. Rental rate increases and reduced concessions are achievable.
Tenant quality upgrade: When spaces become available, landlords can be selective about tenant quality and lease terms.
Retention focus: While landlords have leverage, retaining quality tenants remains important. Reasonable renewal terms maintain stability.
Cap Rate Benchmarks
| Retail Format | Cap Rate Range |
| Grocery-Anchored Centers | 6.00-7.25% |
| Neighborhood Strip Centers | 6.50-8.00% |
| Single-Tenant NNN (Credit) | 5.50-6.75% |
| Single-Tenant NNN (Non-Credit) | 6.50-8.00% |
| Power Centers | 7.00-8.50% |
Source: CoStar, SVN Denver Commercial, CBRE, Cushman & Wakefield Denver Retail Reports 2025
Risks to Consider
While record-low vacancy is positive, investors should consider potential risks:
Economic slowdown: A recession could impact consumer spending and tenant health, though essential retail would be more resilient.
Interest rate sensitivity: Cap rates could expand if interest rates rise, offsetting NOI growth.
Tenant concentration: Properties dependent on single tenants or sectors carry concentration risk.
E-commerce evolution: Continued e-commerce growth could pressure certain retail categories.
Bottom Line
Denver’s record-low retail vacancy creates a landlord-favorable market with positive implications for investors. Quality retail properties offer stability, income, and modest growth potential that is increasingly valued in uncertain times. While premium pricing reflects strong fundamentals, retail remains one of the most attractive commercial real estate sectors in Denver for investors seeking defensive positioning and reliable cash flow.
About SVN Denver Commercial
SVN Denver Commercial helps investors capitalize on Denver’s strong retail market. Contact us to discuss retail investment opportunities.