Phillip Morris International is already behind one of the Denver area's largest industrial developments, but the tobacco giant is taking an even bigger bite out of the market following a deal to lease a recently completed warehouse just a few blocks away.
Working on behalf of Zyn, the PMI offshoot that produces smoke-free nicotine pouches, the conglomerate leased 150,000 square feet in one of the two buildings at the Sun Empire industrial development in Aurora, Colorado. The deal means the company will fill the majority of 25000 E. 56th Ave. and further solidifies its expansive real estate presence in the Denver International Airport area.
"We have leased the space to help our accelerated hiring strategy and for external warehousing," Sam Dashiell, a Philip Morris spokesman, said in a statement.
The new warehouse space is a short drive from the company's $600 million manufacturing development on East 48th Avenue. That project is expected to generate more than $1 billion in economic contributions for the Denver-area suburb by the time it makes its scheduled operational debut later this year. A PMI affiliate closed on the site for the project last year in what was one of the largest direct land sales to a user, setting a record price per square foot based on land area in the Denver suburb.
The seller in that sale agreement was Opus Development Co., the Minneapolis-based firm behind the Sun Empire project and, following the recent lease, PMI's landlord.
The developer has completed construction on two of the buildings slated for the nearly 170-acre industrial park. The larger of the two includes about 624,000 square feet and has yet to be leased, while the smaller one — and PMI's new home — spans a little more than 204,900 square feet. Opus is planning to develop up to 1.2 million square feet of additional warehouse space across three more buildings.
Denver's industrial market is beginning to show signs of settling after a pandemic-induced construction boom sent vacancy rates soaring over the past couple of years. At a little more than 9%, the region's vacancy rate is one of the highest among major markets in the United States, according to CoStar analysis, but a development pullback is expected to rebalance the region's supply-demand equation.
There is less than 5 million square feet of logistics space under construction in the Denver area, according to CoStar data, a pipeline that reflects the lowest level of new development in nearly a decade. Ongoing financing challenges have complicated the outlook for large, speculative warehouse projects to get off the ground, a reality that is colliding with increasing demand among larger tenants.
While developers such as Opus have had to compete with a slew of recently completed options, the region surrounding the airport has long been among Denver's most popular industrial pockets.
High-profile tenants such as PMI, Dollar General, Whole Foods Market, Target and PepsiCo have all signed significant expansions in recent years. Despite some short-term oversupply issues, the area is largely expected to remain a hot spot for companies shopping around for space and developers willing to build it.