Colorado Real Estate News

Development continues to dominate in Cherry Creek North

Cherry Creek has transformed drastically over the past decade – development is ramping up around the neighborhood and cranes are all around! Cherry Creek has become one of the most desirable submarkets, seen in both the commercial and residential industries. The ample number of retail, restaurants and services drive an abundance of street level activation, surpassing nearly all areas in the Denver metro. Let’s take a look at some future projects!

Under Construction:

200 Clayton Street

RBA – 76,715 SF

Stories – 8

Property Mix – Office (67,800 SF) / Retail (5,600 SF)

Developer – Broe

Projected Delivery – Q1/Q2 2023

255 Fillmore Street

RBA – 100,110 SF

Stories – 7

Property Mix – Office (90,529 SF) / Retail (9,581 SF)

Developer – BMC

Projected Delivery – Q3/Q4 2023

300 University

RBA – 59,713 SF

Stories – 4

Property Mix – Office (50,060 SF) / Retail (9,653 SF)

Developer – Cherry Creek LFS

Projected Delivery – Q3/Q4 2023

Proposed:

242 Milwaukee Street

RBA – 92,000 SF

Stories – 7

Property Mix – Office (83,000 SF) / Retail (9,000 SF)

Developer – BMC

Projected Delivery – 2024

250 Clayton Street

RBA – 215,000 SF

Stories – 7

Property Mix – Office (215,000 SF)

Developer – TBD

Projected Delivery – 2024

201 Fillmore Street

RBA – 148,000 SF

Stories – 8

Property Mix – Office (140,000 SF) / Retail (8,000 SF)

Developer – Schnitzer West

Projected Delivery – 2024

Colorado Real Estate News

Monthly Economic Indicators | October 2022

About This Report:
The Monthly Economic Indicators is a comprehensive analysis of economic conditions in the seven-county Metro Denver area, or the region comprised of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, and Jefferson Counties. There are two metropolitan statistical areas (MSAs) located within the Metro Denver region: the Boulder MSA (Boulder County) and the Denver-Aurora-Lakewood MSA (the Denver MSA) (Adams, Arapahoe, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson, and Park Counties). This report presents recent data and long-term trends for the seven-county region, MSAs, or counties, depending on availability. The analysis includes four main data sections: labor force and employment, the consumer sector, residential real estate, and commercial real estate.

Notable Rankings:
 Metro Denver ranked tenth among the top metro areas where funding for women-led startups has grown the fastest, according to new data from Pitchbook. As of July 31, 2022, female-founded startups in Denver had already raised as much money since 2020 as they did between 2008 and 2019.
 In Area Development’s latest “Top States for Doing Business” report, Colorado ranked 10th in the Access to Capital and Funding category due to the high levels of venture capital funding awarded in Colorado.
 U.S. News & World Report published its annual “Best Colleges” ranking, with Colorado School of Mines
scoring highest among all universities in Colorado. The university was tied for 89th place among the 440
universities ranked nationally. University of Colorado Boulder ranked 97th overall, and University of Denver ranked 105th overall. The University of Colorado Denver, which ranked 219th overall, ranked 59th in the “Best Colleges for Social Mobility – National Universities” list which ranks schools on the success of students who received Pell Grants.

Policy Watch –


 Colorado’s minimum wage will increase from $12.56 per hour to $13.65 per hour in 2023, an increase of nearly 8.7 percent. The increase reflects the impact of inflation on doing business in the state. The minimum wage for tipped workers will rise to $10.63 per hour.
 The Colorado Transportation Commission moved to expand parts of Interstate 25 north of Denver. This
move came in conjunction with a decision to nix a potential I-25 expansion in the core of the city. The plans focus on widening I-25 to facilitate the movement of freight and passenger vehicles on the corridor between Denver and Fort Collins. A three-year widening project on E-470 also began in September that will add a third travel lane in each direction. The project will start at Interstate 70 near Denver International Airport and go to East 104th Avenue.
 Re-writes of Colorado’s statewide 10-year priority project plan this month include fewer freeway-widening projects in favor of street redesigns focused on speeding up bus paths through major corridors. Along the Front Range, projects designed to add lanes to major arteries will continue but will expand the roadways less than previously planned.
 Despite officials approving a flat-rate tax refund of $750 per taxpayer this fall in anticipation of more money being collected then allowed by state law, the state is still expected to have about $677 million more than allowed, according to the officials at the Office of State Planning & Budgeting. That will mean taxpayers can expect an average of about $250 to be refunded when they file their state tax returns next year.
 Colorado taxpayers can now pay state taxes using cryptocurrencies, making Colorado the first state to
accept cryptocurrencies as a form of tax payment. The move applies to all state taxes including individual
and business income taxes, sale and use taxes, severance taxes, withholding taxes, excise taxes, and fuel
taxes.

Labor Force/Employment –

 Employment in Metro Denver increased 3.7 percent between August 2021 and 2022, rising by 63,600 jobs across all supersectors. Employment in the Denver-Lakewood-Aurora MSA rose 3.6 percent, or by 55,200 jobs, while the Boulder-Longmont MSA increased 4.3 percent, or by 8,400 jobs, during the period.
 Nine of 11 supersectors reported over-the-year increases in employment. Professional and business services had the largest increase (+8.4 percent), followed by natural resources and construction (+6.3 percent), and leisure and hospitality (+5.8 percent). Financial activities and government were the only supersectors to experience a decrease in employment, falling by 1.5 and 0.7 percent, respectively.

Consumer Sector –

The U.S. Consumer Confidence Index rose in September, the second consecutive month of growth following three months of declines. The index now stands at 108, a 4.2 percent over-the-month increase,
and a 1.6 percent decrease over-the-year.

 Analysts at The Conference Board stated that the bounce back was driven by the present situation index which rose for the second consecutive month. Expectations rose above reading of 80, suggesting less weak growth in the second half of 2022 although the risk of recession remains. Purchasing intentions for large purchases were mixed. Intentions to buy automobiles and major appliances increased, while home purchasing intentions fell. Looking ahead the increase in confidence may help support spending, but inflation and interest rate hikes still pose risks to economic growth in the short term.

 Colorado is included in the Mountain region and the index for the area decreased 18.2 percent between September 2021 and 2022 to 97. The index fell 5.1 percent over-the-month from 102.2 in June. The Present Situations Index fell 8 percent over-the-year to 145.2, while the Expectations Index decreased 29.8 percent to 64.9 during the period.

Retail sales in Metro Denver rose 11 percent between June 2021 and 2022. All seven counties in Metro
Denver reported over-the-year increases in retail sales. Adams County reported the largest increase of 17.4 percent, followed by Denver County (+10.9 percent) and Boulder County (+10.3 percent). Douglas County reported the most modest increase of 4.3 percent. Retail sales throughout Colorado rose 9.8 percent over the-year.

Travel and Tourism –

 The average hotel occupancy rate in Metro Denver rose 7.1 percentage points over-the-year to 77.4 percent in the month of August 2022. The average hotel room rate rose 10.8 percent to $170.84 per night, an increase of $16.59 during the period. Since navigating the worst of the COVID-19 pandemic, the Metro Denver occupancy rate has returned to 90.3 percent of pre-pandemic levels recorded in August 2019.

 According to a new “State of Travel and Hospitality” report by Morning Consult, some of the business travel spending that was derailed by the Covid-19 pandemic may never return. About 40 percent of business travelers who took a trip at least three times a year before the pandemic expect to never travel for business again. Additionally, the share of adults who plan on taking a trip for work this year dropped 10 percentage points between February and May of this year according to a survey of 16,000 adults.

 The Denver International Airport has proposed a budget of $1.33 billion for next year, projecting that traffic will exceed pre-pandemic levels in 2023. If current projections hold, it would be the fifth fastest airport recovery pace in the country, according to research group Fitch Ratings. DEN plans to add 30 jobs to meet increased passenger demand and to respond to staffing shortages.
 According to J.D. Power’s “2022 North America Airport Satisfaction Study”, a large-scale survey of 27,000 travelers from August 2021 to July 2022, Denver International Airport ranked 14th among the largest U.S. and Canadian Airports. DEN’s score, which peaked at 4th in 2018, fell to its lowest level in seven years due to long security lines and other travel hassles.

