Understanding Denver’s elevated industrial vacancy, what’s driving it, and what it means for the market outlook.
Putting the Numbers in Context
Denver’s industrial vacancy rate has risen to approximately 7.7-8.9% depending on the data source and methodology—the highest level in over a decade. For a market that saw vacancy drop below 5% during the pandemic logistics boom, this represents a significant shift. However, understanding the drivers behind this vacancy increase reveals a more nuanced picture than the headline numbers suggest.
Historical Context
| Period | Vacancy Rate |
| 10-Year Average | 5.6% |
| Pandemic Low (2021) | ~4.0% |
| Current (Late 2025) | 7.7-8.9% |
| National Average | ~7.0% |
Denver’s current vacancy, while elevated compared to recent history, remains in line with or slightly above national averages and well below the double-digit vacancy rates seen in challenged office markets.
What’s Driving Higher Vacancy
Supply Surge
The primary driver of Denver’s elevated vacancy is the significant amount of new construction that delivered in 2023-2024. Developers, responding to the pandemic-era demand surge and historically low vacancy, initiated numerous speculative projects. Many of these buildings delivered into a market where demand had normalized from peak levels, creating a temporary supply/demand imbalance.
The good news: construction starts have declined dramatically, with the current pipeline at its lowest level since 2015. This supply discipline will allow the market to absorb existing inventory without competing with significant new deliveries.
Demand Normalization
E-commerce growth, which drove exceptional industrial demand during 2020-2022, has returned to more normal growth rates. While e-commerce continues to expand, companies are no longer in panic-mode expansion to build out fulfillment networks. This normalization has reduced absorption rates from the extraordinary levels seen during the pandemic.
Tenant Right-Sizing
Some tenants that expanded aggressively during the pandemic have subsequently right-sized their space requirements. Companies that leased excess capacity as a buffer against supply chain disruptions have shed some of that space as supply chains stabilized.
Big-Box Concentration
Much of Denver’s elevated vacancy is concentrated in large-format big-box buildings, particularly in the DIA corridor where significant speculative development occurred. These 500,000+ square foot buildings require fewer but larger tenants, making absorption lumpier and more time-dependent than small bay product.
Vacancy by Submarket
Denver’s industrial vacancy varies significantly by submarket:
| Submarket | Vacancy | Outlook |
| Central Denver | 5-6% | Stable, tight supply |
| Northeast/I-70 | 8-10% | Improving, supply absorbed |
| DIA/Airport | 12-15% | Elevated, needs time |
| Southwest | 6-8% | Stable |
| Small Bay (All) | 4.3-5.1% | Strong, outperforming |
Source: SVN Denver Commercial, CBRE, JLL, Cushman & Wakefield Denver Industrial Reports Q4 2025
Signs of Stabilization
Several indicators suggest Denver’s industrial vacancy may be approaching a plateau:
Direct vacancy decline: Direct vacancy actually declined 10 basis points quarter-over-quarter in Q4 2025, suggesting absorption is beginning to catch up with supply.
Construction pullback: With the pipeline at its lowest level since 2015, new supply pressure will diminish significantly in 2026.
Preleasing activity: 41.8% of under-construction space is preleased or build-to-suit, indicating that remaining construction is disciplined rather than speculative.
National context: Nationally, industrial vacancy is expected to peak in mid-2026 at approximately 7% before declining. Denver should follow a similar trajectory.
Investment Implications
Elevated vacancy creates both challenges and opportunities for investors:
Selective opportunities: Buildings with vacancy may be available at discounts to stabilized values, offering upside for investors who can execute lease-up.
Submarket focus: Central Denver and small bay product offer lower vacancy risk. DIA-area big-box requires longer hold periods and lease-up patience.
Timing considerations: Buying during elevated vacancy with a 3-5 year hold may allow investors to benefit as the market tightens and rents recover.
2026 Vacancy Forecast
Denver industrial vacancy is expected to plateau in early 2026 and begin declining in the second half of the year as reduced construction allows demand to absorb existing inventory. By year-end 2026, vacancy should return to the 7-8% range, with further improvement expected in 2027 as supply/demand dynamics continue to normalize.
Bottom Line
Denver’s elevated industrial vacancy of approximately 8.9% reflects a temporary supply/demand imbalance driven by pandemic-era construction rather than fundamental weakness in demand. With construction at decade lows and absorption continuing, the market is positioned for gradual improvement. Investors should view current vacancy as a transitional condition rather than a structural problem, with opportunities available for those willing to accept near-term lease-up risk in exchange for attractive entry pricing.
About SVN Denver Commercial
SVN Denver Commercial provides detailed industrial market analysis and investment guidance. Contact us to discuss Denver industrial opportunities and market conditions.