AURORA | Marijuana retailers across Aurora officially opened their doors this month after more than a year of preparations and conjecture regarding whether or not city council would ever grant licenses to green cross businesses in the largest burg in Arapahoe County.
And while grand openings have occurred without much of a hitch this October, the great experiment that is the legalization of recreational marijuana has slowly but steadily been impacting the availability of industrial space across the Denver metro region, according to new industry data.
Two quarterly reports as well as data provided by the Aurora Economic Development Council revealed that industrial vacancy rates have been consistently shrinking across the region, including in Aurora. The third quarter industry reports conducted by Cassidy-Turley Real Estate Services and the CoStar Group found the Denver-metro vacancy rate for industrial spaces to be about 5 percent, over two percentage points lower than the national average of 7.5 percent. In Aurora specifically, vacant industrial spaces clocked in at a rate of 7.1 percent, a number half of what it was in mid-2011 when the rate stood at 14.9 percent, according to the AEDC.
“It’s been an interesting year-and-a-half with vacancy rates going down, space getting tighter and rental rates creeping up a little bit – there’s been a lot of commotion and movement,” Yuriy Gorlov, business development manager of the AEDC, said. “Aurora definitely has a good mix of space whether it’s newer or older, but there’s been a lot of companies moving around.”
Gorlov said that the declining amount of vacant industrial space has proved problematic for both marijuana entrepreneurs looking for affordable facilities to house their grow operations as well as business owners in other industries who are looking to establish spaces of similar size and capacity, but are being pushed out by the high number of growers.
“We’ve heard from other companies and brokers that they’ve leased millions of square feet to growers in Denver, which has pushed out a lot of other big employers,” Gorlov said. “The assemblers and manufacturers are trying to develop those 30,000-square-foot spaces, too, and they’re now complaining these marijuana guys are getting all the space.”
According to the CoStar report, the total amount of vacant sublease space has plummeted by nearly 200,000 square feet in the Denver-metro area this year alone. And although some traditional businesses are being pushed out of the Denver market, many marijuana industry newcomers, especially in Aurora, have had a difficult time locating affordable space themselves.
“It’s really hard for people that are sensing a lack of space, because there are only a few industrial parks in Aurora and they’re owned by big name companies,” Gorlov said.
He identified Majestic, Prologis and Gateway as the three major property managers in Aurora. He said that although these three may in fact have available real estate, looming insurance, security and investor concerns prohibit them from jumping into the arena.
“All those guys are hesitant to work with these [marijuana] guys because on the federal level it’s still such a shady game at this point,” he said. Chris Woods, president of Terrapin Care Station, which opened in Aurora Oct. 15, said he and his team struggled to find an affordable Aurora-based building to house their robust grow operation.
Woods said some of the first spaces he eyed for a potential grow house wanted to charge as much as $60 per square foot. Average rental rates for industrial space in the Denver area currently stand at $7.12 per square foot, according to the CoStar report.
“I understand that the market’s becoming more inflated and it’s significantly different than [when this industry started] at the tale end of the recession in 2009,” Woods said. “One difference growers face is that the real estate market is hot, so renters who maybe could take a risk before, now don’t really need to.” Woods purchased a 20,000-squaure-foot facility in March after convincing the sub-leaser to sell the property outright.
“My advice would be to have a really good real estate broker and just know that it’s expensive,” he said. “Honestly, I don’t have much good advice for people given the climate right now.”