Commercial Development –

Vita Fox North LP broke ground on Fox Park, a World Trade Center Denver-anchored development project in Denver’s Globeville Neighborhood. The project will bring an estimated 6 million square feet of residential and commercial space, as well as 14 acres of parks and open space. The first phase of construction will consist of 1,050 residential units, 350,000 square feet of office space, a hotel, and retail space in addition to the World Trade Center Complex. The developer is aiming for a phase-one completion date in 2024.
 Evergreen Devco Inc.’s master development plan for RiverPark in Littleton was approved in September. The mixed-use community, to be built on a 33-acre site at 7755 S. Santa Fe Drive, will include approximately 300 residential units as well as an undisclosed amount of commercial space. Evergreen plans to break ground on the project by the beginning of 2023.
The Broomfield Town Square project, which calls for as many as 643 residential units was approved by the Broomfield City Council. The plan also includes as much as 187,000 square feet of commercial space and the redevelopment of a local Safeway into 65,000 square feet of retail, co-working, and community space. Developers plan to break ground in late 2022 or early 2023.
Whole Foods submitted plans in Aurora this month to build a 136,700-square-foot facility on 18.5 acres at the corner of Denali Street and East 60th Street in the HighPoint industrial park. The facility would employ 150 to 175 employees when finished.
FlexHQ, a California-based co-working company, purchased a 76,000-square-foot building at 5180 Fox Street in Denver with plans to convert the space, which is primarily an industrial warehousing building, into a co-working shared office space.

The University of Colorado Denver released plans to build a new engineering building on the corner of Larimer Street and Speer Boulevard. The building, which will be five stories and 72,000 square feet when completed, is in response to a 50 percent student increase in the last five years. The school plans to break ground in April 2023.
Vib Denver RiNo, a boutique brand from Best Western Hotel Group, opened in the River North Art District in Denver. The six-story hotel at 3560 Brighton Boulevard includes 112, a rooftop restaurant, a coffee shop, and a lobby bar.
Virgin hotels broke ground on a new hotel at 4400 Fox Street. The hotel will be in the Fox Park development in Denver. Current plans call for the hotel to open in 2025 and will include 241 rooms, a coffee shop, a rooftop lounge, a cocktail and event space, as well as a restaurant.

**Information provided by Metro Denver Economic Development Corporation

Colorado Real Estate News

Denver Metro: Commercial Market Stats | Q3 2022

LEASING – OFFICE

DOWNTOWN DENVER

CBD – Central Business District

Summary

Remote work initiatives continue to have an outsized impact on Denver’s CBD office market fundamentals. The vacancy rate of 25.7% is the highest rate recorded in metro Denver, driven higher in the last year due to the delivery of a handful of major projects and continued large-scale move-outs.

Even prior to the pandemic, vacancies in Denver’s CBD trended above the metro average for years. While the submarket has diversified over the last decade, mainly from tech companies relocating from coastal markets, Denver’s CBD still has a large presence of energy companies. CoStar estimates that nearly 10% of office space in the CBD is occupied by energy tenants. Beginning with the shale bust in 2014, energy companies were again hit hard in 2020 due to the historic drop in demand. Some of the CBD’s established long-term energy tenants, such as Whiting Petroleum and Occidental Petroleum, have returned large blocks of space to the market. DCP Midstream recently relocated its headquarters from the Republic Plaza, where the company had occupied 171,000 SF for years. The company took 72,000 SF at the newly completed Belleview Station in the Denver Tech Center.

Despite ongoing uncertainties several trophy assets have traded since the onset of the pandemic as investors view them as less risky given the flight to quality trend. Developers are still bullish on the area, as well. A new high-rise broke ground in 2022. The CBD remains as the primary office node in Denver and has a number of positive factors. Downtown is served by several light rail stops in the Regional Transit District (RTD) system and benefits from connectivity to the greater Denver metro. The continued growth in multifamily units and retail offerings has transformed Downtown into a true live/work/play environment that has increased the area’s appeal to office users and investors.

LoDo – Lower Downtown

Summary

LoDo is Denver’s oldest neighborhood and a premier live/work/play destination. Demand in this slice of the market is driven by employers utilizing highly amenitized workspaces to attract top talent in a competitive labor market, and tenants are willing to pay a premium to be located in the area. Foot traffic in the area decreased significantly at the onset of the pandemic but has improved in the last year with tourists returning and a growing percentage of employees back in the office.

Vacancy in the last few years quickly increased as a number of tenants placed space on the sublease market or backed out of lease deals that were in the works. There are still many uncertainties about office space use post-pandemic, but an uptick in leasing activity in the last year has increased optimism in the long term health of LoDo’s office fundamentals.

LoDo is one of Denver’s most expensive office submarkets with rents averaging second to neighboring submarket Platte River. Some tenants are taking advantage of the current economic conditions to lease office space at a discounted rate, especially when it comes to sublease listings. LoDo’s tenant base remains well-diversified, with a heavy flow to tech, investment, law, and even medical service tenants taking space in recent deliveries.  

Investors have made big splashes when opportunities present themselves, but trades have varied widely in any given year.

Platte River/RiNo (River North)

Summary

Denver has experienced incredible growth in the past decade, and no place is this boom more evident than in Platte River. The submarket encompasses Denver’s fastest-growing neighborhoods, including Union Station and RiNo, where extensive revitalization has been ongoing.

With opportunities for large-scale development few and far between in neighboring LoDo, development accelerated to staggering levels in Platte River in recent years. Nearly 2.5 million SF has delivered since 2018, which has radically altered the landscape of the submarket. Another 670,000 SF is currently in the pipeline.

With much of the recent development speculative, the vacancy rate has fluctuated significantly. Ongoing supply pressure, coupled with tempered office demand in the wake of the pandemic, have pushed vacancies to near-record highs.

Demand for new construction was nothing short of impressive in past years. Additionally, investors are willing to pay top dollar for high occupancy buildings. These trends speak to sustained demand from tech tenants, a key sector in the Platte River Submarket.

CENTRAL DENVER

Cherry Creek

Summary

Cherry Creek is one of the most popular neighborhoods in Denver. The area offers a live/work/play environment and has become synonymous with fine dining and high-end shopping. After negative net absorption dominated in 2020, space gains turned positive in 2021 and into 2022. Trailing 12-month absorption totals 110,000 SF, and Cherry Creek is one of the few Denver submarkets to remain in the black. Cherry Creek has shown greater resiliency in maintaining occupancies than in most areas across the metro.As vacancies across Denver continued to rise in the last year, the vacancy rate in Cherry Creek diverged from the metro trend in 2021 and fell by roughly 600 basis points in just six quarters. Vacancy registers 7.2%, making the submarket one of the tightest office locations in Denver.

Only a handful of office buildings exceed 100,000 SF, most of which were built in prior cycles. New zoning initiatives implemented in 2012 paved the way for Cherry Creek’s construction boom, allowing for increased development of high-end office, multifamily, and hotel product. Cherry Creek has always been among Denver’s most expensive submarkets, and the high cost of land historically limited new construction in the area. However, the zoning initiatives allowed for increased densification and higher buildings in Cherry Creek North, where the majority of office product in the submarket is concentrated. Developers responded by transforming the luxury shopping area into a premier mixed-use development. The submarket is now virtually built out. New development going forward will likely require the demolition of existing buildings. A number of older office buildings have undergone extensive renovations in recent years to compete with new space hitting the market. 

240 Saint Paul Street delivered in November 2021. The six-story building totaling 75,000 SF includes office and retail space. Fitness brand Equinox is anchoring the building, taking 33,000 SF on the first three floors. BMC purchased the site in 2017. It previously contained an older building that has been demolished. BMC Investments has been active in transforming Saint Paul Street over the last few years. The investment firm is behind The St. Paul Collection residences, as well as retail establishments including SoulCycle and Le Bilboquet. BMC anticipates that with the delivery of its newest project, Saint Paul will become one of the most heavily trafficked pedestrian streets in Cherry Creek. 

