Page 14
— Office Properties Quarterly — September 2016
D
enver continues to be one
of the hottest markets in
the country for popula-
tion, housing and economic
growth. The city also boasts
the fifth-highest millennial popu-
lation in the United States. Young,
educated workers are flocking to
the state, helping to attract new
companies and grow existing busi-
nesses. The Colorado Office of Eco-
nomic Development and Interna-
tional Trade reports that since 2013,
the state has attracted or retained
111 companies and 27,076 jobs.
It’s not surprising that the office
lease market has followed suit.
Vacancy rates have declined for
more than four years running. Since
2012, Lower Downtown has led the
way in total net absorption, add-
ing 843,000 square feet of occupied
space through the second quarter.
Market factors have combined to
create record-high lease rates in the
central business district and all sub-
markets. Rates have climbed to an
average of $40.06 per sf, 9.7 percent
higher than first-quarter 2015. And
rents for trophies (ultra-premium
office towers within the Denver
skyline) are even pricier at $42.83
per sf.
Is there any rental rate relief in
sight?
JLL’s data indicates that new con-
struction coming on line is finally
slowing vacancy compression. The
3.3 million sf under construction in
Denver represents
a 10-year high.
Though only 23.3
percent is leased,
builders remain
optimistic as Den-
ver’s diversified
tenant base con-
tinues to tighten
fundamentals this
year. In particular,
Denver has suc-
cessfully fostered a
culture of innova-
tion that’s attract-
ing Silicon Valley-
style startups.
That said, we expect all this new
construction and competition from
subleases ultimately is going to
impact the rate at which we see
new leases. Owners likely will have
to lower rates or offer more conces-
sions to fill the buildings.
I work with companies of all sizes
and the most common question
across the board of late is: What can
we do in the near term to secure a
great space that’s going to help us
attract (and keep) the best of the
millennial talent flooding to the
area without breaking the bank in
the current market?
Here are five strategies for maxi-
mizing the efficiency and effective-
ness of an office environment to
attract and retain talent, and miti-
gate the effects of paying top-cycle
rates.
Be flexible.
Small or quickly grow-
ing companies should be as agile as
the people they are trying to attract.
If your business allows it, con-
sider alternatives to the traditional
long-term lease (i.e., a sublease
with more flexible terms). The sus-
tained depression in the oil and gas
market is slowly freeing up more
space for subleasing. We recently
represented growing tech company
CommercialTribe in just such a
deal, helping it negotiate excellent
sublease terms that allowed the
company to customize its space to
support its brand and attraction/
retention strategy.
Maximize the efficiency of the
square footage.
Once the ideal loca-
tion is found, avoid sticker shock in
the current market by maximizing
the efficiency of the square foot-
age. That ultimately might mean a
slightly smaller per-person square
footage allocation, but if the space
is planned appropriately, the office
can be more functional for employ-
ees and the bottom line.
Consider free addressing for
employees.
Instead of assigning
each employee a set workstation
(and square footage), consider
empowering employees to make
their own choices about where they
work within the office, depend-
ing on the task. An employee may
take her laptop to the quiet area for
heads-down work in the morning,
but switch to a more social lounge-
type space in the afternoon for col-
laborative work.
Look for buildings with built-in com-
mon space amenities.
In order to be
competitive, many older buildings
in Denver are renovating to meet
the demands of today’s tenants.
Think: common rooftop patios, res-
taurants, Wi-Fi throughout, gyms,
all-hands meeting areas, etc. Take
a page from the Google playbook.
Think about the amenities that will
make people want to come into the
office and stay there.
The Wells Fargo building, for
example, recently completed com-
mon area and gym renovations
as well as a lobby renovation that
includes a massive video art instal-
lation to give the space an edge and
attract a new generation of tenants.
Future-proof the office space.
Work
with a knowledgeable broker who
can help secure lease terms that
will allow the company to grow
in the space, should it so choose.
Negotiate first right of refusal on
adjacent spaces to have the option
of expanding within the current
space, and make sure the layout is
conducive to an efficient expan-
sion. For example, a recent identity
security client was able to strate-
gically locate the break room and
boardroom so that when the firm
expands, the room will support the
added employees and there will
be no need to rework high-cost
infrastructure.
s
Cathy Harris
Vice president
of project and
development
services, JLL,
Denver
®
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