LOVELAND — Earlier this year, when Amazon.com Inc. (Nasdaq: AMZN) signed a development agreement with the city of Loveland to build a massive new logistics center on Byrd Drive near the Northern Colorado Regional Airport, it was a sure sign of an ongoing trend.
As Northern Colorado’s population and economy continue to grow, businesses and developers are flocking to build industrial logistics and distribution facilities to meet the region’s needs. Even with the state’s slowing population growth and inflation and supply chain restrictions weighing on the economy, demand for these types of spaces in Northern Colorado remains at record highs. .
“It’s no secret that all these specific industrial buildings are coming,” said Kelly Jones, director of economic development for Loveland. “What’s a little surprising is the pace they’re coming to now. I can tell you just by looking at the permits and the activity in our queue, it’s not slowing down.
Mike Eyer, senior vice president of commercial brokerage firm CBRE, said a record 600,000 square feet of industrial space was leased in northern Colorado in the first two quarters of 2022. About 900,000 additional square feet are being delivered. Buildings are also absorbed faster than normal, Eyer said. Usually, it takes about one and a half to two years to fully lease industrial projects of this scale. Today, most buildings are fully let within a year of completion.
“It’s still true on many fronts [that the industrial market remains hot]”, Eyer said. “There is still a pretty strong appetite from developers looking to enter the market.”
The market they are trying to enter is one that has seen robust growth over the past decade. Between 2010 and 2020, Weld and Larimer counties were the second and fifth fastest growing counties in the state – Weld grew 30%, Larimer 20%.
Some of the individual municipalities in the region have grown exponentially. Timnath increased by 938%. Severance and Berthoud each experienced growth of over 100%. Wellington, Windsor and Johnstown increased by more than 75%. Lochbuie, Frederick, Firestone, Erie, Dacono, Milliken and Mead were up over 40%. Jobs in Northern Colorado grew 9.3% between 2015 and 2020.
Although statewide population growth slowed in 2021, the state is still expected to reach 6.5 million by 2030.
“Assuming the population growth trajectory remains the same, you will continue to see a number of these businesses coming to the area,” Eyer said.
Clyde Wood, president of business development for McWhinney Real Estate Services Inc., said it’s no secret that the need for industrial distribution and logistics facilities has grown with the population.
“I think the connection is pretty clear,” Wood said. “Over the years, while population growth and the new home market have been robust for several years, the industries that support this growth need space. The connection is pretty clear why we see so many of those growing up and needing space here.
The list of major companies to move into these types of spaces in northern Colorado in recent years is impressive. McWhinney took the first big plunge with Centerra Industrial, a 660,000 square foot campus in Loveland. In 2016, Safelite Group Inc. became one of the region’s first major Class A industrial tenants. Amazon and Home Depot have also leased space from Centerra Industrial.
“It was quite innovative at the time,” Wood said. “I think it caught a lot of people’s attention.”
Hines Interests LP and U-Haul have also leased space in Loveland on Byrd Drive. Denver developer Etkin Johnson built Axis 25 in the city.
Further south along Interstate 25, Mead has also made itself a logistics hub. It landed a regional FedEx distribution terminal in 2020. Several other industrial distribution installations are underway: Elevation25 by Silver Point Development and Access 25 by The Broe Group.
Access 25 will be the only highway-rail-access dual-access park in the area, and it has already landed Home Depot as a tenant.
FedEx also has a regional distribution facility in Johnstown at McWhinney’s Iron Horse Industrial Park.
Then there’s the crown jewel: the 3.87 million square foot logistics center that Amazon is building in east Loveland. This facility, scheduled to open in 2024, could have 62 loading docks and employ more than 1,000 people.
Many of these companies were previously present in the state, but not in northern Colorado,
“A lot of them have been to Denver and are looking to plant a flag here,” Eyer said. “Before two or three years ago, the region didn’t have the population to support this.”
This means municipalities that developers and big business would not have considered before are now on the map for potentially massive developments.
“Towns like Loveland and Johnstown, we’re all getting the look we wouldn’t have 10 years ago,” Jones said. “The speed at which the consumer wants products is forcing companies to place their distribution facilities in locations closer to population centers.”
Getting Amazon’s logistics center has been a years-long journey for Loveland, a journey the city hopes won’t end with this facility.
“It’s hard to land them,” Jones said. “The process we went through was not easy. There is prestige in getting it. It was very competitive. This points other developers to us… It was a huge blow to earn this from one of the biggest companies in the world. Eventually, we would like to continue to build this relationship as they become more familiar with us. There is momentum beyond this installation.
For other projects in the area, those not specifically designed for a company like Amazon, competition for tenants will be fierce, Eyer said.
“These projects are all very similar,” Eyer said. “The buildings are similar. For the most part, the locations are close. It’s a very competitive market. Developers who started construction a year ago have a significant advantage over those starting now because they have a lower cost base. These buildings are almost like amenities where whoever can offer the most competitive rental rate is going to win.
How long this trend can continue depends on how the region’s population and economy continue to grow. The need for more industrial logistics and distribution facilities is expected to evolve as the region grows. When – if at all – the industrial market might become oversaturated is unknown, but it is a factor that weighs on the minds of experts.
“I would say absolutely,” Wood said. “In northern Colorado, it’s something we focus on a lot. For several years, we were the only game in town. We’ve proven the concept that there’s a demand for class A industrial space here. It’s got interest from outside developers. They want a piece of the pie, but that pie isn’t as big as Denver Metro. Even though the demand is steady, it’s not that deep… We’re very cautious about oversupply, but we are still bullish on the market in general.
Even so, Eyer said, it hasn’t happened yet.
“I think we haven’t hit that saturation point,” Eyer said. “I think we have the demand to handle what is currently under construction. It is impossible to say what the demand will be. We are not there yet. We are seeing record rental activity. I have no doubt that we will absorb the current construction.