A number of office projects broke ground within the last year to capitalize on tenant demand. Broe Real Estate Group is developing a 76,000-SF building at 200 Clayton. OmniTraxx has preleased 20,000 SF in the building. Two older building were previously at the location and were demolished. Construction on 200 Clayton was originally scheduled to begin in summer 2020 but uncertainties in the office market brought on by the pandemic delayed the groundbreaking. BMC Investments began construction on 255 Fillmore Street in April. The 100,000-SF is 91% leased and is scheduled to deliver in mid-2023.

The quality of life that Cherry Creek provides is highly attractive to businesses, and companies here are willing to pay a premium in order to call the neighborhood home. Cherry Creek was a clear rent-growth winner this past decade. Rents have grown by more than 50% over the past decade, one of the top performances in the Denver market. Additionally, Cherry Creek is one of the priciest submarkets in the metro, with average rents of more than $38.00/SF, behind only Platte River and LoDo. Annual rents are up by 2.0%.

Cherry Creek is difficult to build in—that and the neighborhood’s continuing appeal as a trendy, upscale, and walkable destination has helped to leave office owners in a solid position at the bargaining table relative to other areas in the metro.

Glendale

Summary

Glendale has traditionally served as an affordable option to nearby Cherry Creek, which is one of the most expensive locations in the Denver market. But recent mixed-use development in Glendale has transformed nodes throughout the submarket into live/work/play hotspots in their own right. After a decade without any new deliveries, two projects have recently been added. Boulevard One has turned the former Lowry Air Force Base into a community with housing, retail, restaurants, and office space, while 9th & Colorado features a walkable mixed-use development. 9th & Colorado is being developed on the site of the University of Colorado’s former Health Sciences Center campus with plans to eventually total over 2 million SF of mixed-use space. Continuum Partners purchased the 26-acre site in 2015.

In the largest recent lease in Glendale, NGL Energy Partners took 48,000 SF in 20Q4 at Continuum Partner’s newly completed office project located within the 9th & Colorado development, which is currently 100% leased. The oil and gas company took occupancy of the space in December 2020, relocating from the nearby Colorado Blvd/I-25 Submarket where it occupied 30,000 SF at Ptarmigan at Cherry Creek. The new location houses 185 employees.

More development is on the way, which will continue to transform this once sleepy area of Denver. After years of setbacks, Glendale 180 finally received the green light. This $150 million entertainment district at Virginia Ave and Cherry Creek Blvd will feature a music concert venue, movie theater, restaurants, and a hotel, and is scheduled to break ground this fall. While office space will likely not be part of the district, it represents an evolution of Glendale that will aid in attracting prospective tenants to the area.

New developments in Glendale are adding vibrancy to the submarket, but they’re also raising the vacancy rate. Vacancy hovered around 8% from 2014-2019 but has more than doubled to 17.6% in just the last 2 years. Vacancy is especially high in newer 4-5 Star rated properties. Rent growth is up marginally on a year-over-year basis, but it will remain difficult for landlords to push rates until leasing activity returns to pre-pandemic levels and the amount of available space on the market begins to subside.

Colorado Boulevard/I-25

Summary

Adjacent to Cherry Creek and located within proximity to downtown Denver, Colorado Blvd/I-25 is a mature submarket that offers rent savings compared with the metro average. More than 75% of the inventory is located within one mile of a light rail station (generally the Colorado Station stop), which now grants more access than ever thanks to a major ongoing expansion to Denver’s light rail network elsewhere in the metro. 

The Colorado Blvd/I-25 vacancy rate of 13.3% recently fell below the metro average of 14.9% after absorption trended positive beginning in the second half of 2021. Trailing 12-month absorption now totals 110,000 SF.

In the past, Cigna was behind the largest lease at Colorado Tower III, signing on for 136,000 SF on a lease that began in March 2019. The firm relocated over 1,000 employees from 8505 East Orchard Road in the Denver Tech Center. While the submarket is not known for having a high concentration of tech companies, some of the highest-profile recent leases came from this sector. In 2020 TEKSystems leased 10,000 SF at Tower I in the Colorado Center, where OpenTable leased 15,000 SF in 2017. In July 2018, Overwatch.ID, a tech security company that provides an identity security platform to organizations, signed on for about 9,000 SF at 900 S Broadway. 

The submarket offers a discount on rents relative to the Denver average. At about $26.00/SF, rents are about 7% below the metro benchmark. While rent growth has cooled following the onset of the pandemic, the submarket’s relative affordability helped to prevent the steep losses that were recorded in Denver’s expensive urban core. With an inventory that skews far older than the metro average, offices here generally aren’t competing with the numerous speculative developments going up elsewhere in Denver.

Construction activity has been minimal in the Colorado Blvd/I-25 Submarket. Prior to 2017, the submarket hadn’t had a 50,000-SF plus delivery since the 260,000-SF Tower II of the Colorado Center delivered in 1996. After a 20-year drought, Tower III at the Colorado Center has added 230,000 SF of Class A speculative space: The building delivered towards the end of 17Q2 and remained fully vacant and available at the onset of 2018. The building secured leases in back-to-back months beginning in March 2018 for a combined 156,000 SF. All of the space, which includes 218,000 SF of office space and 12,000 SF of ground floor retail, has been marketed at $26-$30/SF triple net since the preleasing phase.

Tower III is right next to the Colorado Station light rail stop. Outside of Cherry Creek, virtually every large project constructed this cycle in the Denver metro is located within a quarter-mile of a light rail stop.

The submarket overwhelmingly attracts tenants in the professional business services or financial sectors, which combined represent more than 80% of the submarket’s occupied space. Metro wide, these two sectors are responsible for just over 60% of occupied space.   

SOUTH DENVER METRO

DTC – Denver Tech Center

Summary

The Denver Tech Center (DTC) is one of the metro’s primary employment clusters. The submarket has evolved into a sprawling urban node with a diverse mixture of tenants, but it still remains a hub for technology companies, particularly those that specialize in telecommunications. DTC has three light rail stops located within the submarket, making it a prime location for transit-oriented development. Because of the new mass transit options, the submarket has transformed in the past decade from a commuter office park to a vibrant mixed-use development. Leasing activity and speculative development have largely been put on hold due to the coronavirus pandemic. However, build-to-suit activity continues. Vectra Bank is scheduled to deliver its new corporate campus later this year.

Due to the submarket’s relative affordability, proximity to Denver’s wealthiest zip codes, and revival following the expansion of the light rail network, the DTC has attracted many tenants from both within and outside of the metro. High-profile leases from tenants including DCP Midstream, HealthPeak, and York Space Systems have kept vacancies in check. The average rent in Denver Tech Center historically mirrors the metro average. Like most of the metro, annual rent growth moderated in the submarket at the height of the pandemic but is starting to see improvement.

Investors seeking to enter Denver’s office market without paying sky-high prices in the urban core often look to DTC and the greater Southeast Suburban corridor. Sales volume reached a cyclical-high in 2019, and the average transaction price per SF was a fraction of those in downtown submarkets. Out-of-state players made the biggest splashes, targeting 1980s and 1990s vintage product with higher occupancy rates. Deal volume fell significantly at the onset of the pandemic, but investors have returned to the DTC submarket with a number of major sales closing in 2021.

Greenwood Village

Summary

Greenwood Village is one of Denver’s premier office hubs. It is surrounded by some of Denver’s wealthiest zip codes, providing a strong base of highly skilled workers for companies to draw from. In the city of Greenwood Village, about 75% of residents have a bachelor’s degree or higher, and nearly half of this cohort has a graduate or professional degree. The median household income is about $130,000.

