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Page 20 — Office Properties Quarterly — December 2016
T he remarkable Denver econ-
omy has been extensively
charted over the past several
years, with chronicles devot-
ed to the influx of capital
and talent. In 2016, for the second
year running, Forbes named Denver
as the best place for business and
careers in the U.S. and attributed
this recognition to the city’s reputa-
tion as a hot spot for millennial tal-
ent.
Denver’s boom has strengthened
its commercial real estate market –
from office and industrial to retail
and multifamily – buoyed by a 3.6
percent unemployment rate, the
lowest in the U.S., according the U.S.
Bureau of Labor Statistics.
Today, over 75,000 people live in
downtown Denver alone. Job num-
bers are at a historic high and are
expanding across almost the entire
spectrum – from leisure and hospi-
tality to construction to professional
and business services. The startup
community is building and tech
employment is growing; Moody’s
reports that 7.9 percent of the total
jobs in Denver are in the core tech
sector.
And all this growth has led to
infrastructure improvements. The
city has a dynamic and expanding
transportation system (FasTracks)
that recently opened a direct train
line from Denver International
Airport to Union Station, not only
connecting the airport with the
central business district, but also to
the city’s massive light-rail system
already in place.
This multibillion-dollar transit
expansion is one of the hallmarks of
this city’s exponen-
tial growth. Com-
panies and inves-
tors alike have
taken note of the
investment Denver
has made in itself,
creating ease with
which people can
and will navigate
the entire metro
area.
The hub of this
massive transpor-
tation system is
downtown Denver.
Currently, 88 total miles of rail con-
nect into downtown Denver. This
year alone brought transit from
DIA, Westminster, Wheat Ridge and
Aurora, all accessing the center of
downtown Denver. The efficiency
and mobility has permitted firms
– for the first time in my 30-year
career – to move from Boulder to
Denver. Additionally, the abundance
of labor provides employees the
ability to live, work and commute
into Denver’s CBD.
Denver’s sustained prosperity has
mitigated the impact of the slow-
down of one of its largest industries
– oil and gas.
Rising oil and natural gas prices
traditionally cultivated an active
job market in our city but there are
changes afoot. The plunge in oil pric-
es of the world’s major energy cities
has had a net-negative effect on the
world’s largest energy-producing
markets. As a group, these markets
are experiencing slower economic
growth, slower job creation and
weaker office sector fundamentals.
While office markets such as
Moscow; Aberdeen, Scotland; Cal-
gary, Canada; and Houston have
faced significant headwinds due to
the oil shock, our report “Occupier
Research Report, Oil: the Commod-
ity We Love to Hate,” indicates that
office markets in energy-centric
metros with more diverse econo-
mies, such as Denver and Dallas,
have held up much better in the
face of lowered pricing.
In the United States, which is
poised to surpass Saudi Arabia as
the top-producing country globally,
oil-centric markets led by Houston
and Oklahoma City register some of
the highest office vacancy rates in
the nation.
Denver has seen its office vacancy
rate improve from 12.8 percent mid-
2014 (when oil prices were booming)
to 11.4 percent mid-2016 (post-oil-
price correction). Since mid-2014,
the Denver office market has
absorbed 3.6 million square feet and
has seen rents grow by 13 percent.
Denver’s oil and gas industry
accounts for approximately 23 per-
cent of the office market within the
approximate 28 million sf of total
office space in the Denver CBD.
Nicholas J.
Pavlakovich
Vice chairman,
Cushman &
Wakefield, Denver
Market Trends
The multibillion-dollar transit expansion of FasTracks is one of the hallmarks of Denver’s
exponential growth.