Office Properties

15 / 28

July 2015 — Office Properties Quarterly — Page 15
While tech-leasing activity is very
active, the sector is a growing mar-
ket, rather than market leader in
terms of square footage, and there
are several submarkets.
The Boulder market is home to
the full spectrum of tech compa-
nies, from startups to mature, legacy
companies, while the northwest
market – Broomfield, Louisville and
Westminster – houses companies
that want to be near Boulder, but
require a larger footprint, accord-
ing to the CBRE report. Colorado
Springs is home to small startups
and other industries involved in
high-tech manufacturing and aero-
space and defense. And Fort Collins,
with strong connections to Colorado
State University, cultivates startups
in software, biotechnology and ener-
gy sectors.
Boulder, which is known for its
entrepreneurial environment with
a deep-rooted investor commu-
nity, sees the most clustering of
tech companies of all the submar-
kets, which can be exemplified by
Google’s decision stay in Boulder
when the company needed to
expand. Google recently signed off
on a $100 million design-build cam-
pus that will be located at 30th and
Pearl streets.
While Boulder is bursting at its
seams, one of the major real estate
trends the tech industry is witness-
ing is a shift in desired location that
is moving to Denver, specifically in
the central business district and
Lower Downtown areas.
“The CBD will see a bigger foot-
print next year and the year after
that from tech tenants,” said Oster-
mick. “There is such an interest in
being downtown and being around
all the amenities and the tech cul-
ture that is evolving there. So that
2 percent [on the graphic], which
seems really small right now, will
absolutely go up.”
Tech companies like to cluster
for a variety of reasons, but one of
the main reasons is for access to a
strong pool of talent. The industry
is waging a war for talent, which
makes access to Denver’s thriving
employee pool all the more appeal-
ing.
“One of the trends that we’re
seeing is companies choosing to
bifurcate offices in order to access
that talent,” said Alex Hammerstein,
senior vice president, CBRE. “Where-
as before, companies were leery of
splitting operations and upsetting
the culture that they built, now they
are looking at where they need to be
in order to capture that labor pool.
And so we’re seeing a trend, specifi-
cally with Boulder companies that
have been in Boulder for a while,
looking at LoDo as an optimal place
to have a second location.”
In terms of recruitment, the Den-
ver area offers the convenience
and cost savings associated with
its mass transit system, the CBRE
report states. The transit system
is helping widen the metro area.
“Along with increased leasing activ-
ity downtown, tech firms, particu-
larly startups, are also spreading
into emerging markets like River
North, Golden Triangle and South
Broadway,” the report states.
Why Colorado
Colorado is the second-most edu-
cated state and ranks second for
in-migration of millennials from
2009 to 2012, enhancing the appeal
for new tech companies to locate in
the state. “I think it’s a labor issue
to have access to a young, vibrant,
educated work-
force and then
also access to the
investor commu-
nity in Colorado,”
said Hammer-
stein. “It’s a very
appealing place
to locate a busi-
ness.”
In addition to
attracting tech-
savvy talent, it is
also fairly easy
to get people to
relocate to Colo-
rado, said Kevin
Foltz, manag-
ing director for
Forum Real Estate
Group. “I think
they can certainly
attract the best
and the brightest
and bring them to
Colorado easily.”
Also Colorado is
relatively afford-
able compared
with other tech
hubs around the
nation. “We have
a very educated
work force, but
it’s not quite the
scale of those
markets like New
York, Chicago or
Silicon Valley, and
it’s certainly a
lower-cost mar-
ket to operate
in,” Hammerstein
said.
The Colorado
Technology Asso-
ciation did a cost
analysis compar-
ing Denver and
San Francisco.
“A Series A financing of $5 million
in San Francisco is equivalent to a
Series A financing in Colorado of $3
million,” said Mitisek. “So when you
add up real estate taxes, overhead,
incentives and cost of doing busi-
ness, it’s almost 65 cents on the dol-
lar cheaper to build an equivalent
enterprise.”
In the CBRE report, Denver is listed
as having the 13th highest office
lease rates of fourth-quarter 2014,
with an average asking office lease
rate of $23.15 per sf full service
gross, which is 37 percent of San
Francisco’s overall asking rate.
Fostering a lot of startup compa-
nies drawn to this lower-cost envi-
ronment does make for a more fluid
community due to acquisitions.
“There’s always a give and take but,
on trend, we’re a net in-migrator of
tech companies,” said Ostermick.s
The history and future of Google’s
regional headquarters in Boulder
exemplify many of the tech trends
that are defining Colorado’s real estate
landscape.The company originally
began as a startup, SketchUp, which
was then acquired by Google.The
company’s footprint grew to include
more than 300 employees focusing
on product development for Google.
Once the offices began to feel a space
crunch, the company worked hard to
find a way to grow, yet stay in the city.
“Boulder is a wonderful commu-
nity for us and our employees,” said
Andrew Silvestri, public policy and
government relations manager for
Google’s central region. “We’ve had
a positive relationship with the city,
the university, the local tech scene,
business leaders, K-12 schools and
local charities.We love the idealism of
Boulder, the lifestyle, the vibrant entre-
preneurial culture and the passion
around discussions.”
While Google is a multinational
company, the regional headquarters
employs Boulderites, first and fore-
most, said Collin Kemberlin, AIA, LEED
AP, principal withTryba Architects.
Maintaining the physical Boulder
address and presence in the commu-
nity while still having the opportunity
to grow and expand was an important
factor for staying in the city limits.
This worked out well for Forum Real
Estate Group, the project’s master
developer, owner and executer, which
recognized the potential possibili-
ties for the 4.7 acres of land. “Being
in Boulder, with the growing tech
community, we knew that large floor-
plate office space was at a premium
and, really, nonexistent, especially in
the central business core,” said Kevin
Foltz, managing director for Forum
Real Estate Group. “With Boulder being
such a hotbed for tech companies,
whether it’s Google or many others,
that are growing and want to grow
in Boulder, we knew that this type of
office space was going to be highly
sought after.”
Foltz teamed up withTryba Archi-
tects to begin the development plans
before Google signed on. From the
beginning,Tryba wanted to make the
campus emulate a college campus
rather than a traditional office cam-
pus, said Kemberlin.The campus
is designed to encourage people to
gather and work around a common
space that highlights different levels of
physical and visual connectedness to
each other and nature, which is a hall-
mark of creative places, he said.
“Companies like Google, who are
leading the charge of innovative,
creative workspaces, are realizing
that there are fundamental positive
impacts to their bottom line, their
operations, their employee health and
wellness and retention, by embracing
these ideas,” he said.
The company has access to a strong
talent pool, thanks to its relation-
ship with the University of Colorado,
as well as its proximity to other tech
companies located in Boulder and
Denver. Google also uses many of the
recruitment strategies tech companies
are known for, including flexibility
in office space, work schedules and
accommodations to support a wide
variety of people and lifestyles, said
Kemberlin.These are all attributed
more and more to the millennial
workforce, the target generation for
tech employees.
Another strong recruiting tactic is
being environmentally conscious.The
new campus is located near Boul-
der’s public transit hub, and is being
designed to meet LEED Gold and well-
building standards, he said.
“I think the tech sector tends to be
forward-thinking, so they’re looking
further down the road than maybe
some other industries,” said Foltz. “And
obviously part of that is a dedication
to sustainability, green buildings and
smart buildings.”
Courtesy CBRE
Colorado’s technology footprint broken out by submarket concentrations