Leasing activity has picked up in the last year, indicating that tenants are beginning to return to the market after assuming a wait-and-see approach immediately following the onset of the pandemic. While this bodes well for future space gains, roughly 1 million SF has been vacated in the Greenwood Village submarket since the beginning of 2020. Vacancy registers 21.9%, which is the third-highest vacancy rate among Denver submarkets, just behind the CBD and Inverness. Looking ahead, the office market is projected to remain tenant-favorable, with vacancies remaining high through the end of the forecast. 

The largest vacancy was from Newmont Mining. The Fortune 500 company vacated roughly 200,000 SF at Palazzo Verdi in 20Q4 as it moved into its new headquarters in the nearby Denver Tech Center.

Leasing activity primarily consisted of smaller tenants in the past year, but a few larger deals have been signed in the submarket. Kimley-Horn leased 62,000 SF at Carrara Place and will take occupancy of the space in October. NextWorld, a Colorado-based software company, leased nearly 54,000 SF in 21Q2 at Plaza 25 at Arapahoe Station and took occupancy of the space in October. The company opened its new headquarters at the location and plans to hire an additional 300 employees with an annual average wage of nearly $150,000. Delta Dental of Colorado signed one of the largest leases since the start of the pandemic, taking 55,000 SF at Peakview Tower. The dental insurance company took occupancy of the space in 20Q4. Wireless Service provider Theia Group took 33,000 SF at Palazzo Verdi, partially backfilling the space left behind by Newmont Mining.

Nothing delivered in Greenwood Village in the last 12 months, and no notable projects are currently under construction. This is a positive for the submarket given the abundance of available space.

Greenwood Village is served by two light rail stations, Orchard Station in the submarket’s northeast, and Arapahoe at Village Center Station in the submarket’s southeast. With the exception of one smaller medical office, new development this cycle has universally been located within one half-mile of Arapahoe at Village Center Station. Offices near Orchard Station were almost universally built in the 1970s, and development since then has been limited to renovations at these older buildings.

Two major developments have delivered in the Greenwood Village submarket in the last decade: CoBank Center’s 274,000-SF headquarters delivered in 2015, while Village Center Station II, a 306,000-SF development fully leased by Charter Communications, delivered in early 2018. Both buildings only broke ground after securing full-building leases from their respective tenants, and speculative development this cycle has been limited to the 36,000-SF Landmark Medical Center, a 2014 delivery.

Asking rents in Greenwood Village typically mirror the Denver metro average. And like the local market, rent growth cooled off substantially in the past two years as the submarket continues to contend with tempered demand and uncertainty regarding the long-term office outlook. Competitive pressure from an array of alternative options in Downtown Denver neighborhoods could be playing a role as many expanding or relocating companies have preferred the urban core.

Inverness

Summary

Located in the Southeast Suburban Corridor of Denver, Inverness is an ideal location for large corporate users due to the submarket’s access to a strong base of highly skilled workers, relative affordability, and multiple transportation options. Technology, finance, and healthcare companies are prevalent throughout this submarket. DirecTV, Comcast, and ViaSat have a large office presence.

Leasing activity has been quiet with remote and hybrid work models gaining traction. Although there haven’t been any new deliveries in the last year, negative absorption has caused the vacancy rate to rise to 22.2%. This is among the highest in Denver. In the largest move-out, Sprint closed a call center at Inverness Business Park, vacating roughly 144,000 SF in the first weeks of 2022. Office fundamentals were already slowing in the Inverness Submarket before the pandemic. Several large blocks of space (or entire buildings) became available in 2019, as tenants such as AECOM and Arrow Electronics moved to new construction in nearby submarkets.

Not all sectors are giving back office space. Defense, space and other aerospace contracts have boosted office leasing in Denver, especially in the Southeast Suburban corridor. The largest leases since the start of the pandemic in Inverness belong in this sector. ViaSat, a satellite and digital communications products maker, renewed its 100,000-SF lease at 349 Inverness Drive S in April 2020. The company also occupies 70,000 SF at 360 Inverness Drive S. United Launch Alliance renewed its 72,000-SF lease at 9950 E Easter Ave in the same month.

The healthcare industry has also been very active in Inverness. In addition to United Healthcare Group’s 42,000-SF space at INOVA, Dry Creek Medical occupied 52,000 SF at 145 Inverness Drive in the first half of 2019, the biggest move-in of the year. Other medical tenants such as Patientnow Inc. and AllHealth Network were among the most notable leases signed in the last few years.

Major office developments have been limited in the past decade, with the majority of construction activity taking place in the neighboring Denver Tech Center. The only 50,000 SF-plus delivery since 2019 was Dry Creek Medical’s 53,000-SF building at 145 Inverness. Nothing is currently under construction, a benefit to fundamentals given the uncertainty of economic conditions in the near term. Shea Properties has proposed Prime Meridian, an office campus that could total roughly 1 million SF if built-out. The site offers easy access to I-25, C-470, and Lincoln Ave., in addition to a planned private shuttle circulating from the campus to the Lincoln RTD light rail station.

The average asking rent of $26.00/SF in Inverness is about a 10% discount from the Denver average. Annual rent growth steadily declined in each quarter following the outbreak, ultimately dipping into negative territory in 21Q1 for the first time since the Great Recession. Year-over-year rent growth in Inverness now measures 0.9%, relatively in line with the metro benchmark of 1.3%.

NORTH DENVER METRO

Northwest Denver

Summary

The Northwest Denver Submarket was largely overlooked by developers in the last decade, and minimal supply pressure allowed vacancy to register below the metro average for much of the last decade. While development has picked up in the last few years, vacancies in the submarket remain well below the Denver average. The area’s roster of large, high-credit tenants has helped insulate the submarket from impacts related to remote and hybrid work models.

Ball Corporation has been the most active tenant in the submarket dating back to the beginning of the pandemic. Headquartered in Broomfield, the company supplies packaging solutions for beverage and household products, as well as aerospace and other technologies and services primarily for the U.S. government. Ball Corp is constructing its new headquarters in Westminster consisting of four buildings totaling 186,000 SF. The project was expected to complete by the end of 2020 as the packaging company transitions from its long-time 211,000 SF headquarters at 10 Longs Peak in nearby Broomfield, but has been delayed. Buildings 1 & 2, totaling 93,000 SF, delivered in mid-2021.

Construction deliveries picked up in the last few years. In addition to buildings 1 & 2 at Ball Corp’s new headquarters, LoHi Offices, also known as 32|V, delivered in October 2020. The speculative project is comprised of 30,000 SF of office space and ground-floor retail. The new building is located in the center of Denver’s trendy LoHi neighborhood which features an abundance of restaurants, coffee shops, and boutique shopping. Several blocks away a speculative project called Firehouse delivered 14,000 SF to the submarket in 2021. In the same neighborhood, 2926 LoHi is under construction, and the 33,000-SF building is scheduled to deliver in early 2023.

Recent expansions to Denver’s light rail network have notable implications in parts of the submarket, both for new development and the existing inventory. With the recent opening of the G-Line, one-third of submarket stock (about 2.2 million SF) is now located within a mile of a light rail station.

Rent growth is essentially flat on a year-over-year basis. Northwest Denver offers office tenants a significant discount relative to the market. The average asking rent in Northwest Denver is about 20% below the metro average, which should help the submarket recover as workers return to the office.

Broomfield County

Summary

The Broomfield Submarket is located roughly midway between Boulder and Downtown Denver. Its highly rated school system, abundance of work opportunities and recreational activities make it a sought-after area for residents and businesses alike. Broomfield is one of the main suburban tech hubs in the region, but a long list of companies in various industries drive the local economy. Several major office hubs exist in the area and various arterial highways make for an easy commute for the high number of well-paid residents in the area.

Broomfield is emerging as a biotech hub as investors and tenants have been priced out of more expensive markets such as San Diego, Boston, San Francisco and Seattle. Lincoln Property Co. announced plans for a four-building life science campus totaling 450,000 SF that is scheduled to deliver in 2024. Growth in the life science sector across the country has far outpaced that of industries that had previously fueled demand for traditional office space. 

