Stores in Cherry Creek appeared to have recovered from the worst of the construction woes that even drove some retailers out of business, indicates a report released today.
More than 98 percent of the space in the Cherry Creek area is leased, as stores are experiencing the lowest vacancy rate on record.
That was one of the findings presented at the “State of Cherry Creek” report presented Friday at a breakfast meeting to a sold-out crowd by the Cherry Creek Area Business Alliance.
Denver Mayor Michael B. Hancock, one of the speakers, said what happens in Cherry Creek transcends that neighborhood. Cherry Creek North if often described as the Rodeo Drive of Denver, as it is arguably the most sough-after retail address in the metro area.
And it’s only getting better, Hancock said.
“With the biggest construction boom in decades, bringing with it new apartments, condos, commercial space, retail, and a new hotel, it’s no overstatement to say that we are truly in an exciting time in the history of Cherry Creek,” Hancock said.
“This area is a powerful economic engine whose impact spreads far beyond the area it occupies,” the mayor continued.
“With the new area plan and zoning now in place, I have no doubt that we will continue to see Cherry Creek succeed as this city moves forward,” he said.The CCABA’s bi-annual report, prepared by economist Patty Silverstein of Littleton-based Development Research Partners, shows the retail vacancy rate at the end of the third quarter was only 1.8 percent.
That reverses the trend in the first quarter, when the vacancy rate was 2.8 percent, compared with 2.3 percent in the first quarter of 2013.
The first-quarter decline concerned retailers, Silverstein said.
“A lot of people were up in arms that construction projects had hurt business; during the construction some retailers even went out of business, which is very unfortunate,” Silverstein said.
“I told the crowd (at the breakfast event) that there is a lot of pent-up demand out there,” she said.
“Don’t panic,” Silverstein said.”While we hate to lose retailers, new retailers are coming in, breathing new life into the area, hence the record-low vacancies.”
Silverstein said she wouldn’t advice developers to construct a lot of new retail space to meet the demand.
Instead, the supply will increase from the 30,000 square feet being built in the 250 Columbine condo and office project, as well in about a dozen luxury apartment buildings either being constructed or on the drawing board.
The new apartment towers almost always have ground floor retail.
Asked if the retail vacancy rate will rise as the new supply is added, Silverstein said she needs to “dust off her crystal ball.”
She said the vacancy rate may remain fairly stable, since the new housing also will bring new residents to Cherry Creek.
“I’m not sure if it is possible to get below 1.8 percent, though,” she said.
For comparison, all of Denver had a retail vacancy rate of 4.8 percent and the seven-county, metro-wide vacancy rate was 5.7 percent.
The CCABA area is bordered by East 6th Avenue on the north, East Cherry Creek Drive to the south, and University Street to the west.
The taxable assessed valuation of the non-residential property is $293.7 billion, up 7.2 percent from $273.9 billion in 2013, according to the report.
Residential property is assessed at $152.1 billion, up 11 percent from just under $137 billion in 2013.
The report also found that the average annual wage of an office worker in the CCABA area was $141,500, 77 percent higher than the average annual wage of $79,800 in Denver.
However, the average retail wage for retail-related employees was $30,100, 25 percent lower than the average retail wage for all of Denver of $40,300.
The Denver retail wage is higher than in the CCABA because of a higher concentration of employment in wholesale trade, which has the highest average wage, according to the report.
In the second quarter, the CCABA area generate almost $7.6 million retail sales tax, up 12.8 percent from about $6.7 million in the second quarter of 2013.
The report also found the 2.8 million square feet of office space has an overall vacancy rate of 7.6 percent, down from 9.6 percent. The overall office vacancy rate for the metro area was 10.5 percent.
“This encouraging economic report card demonstrates once again that the Cherry Creek Area, roughly one square mile in size, generates tremendous economic value for the City and County of Denver, in terms of sales and property tax generation and job creation,” said CCABA Nick LeMasters, chairman of the CCABA board and general manager of the Cherry Creek Shopping Center.
Highlights of the report include:
Sales Tax Revenue
- Sales tax collections in Cherry Creek increased 12.8 percent between the second quarters of 2013 and 2014, compared with an 11.1 percent increase for Denver..
- The largest category of sales tax collections in Cherry Creek during the second quarter of 2014 was clothing and department stores, which increased 13.8 percent year-over-year. The second-largest category, restaurants and hotels, increased 9.1 percent.
- Businesses in Cherry Creek employed approximately 15,400 workers in the first quarter of 2014, with an average annual salary of $86,940*.
- Office related employment in Cherry Creek increased 6.2 percent from the first quarter 2013 to first quarter 2014. There were nearly 7,900 office workers in Cherry Creek earning an average annual salary of $141,500, of which over one-third are employed by financial services companies.
- The 7.3 percent office vacancy rate in the third quarter of 2014 in Cherry Creek was the lowest recorded since the third quarter of 2003. The average office lease rate during the third quarter was $31.74 per square foot, 15.7 percent higher than the prior year.
- The average retail lease rate reached $36.43 per square foot during the third quarter, 31.5 percent higher than the prior year.
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