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Page 4 — Office Properties Quarterly — March 2017
Over the last few years, Den-
ver’s office property market-
place has been bolstered by
strong hiring in the metro’s
primary office-using sec-
tors, which enabled vacancy to
hover near a decade low by midyear
2016. By year’s end, local employers
added 47,900 workers to payrolls,
10,000 of which were office-using
positions.
The office market will continue
to improve in 2017 as firms expand
into larger spaces and hiring in pri-
mary office-using sectors remains
stable. This year, area employers
will increase the Denver workforce
by 2.8 percent, or 41,500 employees.
This includes 10,000 office-using
positions, which will help offset a
robust development pipeline.
In 2016, new supply encountered
high demand throughout the Den-
ver metropolis with companies
including Comcast and Agrium
signing leases at speculative office
projects. Comcast announced that
it would move 1,000 workers into
a 212,000-square-foot building in
Centennial this year, while Agrium
moved forward with plans to con-
solidate its U.S. headquarters into
a 120,000-sf space in Loveland. One
of the largest projects completed in
2016 was the 127,000-sf FirstBank
headquarters in Lakewood. Overall,
by year’s end, builders had deliv-
ered 960,000 sf of office space to the
Denver metro area.
Developers, encouraged by several
years of relatively stable vacancy
levels and a healthy job market,
will move forward
with a number of
speculative office
projects this year
to address persist-
ing demand for
new space. Con-
struction will be
largely focused in
the downtown area
and along Inter-
state 25 through
the Denver Tech
Center, Green-
wood Village and
Centennial. Den-
ver’s commitment to providing an
expansive network of commuter rail
lines and alternative forms of trans-
portation has attracted residents
and companies to these areas.
By the end of 2017, deliveries are
projected to reach a cyclical high of
2.3 million sf of office space, a sig-
nificant increase from the previous
year.
In 2016, vacancy remained at a
historical low, ending the year at
14.6 percent. Heightened demand
for Class B/C office space dropped
the rate 40 basis points among this
asset class, while an influx of Class
A stock kept the overall vacancy
flat. The vacancy rate was lowest in
the midtown and northeast Den-
ver submarkets and highest in the
downtown submarket.
This year, healthy net absorption
will keep Denver’s office vacancy
low as completions reach their
cyclical peak; however, demand
will not outweigh the new supply.
For this reason, vacancy rates are
anticipated to rise 20 basis points in
2017 to 14.8 percent, remaining well
below the previous 10-year average.
Low vacancy last year supported
office property rent gains and
boosted the average asking rent to
$25.14 per sf, a 1.6 percent year-
over-year increase. The average ask-
ing rent growth for Class A office
space atrophied while average ask-
ing rents for Class B/C office space
surged.
In 2017, with vacancy hovering
near historical lows, the average
asking rent is forecast to rise 1.7
percent to $25.57 per sf.
Denver’s strengthening market
conditions in 2016 spurred buyer
interest in office assets, although
limited for-sale inventory hindered
transaction velocity. That said, buy-
ers targeted office properties in
southeast and southwest Denver,
along with assets in downtown and
west Denver.
Brian Smith
Vice president
investments,
Marcus &
Millichap, Denver
Market Update
Marcus & Millichap
Imagining new possibilities.
Creating lasting communities.
Commercial real estate with a proven past and future focus
MINNEAPOLIS DENVER
HFF DENVER
$4.7 BILLION IN 2016
$2.3 Billion
84 Debt Transactions
$2 Billion
39 Investment Sales Transactions
$385 Million*
6 Equity Placement Transactions
2016 YEAR-END HIGHLIGHTS
For investment sales, financing, distressed debt/REO, loan sales, equity recapitalization,
restructuring services or advisory services, contact HFF.
Eric Tupler
Debt & Equity
Placement
(303) 515-8001
Mark Katz
Commercial
Investment Sales
(303) 515-8093
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Multi-housing
Investment Sales
(303) 515-8010
Josh Simon
Debt & Equity
Placement
(303) 515-8002
Jules Sherwood
Commercial
Investment Sales
(303) 515-8027
Peter Merrion
Commercial
Investment Sales
(303) 515-8026
Brock Yaffe
Debt & Equity
Placement
(303) 515-8034
Leon McBroom
Debt & Equity
Placement
(303) 515-8008
Jeff Haag
Multi-housing
Investment Sales
(303) 515-8004
Kristian Lichtenfels
Debt & Equity
Placement
(303) 515-8007
Chad Murray
Commercial
Investment Sales
(303) 515-8025
Mark Williford
Commercial
Investment Sales
(303) 515-8032
*Equity is based on total capitalization.
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