Although office fundamentals have softened since the onset of the pandemic, tenants are still demonstrating longterm confidence in the submarket. Gogo’s recent recommitment to Broomfield sends a message that the suburban submarket can also compete for tech tenants entering or expanding in Metro Denver. The in-flight internet service company renewed its 125,000-SF lease at 105 Edgeview Dr. in June. The company recently sold its division that sells internet connectivity to airlines but retained its business jet internet services which is operated from its Broomfield office.

In another reinforcement of Broomfield’s appeal to a broad tenant base, the submarket has recently attracted several major expansions or relocations from international firms. Switzerland-based Partners Group moved into a new 80,000 SF in 2019, upgrading from a much smaller space it temporarily worked out of in Downtown Denver since mid-2016. German manufacturing firm Viega developed an 80,000 SF campus in Broomfield. The firm relocated its North American headquarters from Wichita, KS.

Broomfield is one of the fastest-growing cities in the metro, and office development that took off last cycle has been met by robust residential and mixed-use development this cycle. As these trends show no sign of slowing, Broomfield continues to increase its viability as a live-work-play destination, while offering proximity to both downtown Denver and Boulder.

Rent growth was slowing even before the outbreak, and moderate rent losses are expected as tenants continue to evaluate office space requirements amid the growing popularity of hybrid work models. The average asking rent in Broomfield County generally mirrors the metro average, but the submarket does offer a substantial discount relative to pricier downtown submarkets.

Boulder

Summary

Boulder is an attractive market that boasts a high quality of life along with ample career opportunities. The University of Boulder has proved to be a boon for technology startups and has aided in creating a pool of skilled workers. Many big tech companies have entered the Boulder market with the acquisition of locally based startups. For example, Google purchased Boulder software company @Last in 2006, which led to the tech giant building out a Boulder campus, and more recently expanding.

The city has also become a landing spot for biotech companies with many occupying a mix of office and flex buildings. Boulder’s high concentration of flex space, many of which are outfitted with high-end lab space, continues to attract tenants to the area.

Low vacancies and a high-quality tenant base have given landlords the ability to push rents over the last decade, resulting in strong cumulative rent growth. The pandemic softened office fundamentals, leading to rising vacancies and stagnant rent growth. Major companies have transitioned to remote or hybrid work models, but vacancies are now contracting and rents are improving after many companies are now heading back to the office.

Boulder is still a relatively affordable market and has benefitted as some investors have been priced out of core gateway markets. Boulder has attracted investors in the pandemic era because it is less vulnerable to economic upheavals due to its diverse and highly skilled workforce, as well as the University of Colorado Boulder and government labs offering steady employment in the community.

LEASING – RETAIL

CENTRAL DENVER

Downtown Denver

Summary

Vacancies for retail space in Downtown were higher than the five-year average during the fourth quarter, but they were essentially unchanged from this time last year. The rate also sits above the overall market’s average. Meanwhile, retail rents have risen by 3.1% in the past 12 months.  

Although roughly 160,000 SF of retail space has delivered over the past three years, nothing is currently underway in Downtown. 

Retail properties trade with regularity in Downtown, and this past year proved no different, as investors remained just as engaged in the submarket. Compared to the overall Denver area, market pricing sits at $330/SF, which is well above the region’s average pricing.  

Central

Summary

Central Denver lies between the bustling downtown area to the west and the wide-open plains of Aurora to the east. Retailers in the submarket are able to draw from some of Denver’s fastest-growing neighborhoods. The Central Park neighborhood that lies directly north has grown into Denver’s most desirable locale for young families, while the Lowry neighborhood that lies to the south offers families and young professionals a quiet residential community within a short 10-minute drive to downtown. Employment in the area is driven by the high-paying healthcare, aerospace, and bioscience industries. Retailers are attracted to the area’s favorable demographics and explosive growth, supported by proximity to a number of Denver’s most desirable neighborhoods.

One of the longest commercial streets in America, Route 40, better known as Colfax Avenue, runs through the heart of central Denver. The Colfax corridor boasts more than 50 years of operation and is an iconic fixture in Denver with eclectic eateries, neon-signed hotels, and unique Colorado history. An ideal day can be spent along the Colfax corridor, with its numerous brunch offerings, inviting coffee shops, and shopping for one-of-a-kind items at surrounding boutiques and thrift stores. 

Colfax Avenue has long been an important east-west transportation route that connects downtown Denver with Anschutz Medical Campus, and the City of Denver is implementing a new Bus Rapid Transit (BRT) line that will improve mobility along the corridor.

Cherry Creek/Colorado Boulevard

Summary

Retail vacancies in Colorado Bl/Cherry Ck were roughly in line with the five-year average during the fourth quarter, and they were essentially unchanged from this time last year. The rate also comes in below the region’s average. Meanwhile, retail rents have risen by 3.3% in the past 12 months.  

As for the pipeline, construction has returned to Colorado Bl/Cherry Ck after a lull in net new supply over the past few years. 

Retail investors are reasonably active in Colorado Bl/Cherry Ck, and those trends have largely held serve in the past 12 months. Compared to the overall Denver area, market pricing sits at $372/SF, which is well above the region’s average pricing.  

EAST DENVER

Northeast

Summary

Retail vacancies in Northeast were roughly in line with the five-year average during the fourth quarter, but they increased modestly in the past 12 months. The rate also sits above the overall market’s average. Meanwhile, rents have surged in the past 12 months, growing by 4.2% year over year.  

As for the pipeline, development has been relatively steady over the past few years in Northeast, and it remains up and running today. 

Northeast is a very liquid investment market, characterized by heavy trading, and those trends have largely held serve in the past 12 months. Market pricing sits at $282/SF, which is above the average pricing in Denver.  

Aurora

Summary

Vacancies for retail properties in Aurora were under the five-year average during the fourth quarter, and they compressed in the past year. The rate also comes in below the region’s average. Meanwhile, rents have surged in the past 12 months, growing by 4.4% year over year.  

As for the pipeline, development has been relatively steady over the past few years in Aurora, and that trend has continued in the fourth quarter. 

Aurora is a very liquid investment market, characterized by heavy trading, and that remained the case in the past year. At $232/SF, market pricing is considerably lower than the region’s average pricing.  

Southeast

Summary

Vacancies for retail properties in Southeast were under the five-year average during the fourth quarter, and they compressed in the past year. The rate also comes in below the region’s average. Meanwhile, rents have surged in the past 12 months, growing by 4.1% year over year.  

As for the pipeline, development has been relatively steady over the past few years in Southeast, and it remains up and running today. 

Southeast is a very liquid investment market, characterized by heavy trading, and those trends have largely held serve in the past 12 months. Compared to the overall Denver area, market pricing sits at $303/SF, which is well above the region’s average pricing.  

SOUTH/WEST DENVER METRO

South

Summary

Retail vacancies in South were roughly in line with the five-year average during the fourth quarter, but they tightened a touch in the past year. The rate also comes in below the region’s average. Meanwhile, retail rents have risen by 3.9% in the past 12 months.  

Although roughly 51,000 SF of retail space has delivered over the past three years, nothing is currently underway in South. 

South is a very liquid investment market, characterized by heavy trading, and those trends have largely held serve in the past 12 months. Market pricing sits at $277/SF, which is above the average pricing in Denver.  

Southwest

Summary

Vacancies for retail properties in Southwest were under the five-year average during the fourth quarter, and they compressed in the past year. The rate also comes in below the region’s average. Meanwhile, rents have surged in the past 12 months, growing by 4.4% year over year.  

Although roughly 50,000 SF of retail space has delivered over the past three years, nothing is currently underway in Southwest. 

Southwest is a very liquid investment market, characterized by heavy trading, and that remained the case in the past year. At $239/SF, market pricing is considerably lower than the region’s average pricing.  

