Marine Sgt. Phillip Sena, middle, and Cpl. Daniel Kravchuk, right, prepare a Toys for Tots collection box for The Courtyard at Lakewood, a retirement community. The Marines are kicking off their holiday program. (Helen H. Richardson, The Denver Post)

Pot vs. tots: Scarce Denver warehouse space puts pinch on Toys for Tots

The Denver marijuana industry is a contributing factor to a lack of warehouse space and an increase in building prices

With a booming marijuana industry contributing to skyrocketing industrial real estate prices in Denver, regional Toys for Tots organizers are struggling to find a spot to set up Santa’s workshop.

The nonprofit’s organizers in Colorado Springs and Pueblo have found a business willing to donate a warehouse to the group that collects toys and money to give disadvantaged kids Christmas presents. However, Denver regional Toys for Tots coordinator and Marine Sgt. Phillip Sena is scrambling to find a space. (UPDATE: Toys for Tots has secured a Denver headquarters for the 2015 holiday season.)

The seasonal operation lasts through Christmas. Ideally, Sena wanted to start Oct. 1, but the real estate market threw a wrench in his plans.

“The minute they hear this isn’t a dispensary trying to rent the space out and that we’re looking for someone to donate the warehouse, they lose interest,” Sena said. “I get the business aspect of that. But if we get a warehouse, that means that children are going to get toys this Christmas in Denver.”

About 4 percent of industrial spaces were vacant in Denver as of June, according to a real estate market report by Cushman and Wakefield.

“That’s bonkers,” said Megan Devenport, program manager for Denver Shared Spaces, a group that works with nonprofits, businesses and the city to use real estate for social good. “If real estate prices continue to go up and vacancies continue to go down, we’re going to see these vital services moving out of the city center, and that’s not ideal.”

In Denver, warehouses are going for more than $12 a square foot, Devenport said, with a slightly lower average of $8 a square foot across the metro area.

“That’s almost double what the historic average has been,” she said.

To operate efficiently, Sena and his team need a warehouse at least 30,000 square feet. In 2014, he worked out of a 60,000-square-foot space.

In the meantime, Sena is working out of a van so he doesn’t fall behind.

Without a headquarters, he and other volunteers are spending their days delivering toy drop-off boxes to participating businesses that normally drop by a Toys for Tots home base and pick it up themselves.

Nearly a week after operations kicked off, Sena contacted higher-ups at the Toys for Tots foundation, who said that under the circumstances they would pay for a warehouse.

The catch: The money that goes toward paying for warehouse space will detract from the amount spent toward Colorado kids in need.

Jason Thomas with Avalon Realty Advisors — a local firm that specializes in finding warehouse space for cannabis cultivation — said the marijuana industry is sending warehouse prices soaring.

“Our commercial real estate sector is on fire just across the board,” Thomas said. “Denver has seen the greatest absorption of space by the marijuana industry.”

The marijuana cultivation industry accounts for 3.7 million square feet of occupied industrial space in Denver, according to CBRE Research.

But that’s “only 2.6 percent of the existing warehouse footprint in Denver,” said Paul Kluck, vice president with CBRE Industrial Services.

“We are fortunate in Denver to have a diverse array of industries occupying industrial space, which is contributing to … consistently low vacancy rates,” he said. “Unfortunately for buyers, we expect demand to continue to exceed supply.”

While Devenport said that the marijuana industry is a contributing factor to the lack of industrial space, she attributes the issue to a larger ripple effect.

“Marijuana growers are able to pay cash and give three times the money the building is worth, so small businesses are priced out and then buy up the space nonprofits are able to afford,” she said. “It’s a crisis.”

In 2014, Toys for Tots gave gifts to nearly 90,000 kids in the Denver area.

Sena is hoping that figure holds strong this year.

He added: “I’m holding out hope.”

Elizabeth Hernandez: 303-954-1223, ehernandez @denverpost.com or twitter.com/ehernandez

This story was first published on DenverPost.com