Through first quarter 2018, the Denver manufacturing market continued to exhibit positive market trends. While Denver's population influx has begun to slow from its extremely high levels, it still drives growth in manufacturing and provides a steady labor supply. Nearly 10,000 manufacturing jobs have been created in the Denver Metropolitan Statistical Area (MSA) since first quarter 2010.
The aerospace industry is well established in the region and growing, ranking second in employment concentration among the 50 largest metro areas, according to the Metro Denver Economic Development Corporation. Lockheed Martin Space Systems Co. is constructing a $350 million, 266,000-square-foot satellite factory southwest of Denver. Clean technology and beverage production are increasingly important drivers of local manufacturing, with employment growing 21 percent and 32 percent respectively over the past five years. The Denver MSA ranks fourth in clean technology employment and second in beverage production.
Denver's unemployment rate decreased slightly in first quarter 2018, and the rate remains incredibly low at 2.8 percent (the fourth lowest of the large MSA's). Like construction, the low unemployment rate indicates that finding qualified skilled labor will continue to be an obstacle for Denver manufacturers. Consequently, employment growth in manufacturing was only 1.6 percent from January 2017 through January 2018.
Our market statistics indicate that vacancy in manufacturing space increased slightly in the first quarter to 3.7 percent, from 2.8 percent in the fourth quarter 2017. Of the existing 50.3 million square feet (sf) of manufacturing space in Denver, only 1.7 million square feet is vacant. Vacancy is expected to remain below 4 percent throughout 2018, but might experience a slight uptick. Denver's manufacturing market ended the fourth quarter with 264,155 sf of negative net absorption. However, due to limited supply, absorption will likely turn positive in second quarter 2018.
Asking rates for available manufacturing space increased in the first quarter by $0.35 per square foot (psf) from fourth quarter 2017 to $8.28 psf NNN, down by 2.4 percent from the 2016's historic high. Limited availability in the market, indicates that rates will continue growing in 2018. Development activity in Denver's manufacturing market is starting to accelerate. J.M. Smucker Co. is building a $340 million factory in Longmont, that will add 380,000 sf to the market in early 2019. Ball Aerospace is developing its 145,000-sf expansion of its Westminster facility, which will be completed in 2019. Currently there are nearly 900,000 sf under construction, a high going back to 2010.