West

Summary

West Denver is the largest submarket defined by CoStar in the Denver metro, with just over 25 million SF of inventory. West Denver features extensive retail, cultural, and recreational hot spots that attract both Denverites and visitors from surrounding areas. The Belmar area is a vibrant reinvention of downtown Lakewood that spans 22 city blocks with restaurants, art galleries, and clothing and specialty stores. Within this area along the West Colfax Corridor lies 40 West Arts with more than 20 public art installations and multiple performing arts venues. Retailers are attracted to the area’s favorable demographics and explosive growth, supported by proximity to a number of Denver’s most desirable neighborhoods.

West Denver lies between the foothills of the Rocky Mountains and downtown Denver and is home to some of the metro’s fastest growing and trendiest neighborhoods. Young professionals and families are drawn to the area for its proximity to downtown and relatively cheaper housing costs, but the area is also home to many longtime residents, creating a unique community vibe that celebrates both new development and neighborhood preservation. The W Line of the Regional Transportation District’s Light Rail runs through West Denver, providing public transit options and easy access to Denver’s Union Station.

Rent growth was not negatively impacted here as it was in the urban core during the pandemic, and rents have been rising steadily in the last year with an annualized gain of 3.5%. Investors have remained active in the market, executing on $338 million in volume in the last 12 months.

NORTH DENVER METRO

Northwest Denver

Summary

Retail vacancies in Northwest were roughly in line with the five-year average during the fourth quarter, but they compressed in the past year. The rate also sits above the overall market’s average. Meanwhile, rents have surged in the past 12 months, growing by 4.2% year over year.  

As for the pipeline, development has been relatively steady over the past few years in Northwest, and that trend has continued in the fourth quarter. 

Northwest is a very liquid investment market, characterized by heavy trading, and those trends have largely held serve in the past 12 months. At $237/SF, market pricing is considerably lower than the region’s average pricing.  

Boulder

Summary

Retail vacancies in Boulder were slightly elevated relative to the five-year average during the fourth quarter, but they were essentially unchanged from this time last year. The rate also sits above the overall market’s average. Meanwhile, rents have surged in the past 12 months, growing by 4.9% year over year.  

As for the pipeline, development has been relatively steady over the past few years in Boulder, and it remains up and running today. 

Boulder is a very liquid investment market, characterized by heavy trading, and those trends have largely held serve in the past 12 months. Compared to the overall Boulder area, market pricing sits at $315/SF, which is well above the region’s average pricing.  

Longmont

Summary

Retail vacancies in Longmont were roughly in line with the five-year average during the fourth quarter, and they were essentially unchanged from this time last year. The rate also comes in below the region’s average. Meanwhile, rents have surged in the past 12 months, growing by 5.0% year over year.  

As for the pipeline, development has been relatively steady over the past few years in Longmont, and that trend has continued in the fourth quarter. 

Longmont is a very liquid investment market, characterized by heavy trading, and those trends have largely held serve in the past 12 months. At $242/SF, market pricing is considerably lower than the region’s average pricing.  

**Information provided by CoStar

Colorado Real Estate News

Denver Metro Office Market Stats Q2 2021

DOWNTOWN DENVER

CBD – Central Business District

Summary

Denver’s CBD has been significantly impacted by the coronavirus pandemic and subsequent hybrid work models. Leasing activity fell dramatically at the onset of the pandemic as tenants held off on making long-term lease decisions in the uncertain environment. This wait-and-see approach persisted through the remainder of 2020 and into 2021. With weaker demand, vacancy is up to 22.5%. In addition to direct space hitting the market, sublet availabilities are also posing a challenge to the CBD. Available sublease space in the CBD has doubled in the past year to 1.6 million SF. While office fundamentals in 2020 softened, investors demonstrated long-term confidence in the downtown market with a handful of trophy assets that traded. Annual sales activity totaled nearly $862 million in 2020, up from $564 million in 2019. Denver’s Central Business District is the metro’s financial hub and includes the headquarters of many of its larger companies. The submarket is served by several light-rail stops in the Regional Transit District (RTD) system and is positioned to benefit from the FasTracks extension that has increased access to the Southeast, DIA, and East Denver submarkets. 

LoDo – Lower Downtown

Summary

LoDo is Denver’s oldest neighborhood and a premier live/work/play destination. Before the pandemic, demand in this slice of the market was driven by employers utilizing highly amenitized workspaces to attract top talent in a competitive labor market. Foot traffic in the area decreased significantly at the onset of the pandemic, but is beginning to improve as people return to the office.

The effects of the coronavirus became immediately apparent in LoDo’s office market fundamentals. Vacancy quickly increased as a number of tenants placed space on the sublease market or backed out of lease deals that were in the works. Absorption turned negative, and a lack of leasing activity throughout 2020 and into 2021 indicates that these space losses won’t be recovered anytime soon. Rent growth has declined since March of last year, and CoStar’s forecasting model indicates that rents are projected to contract until mid-2023.

While this may sound like a gloomy scenario, some tenants are taking advantage of the current economic conditions to lease office space at a discounted rate. LoDo’s tenant base remains well-diversified, with a heavy flow to tech, investment, law, and even medical service tenants taking space in recent deliveries.  

Investors have made big splashes when opportunities present themselves, but trades have varied widely in any given year.

Platte River/RiNo (River North)

Summary

Denver has experienced incredible growth in the past decade, and no place is this boom more evident than in Platte River. The submarket encompasses Denver’s fastest-growing neighborhoods, including Union Station and RiNo, where extensive revitalization has been ongoing.

With opportunities for large-scale development few and far between in the neighboring LoDo Submarket, development accelerated to staggering levels in Platte River in recent years. The supply wave began radically altering the landscape of the submarket. Another 530,000 SF is currently in the pipeline.

With much of the recent development speculative, the vacancy rate has fluctuated significantly. Ongoing supply pressure, coupled with tempered office demand in the wake of the pandemic, contributed to vacancies above the submarket’s long-term average recently.

Demand for new construction was nothing short of impressive in past years. Additionally, rents were recently growing at their strongest rate in several quarters, following a multi-year stretch of pronounced underperformance against the metro. Platte River has managed to maintain positive net absorption in the last 12 months, when most other submarkets across the Denver market have reported space losses amid the ongoing pandemic. These trends speak to sustained demand from tech tenants, a key sector in the Platte River Submarket.

CENTRAL DENVER

Cherry Creek

Summary

Cherry Creek is one of the most popular neighborhoods in Denver. The area offers a live/work/play environment and has become synonymous with fine dining and high-end shopping. The COVID-19 outbreak momentarily dampened the appeal of these attractions, but the successful roll-out of the vaccine has resulted in improving office fundamentals midway through 2021.

Prior to the outbreak, office demand was consistently outpacing the pace of development, particularly on the high-end of the spectrum. Vacancies in 4 & 5 Star product compressed by more than 500 basis points in 2019. These outsized figures offset rising vacancies in 1 & 2 and 3 Star properties.

After years of healthy rent hikes, rent growth slowed throughout 2020 as the pandemic weighed on office fundamentals. As of 21Q3, annual rents contracted by -0.7%. 

Only a handful of office buildings exceed 100,000 SF, most of which was built in prior cycles. The submarket is near full build-out, limiting development opportunities to smaller infill projects (relative to construction in nearby downtown).

Glendale

Summary

The Glendale Submarket has traditionally served as an affordable option to the nearby Cherry Creek Submarket, which is one of the most desirable and expensive locations in the Denver market. But recent mixed-use development in Glendale has transformed nodes throughout the submarket into live/work/play hotspots in their own right. Boulevard One has turned the former Lowry Air Force Base into a community with housing, retail, restaurants, and office space, while 9th & Colorado features a walkable mixed-use development on a site that was once Colorado’s Health Sciences Center campus.

More development is on the way, which will continue to transform this once sleepy area of Denver. After years of setbacks, Glendale 180 finally got the green light. This $150 million entertainment district at Virginia Ave. and Cherry Creek Blvd. will feature a music concert venue, movie theater, restaurants, and a hotel, and is scheduled to break ground this fall. While office space will likely not be part of the district, it represents an evolution of Glendale that will aid in attracting prospective tenants to the area.

