Cap Rates in Denver, Colorado

Q1 2026 Cap Rate Outlook Report

April 10, 2026

Multifamily

According to CBRE, multifamily cap rates expanded 9 bps in 2025.  They are forecasting multifamily cap rates to remain flat for the first half of 2026 and then compress.  This is largely due to the six year waive of absorption on new apartment starts slowing and a pull back on applications for new building permits on apartment building developments. 

In the first quarter of 2026, the metrics affecting multifamily cap rates  have softened, contributing to cap rates remaining steady.   According to Freddie Mac, Q1 2026 rents trended downward with vacancies and rental concessions slightly on the rise.  The good news is prices are holding steady as buyer and seller confidence in the real estate market is on the rise.  Currently multifamily cap rates on all classes combined are averaging 5.6%.

According to Fannie Mae, rent recovery is expected to lag throughout the year. Vacancies are currently at 4.6% and are  expected to rise to 5.1% by the end of the third quarter of 2026. 

Industrial

An increase in new deliveries remaining from 2025 has expanded industrial cap rates for the first quarter of 2026. Marcus and Millichap is predicting this trend to flatten as demand remained steady during Q1 2026 and completion of new units and new construction starts trended downwards.  

CBRE reports the leasing of new supply slowing during Q1 turning absorption slightly negative with investment in US  manufacturing declining.   This has pushed vacancy on all classes of industrial properties to an average of 11.5% with flex properties performing the best with a vacancy of 7.2%. Rent growth during Q1 has averaged 3.3%.   Overall, the sale of industrial properties has improved in Q1 pushing cap rates on all types and classes down to an average of 7.5% from 7.9% in Q4 2025.  Although new supply continues to lease up slowly, industrial is looking to be one of the most promising investments for 2026.  

Retail

For Q1 2026, CBRE reports large retail center cap rates at an average of 6.55% with small strip malls averaging 6.44% and single tenant net lease cap rates at 6.80%.  This reflects a continuation of the retail trends from 2025 as delivery of new space continues to slow  net absorption.  Regardless, pre-leasing has remained steady with rent growth at 2.7% which is barely keeping up with inflation.  Long-term growth is predicted to remain steady,  supported by demographics and a rise in the price of retail goods.  On the negative side, vacancies have increased to above 6% due to new supply and move outs.

 As reported by Cushman and Wakefield, 2025 and the beginning of 2026 experienced moderate tenant demand for retail space in spite of the negative metrics from e-commerce.  In fact, retail’s new method of combining e-commerce with in store person experience, is helping to fuel this market stability. In store visits went down by 14% during 2025 while sales grew  6.2% according to Colliers. Apparel sales went up by 3.9% despite a drop in store visits.  Department stores were hit with a 3.9% sales decline.  In-store furnishing sales went up by 4.7%.   Food service sales rose by 2.6% mostly due to inflation with visits to restaurants slightly declining.   Rental rate growth for retail accelerated by 2.7% during Q1 of 2026 and vacancies held steady at 6.4%.

Overall, retail grown is expected to slow during the remainder of 2026 as 34.4% of consumers plan to spend less on retail goods according to The National Retail Federation.   

Office

The tide turned in a positive direction for office properties in mid-2025 for the first time since the 2020 covid pandemic began decimating this sector of commercial real estate. According to Cushman and Wakefield  demand for office space is growing in Q1 2026 with  single tenant net lease office cap rates compressing  by 10 bps to 7.9%.  All other office assets were split with A and B Class compressing to 7.6% and 8.0% respectively and  C Class expanding to 8.70% - 9.40%. Vacancy in Q1 declined, averaging on all asset classes 15.9%,  down from 17.2%. Absorption continues to improve on A Class and decline in both B and C Class.  With the exception of medical office, there is relatively no new construction.

Return on investment is still down in Q1 2025 as more tenant improvement costs continue to shift from the tenant to the landlord.  This has been exasperated by generous rental concessions which are often offered for the first year. 

Hotel

The lodging sector has evolved into a preferred commercial real estate asset class since late 2022, with many properties remodeled and reflagged. Hotels have proven to be resilient, and an inflation hedge as travel continues to increase occupancy and sophisticated revenue management allows for dynamic pricing of room rates on a continuous basis. Despite higher interest rates, the lodging sector is generating showing strong profits, and investment yield opportunities, with large hotel chains buying up their competitors.  Cap rates in Q1 2026 have compressed to an average of 8.20% on the average of all classes, with Class A Luxury Metro properties cap rates at 6.48%, Class B Suburban cap rates at 7.85% and flagged economy at 8.60%. 

While national hotel occupancy and ADR are still increasing, RevPAR growth is anticipated to rise through 2026. It is noteworthy that the majority of all hotel chain are anticipated to experience increasing RevPAR this year.