New developments in Glendale are adding vibrancy to the submarket, but they’re also raising the vacancy rate. Vacancy hovered around 8% from 2014-2019 but has doubled to 15.6% in just the last 2 years. Vacancy is especially high in the newer 4-5 Star rated properties. The impact this is having on rent growth is clear. Year-over-year rent growth is down -1.7% as of 21Q2 and will likely continue to contract over the next four quarters.

Colorado Boulevard/I-25

Summary

Adjacent to Cherry Creek and located within close proximity to downtown Denver, Colorado Blvd/I-25 is a more mature submarket that offers rent savings compared with the metro average. More than 75% of the inventory is located within one mile of a light rail station (generally the Colorado Station stop), which now grants more access than ever thanks to a major ongoing expansion to Denver’s light rail network elsewhere in the metro. 

The Colorado Blvd/I-25 Submarket offers a discount on rents relative to the Denver average. While rent growth has cooled following the onset of the pandemic, the submarket’s relative affordability helped to prevent the steep losses that were recorded in Denver’s expensive urban core. Demand remains tempered for office product, and rents are not projected to recover until at least 2023.

The submarket overwhelmingly attracts tenants in the professional business services or financial sectors, which combined represent more than 80% of the submarket’s occupied space. Metro wide, these two sectors are responsible for just over 60% of occupied space.   

SOUTH DENVER METRO

DTC – Denver Tech Center

Summary

The Denver Tech Center (DTC) is one of the metro’s primary employment clusters. The submarket has evolved into a sprawling urban node with a diverse mixture of tenants, but it still remains a hub for technology companies, particularly those that specialize in telecommunications. DTC has three light rail stops located within the submarket, making it a prime location for transit-oriented development. Because of the new mass transit options, the submarket has transformed in the past decade from a commuter office park to a vibrant mixed-use development. Leasing activity and speculative development have largely been put on hold due to the coronavirus pandemic. However, build-to-suit activity continues. Vectra Bank broke ground on its new corporate campus in 20Q4. 

Several recent move-outs and a construction delivery put upward pressure on vacancies, which peaked at 17.2% in 20Q3. The vacancy rate has since fallen to 16.8% in 21Q3.  

The average rent in Denver Tech Center historically mirrors the metro average. Like most of the metro, annual rent growth moderated in the submarket in 2020 and into 2021.

Investors seeking to enter Denver’s robust office market without paying sky-high prices in the urban core often look to DTC and the greater Southeast Suburban Corridor. Sales volume reached a cyclical-high in 2019, and the average transaction price per SF was a fraction of those in downtown submarkets. Out-of-state players made the biggest splashes, targeting 1980s and 1990s vintage product with higher occupancy rates. Deal volume fell significantly at the onset of the pandemic, but investors appear to have returned to the DTC submarket with a number of major sales closing in 2021.

Greenwood Village

Summary

Greenwood Village is one of Denver’s premier office hubs. It is surrounded by some of Denver’s wealthiest zip codes, providing a strong base of highly skilled workers for companies to draw from. In the city of Greenwood Village, about 75% of residents have a bachelor’s degree or higher, and nearly half of this cohort has a graduate or professional degree. The median household income is about $130,000.

Office rents in the Greenwood Village Submarket were decreasing at a -0.4% annual rate during the third quarter of 2021, but have posted an average annual gain of 1.9% over the past three years. 

While 13,000 SF has delivered over the past three years (a fractional expansion of the existing inventory), nothing is currently underway. 

Vacancies are trending upwards as the pandemic eats away at office demand.

Investors seeking to enter Denver’s robust office market without paying sky-high prices in the urban core often look to Greenwood Village and the greater Southeast Suburban Corridor. Deal volume fell significantly at the onset of the pandemic, but investors returned to the submarket with a number of major sales closing in the last 12 months.

Inverness

Summary

Located in the southeast suburban area of Denver, Inverness has been a popular location for large corporate users due to the submarket’s access to a strong base of highly skilled workers, relative affordability, and multiple transportation options. Technology, finance, and healthcare companies are prevalent throughout this submarket: DirecTV, Comcast, and ViaSat have a large office presence.

Office fundementals were already slowing in the Inverness submarket before the pandemic. Several large blocks of space (or entire buildings) became available in 2019, as tenants such as AECOM and Arrow Electronics moved to new construction in nearby submarkets. Leasing activity slowed even more throughout 2020, which affected net absorption and reduced the leverage landlords have to raise rents, at least in the near term.

Major office developments have been limited in the past decade, with the majority of construction activity taking place in the neighboring Denver Tech Center submarket. No office projects are currently in the works, which could help the recovery of fundamentals going forward.

Investors have been increasingly drawn to the southeast suburban area of Denver and have seized opportunities that come available in the Inverness submarket. After a slow 2020, investment activity has already picked up in 21Q1 with the sale of INOVA Dry Creek 2 for $63.2 million.

NORTH DENVER METRO

Northwest Denver

Summary

Speculative development was virtually nonexistent throughout this past cycle, but a pair of developers have decided to test the waters, albeit on a smaller scale. City Street Investors delivered a mixed-use project named LoHi offices in October with about 30,000 SF of office space  and around 5,000 SF of ground-floor retail. Several blocks away, a spec office project called Firehouse has about 10,000 SF available office space is scheduled to complete later in 2021.

Rent growth moderated in Northwest Denver in 2020, and that continued into 2021. But the slowdown was less pronounced than the metro at large, as the submarket’s stock is relatively less exposed to the uptick in speculative development metrowide that has weighed down rent growth for high-end office space.

Recent expansions to Denver’s light rail network have notable implications in parts of the submarket, both for new development and the existing inventory. With the recent opening of the G-Line, one-third of submarket stock (about 2.2 million SF) is now located within a mile of a light rail station.

Broomfield County

Summary

The Broomfield submarket is located roughly midway between Boulder and Downtown Denver. Its highly rated school system, abundance of work opportunities and recreational activities make it a sought-after area for residents and businesses alike. Broomfield is one of the main suburban tech hubs in the region, but a long list of companies in various industries drive the local economy. Several major office hubs exist in the area and various arterial highways make for an easy commute for the high number of well-paid residents in the area.

While fundamentals have been healthy in the past, several large move-outs in recent years put upward pressure on vacancies. The vacancy rate stands at 12.7% in 21Q3, up from its low point of 6.5% in 19Q2. Rent growth was slowing even before the outbreak, and moderate rent losses are expected as tenants continue to evaluate office space requirements amid the growing popularity of hybrid work models.

Boulder

Summary

The Boulder Submarket in Boulder is a very large submarket that contains roughly 12.7 million SF of office space. The vacancy rate has risen significantly over the past 12 months, and at 11.8%, the rate is the highest it’s been in over a decade. 

Annual net absorption came in at a decrease of 340,000 SF over the past year. The story improves over a longer timeframe: Over the past five years, the submarket has posted net absorption of about 32,000 SF per year, on average. Rents fell by 1.3% over the past year. Things look much better on a longer timeframe, however, as rents have increased at a rapid clip of 4.1% annually on average over the past decade. 

The 150,000 SF currently underway in Boulder is the lowest construction count in more than three years. This represents a continuation of new development in the submarket, which had already seen 530,000 SF deliver over the past three years, representing an inventory expansion of 4.4%. 

Office properties have traded with regularity in recent years, and last year, the number of sales significantly exceeded the three-year average. With the widespread distribution of vaccines, workers are beginning to return to the office. But it will likely take time before many companies bring 100% of their employees back, and that could make for a less linear office recovery. 

**Information provided by CoStar

Colorado Real Estate News

Submarket Spotlight: Cherry Creek

If you live, work, or play in Cherry Creek, it’s no surprise that Cherry Creek is booming with new construction, new tenants and incredible workout spots, food, shopping and more. The new Clayton Hotel is a membership-only club. The Hotel is open to everyone, however, if you want an exclusive membership then Clayton is the place for you. For members, Clayton offers incredible rooftop views, a pool for lounging, a couple restaurants for eating and plenty of space to take meetings, accomplish tasks or to just relax. Clayton offers two restaurants hat are open to the public on the lower level. Oak Market and Of A Kind. Oak Market is a quick grab and go or sit and relax European Style bakery. It has all you need to get your day started Oak Market’s cinnamon rolls and chocolate croissants are incredible. From Monday-Sunday Oak Market is open from 7am -3pm. They offer Happy Hour from Wednesday-Sunday 3pm-7pm. Of A Kind is a sit-down restaurant that is open for dinner Tuesday-Sunday from 5pm-10pm. The bar is open from 4pm-11pm. Of A Kind brings a Mediterranean/Californian fusion to Cherry Creek – from salads to hummus plates to pasta, you will find yourself enjoying every meal you have here. Of A Kind meals are prepared from scratch and they are responsibly-sourced.

Photo Credit: CoStar (260 Josephine Street)

In addition to the new Clayton Hotel, there are a number of other new buildings in Cherry Creek. 260 North Josephine is a 70,000 square-foot mixed-use building featuring Class AA office space, three levels of below grade parking and ground floor retail. There are two new tenants on the ground floor of this building: Shake Shack and Barry’s Bootcamp. Both places have unbelievable shakes and burgers. Okay, maybe Barry’s Bootcamp doesn’t have a burger. But they do offer delicious protein shakes that you are able to get pre/post workout or if you are just needing that extra “pick me up”.  Another new project in the area is the UC Health building on 100 Cook Street. Completed in 2021, this 88,000 square foot medical service building boasts all-glass architecture surrounded by heavy earth tones. The buildings warm, earthy design fits perfectly with the continued development in the Cherry Creek area.                                                                                                                                                                     

Nearby on 135 Adams Street, you’ll see a new-build featuring 37 boutique micro-apartments. Studio 135 is unique in comparison to other apartment buildings for multiple reasons. One of them being that each apartment is a different, unique theme. All units are designed with state-of-the-art appliances like Bosch kitchen appliances, Corian countertops, beautifully-engineered hardwood floors, individual heating and cooling units, floor-to-ceiling windows and extra storage space. Studio 135 provides residents with TV Zones, a wet bar, workstation, rooftop patio with a built-in BBQ and a fire feature to relax and hang out with friends and family. The micro-apartments range from 214 square feet to about 900 square feet.

Photo Credit: CoStar (240 Saint Paul)

One of the biggest developments in Cherry Creek North is 240 Saint Paul. 240 Saint Paul is a beautiful, contemporary Class A office building located in the heart of Cherry Creek North. Located right across from Soul Cycle, this stunning office building will be home to Equinox, Polestar, Parachute and more. This building is energy-efficient with a state-of-the-art HVAC system that circulates the maximum amount of outdoor airflow and utilized MERV-13 filters which are the highest form of air filtration recommended by the CDC. 240 Saint Paul will have a touchless entry system in the main entrances and the lobby. There will also be a fully-valeted lower level parking garage. Nearly 100% occupied, 240 Saint Paul is set to be completed in the Fall of 2021.

Proposed builds in the Cherry Creek area include 200 Clayton, located is right across from North Italian Restaurant. Broe Real Estate is planning an all glass eight-story building on the corner of 2nd and Clayton. This mixed-use building will include office space in addition to 5,600 square feet of ground-floor retail. The architect for this project is Beck Group.

Photo Credit: Denver Infill (200 Clayton)

235 Fillmore and 2nd and Adams are two sites that are also in the proposal process. 235 Fillmore is located right across from Spaces. BMC Group purchased this parking lot and is planning to build 90,000 square feet of office plus 9,000 square feet of ground-floor retail space.

Photo Credit: Denver Infill (235 Fillmore Street)

Cherry Creek is continuing to grow and develop into a neighborhood full of luxury apartments, condominiums, fabulous retail and restaurants and modern office buildings. Cherry Creek has been able to remain true to its charm in keeping the new developments unique but having a similar foundation remaining constant in Class A office buildings and condos/apartments, with a strong contemporary, warm, earthy feel

Colorado Real Estate News

Submarket Spotlight – RiNo/Platte River

Blog_RiNo Submarket Spotlight.jpg

Copied 10/26/2020

The River North Arts District (RiNo)/Platte River submarket was arguably one of the hottest submarkets in downtown Denver heading into 2020. Speculative development has reached record levels in multiple parts of the submarket, namely the up-and-coming RiNo neighborhood and ballpark area. 

Leasing:
The average daily asking rent has remained relatively flat, although concessions are likely becoming more prevalent. At over $42 per SF, Platte River has one of the more expensive offerings in the Denver metro by a sizable margin. The next highest average rent is in LoDo, which is more than a 10% discount from Platte River rates. Relative to the average office rent in Denver as a whole, Platte River rents are about 50% higher.

Construction:
The Colorado Governor deems jobs in the construction industry as essential, which has allowed developers to move forward with projects if they chose to do so. With abundant land and underdeveloped prime locations, Platte River will likely be a corridor of growth over the long haul. Since 2013, almost 400 acres of land sales have closed in the submarket totaling over $500 million in sales. 

Sales:
Investment activity has slowed considerably due to drastically altered conditions brought on by the pandemic. Once the dust settles, there could be opportunities for shrewd investors, especially considering the unprecedented level of speculative development occurring in Platte River. Investment activity in Platte River took a step back in 2019 after a record year for sales the previous year. Nevertheless, last year’s sale volume was the second-highest market of the cycle.

Featured New Development:
Rev360 on Brighton Boulevard – REV360 joins a thriving commercial redevelopment along Brighton Boulevard that is transforming the area – a rebirth that includes blocks of unique restaurants, galleries and shops. Its close proximity to the RTD rail station will make it an ideal spot for businesses drawing local talent from outside the metro area.

**Information provided by CoStar

Colorado Real Estate News

The “New Normal” or “Back to Normal” – How important is having physical space for your business?

Conference Room Meeting in Motion.jpeg

Copied 10/09/2020

After considerable reading, conversations with industry colleagues and clients, general observation on how companies have been adjusting to work this past year, and how they plan to continue working post-Covid, I have realized that there are three main pillars of why we go to the office to begin with, and why the companies who have decided to make working from home the “new normal” will eventually see decreased productivity and ultimately, less success.

Culture: 
Company culture has always been extremely important and we have seen the focus in office decisions pivot from looking solely at price per square foot to the more objective criteria that will impact who the company is and the brand for which they stand.

Human Interaction/Collaboration:
Human interaction is so important to our mental and physical health. As human beings, we thrive on the physical face-to-face connection which aids in stronger relationships, employee retention, increased productivity, innovation and work performance, which are all essential in creating a successful workforce.

Recruiting/Training:
Recruiting and training personnel is a crucial function of any business, and having the ability to successfully hire, retain and grow the right people for your company is best accomplished in a physical workspace that promotes engagement with employers as well as their fellow employees.

I have recently heard many of the ‘big tech’ companies discuss going to a permanent work from home model. It’s undeniable that the Covid-era has thrust us into unprecedented and challenging times, but I believe it’s also important for us to take pause and recognize that it will improve with time, and with the development of therapeutic treatments and vaccines. Most people will be eager to rush back to their workplace with a deeper appreciation of what it means to be in the office with their colleagues. The in-person collaboration, the chance encounters in the hallway or breakroom that turn into brilliant ideas, as well as the opportunity to have face-time with your managers all provide an invaluable experience. Strong company culture is essential to attract new talent and retain your employees, and it is nearly impossible to create and foster a desirable company culture via ZOOM calls and emails alone. 

While many landlords and retail property owners are currently facing financial strain, Denver’s fundamentals are still strong. I believe that in the next 12-18 months, the commercial real estate market will begin to come back as people more regularly return to the workplace, lunch with colleagues, meet clients for drinks after work – bringing us all a needed sense of the “back to normal” we all require to succeed, both personally and professionally. 

-Solveig Tschudi Lawerence, Senior Commercial Advisor