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Page 6 — Office Properties Quarterly — March 2017
Market Update
Over the last several years, Den-
ver has transformed from a
burgeoning market into one of
the premier cities in the coun-
try. It has received numerous
accolades including being named the
best place for business and careers
by Forbes. The city has recovered
extraordinarily well from the reces-
sion, experiencing substantial job
growth.
In the 12 months trailing November,
Denver employment grew by over 3.9
percent, one of the highest job growth
rates in the nation. This statistic
might seem counterintuitive due to
the perception that much of the city’s
economy and employment is tied
to the oil and gas industry. Despite
this perception, Denver actually has
the most diverse industry make-up
among nine major metropolitan sta-
tistical areas and is 21 percent more
diverse than in 2005.
This increased industry diversity
is directly correlated with two inter-
twined factors – population growth
and corporate migration to Denver.
Denver’s 9.9 percent population
growth between 2010 and 2015 is
third in the nation among the 20 larg-
est MSAs, with a significant portion
of these astonishing gains attributed
to millennials. Millennials account for
60 percent of metro Denver’s popula-
tion growth and over 21.4 percent of
the total population. Denver had a
net annual migration of 12,682 people
between the ages of 25 to 34 from
2009 to 2014, the highest in the coun-
try. Colorado, as a whole, is experienc-
ing a similar influx of millennials,
with the net migration from that age
bracket far outpacing all others.
This educated
group is enticed by
attributes beyond
the lifestyle, 300
days of sunshine
and outdoor activi-
ties the city offers.
Denver’s cost of
living index is low
compared to other
major metros and
compares favorably
to the top 10 cities
for millennials.
As Denver has
drawn a major influx of young,
educated and skilled labor, major
corporations have followed suit. Dur-
ing 2016 alone, companies such as
Comcast, Zillow, Charter Communi-
cations, Uber, Transamerica and BP
announced plans to relocate opera-
tions to or expand their current offic-
es in the Denver area. Additionally,
Amazon and Facebook have shown
noteworthy interest in the area and
see Denver as a significant growth
market.
Another major factor in corporate
movement to Denver involves the
city’s relative discount to other major
economic and tech hubs. The corpo-
rate tax rate in Colorado is a flat 4.63
percent, nearly 48 percent lower than
in NewYork and San Francisco. Addi-
tionally, average office rents in Den-
ver are $26.99, over 63 percent lower
than NewYork and San Francisco, 17
percent lower than Austin, Texas, and
12 percent lower than Seattle. The
access to an educated workforce and
the lower overhead makes Denver
the ideal location for a corporation to
open a major office.
With the influx of
young individuals
to the area and a
diverse set of major
corporate play-
ers, domestic and
foreign investors
alike have taken
a long position on
Denver commercial
real estate. Last
year saw the entry
of, among others,
Korean and Chil-
ean capital to the market, and many
domestic players began making Den-
ver a primary target market. Capital is
beginning to compare the market to
Pacific coastal areas such as San Fran-
cisco and Seattle rather than Austin
or Salt Lake City.
Even more alluring is the cost dis-
count on a cap rate basis Denver
provides compared to the coastal
markets.With in-place cap rates 75
to 100 basis points higher in Denver,
investors see opportunity to acquire
quality real estate
in a significant,
yet still expanding,
market.
For the afore-
mentioned reasons,
development activ-
ity has increased
significantly, espe-
cially downtown.
Capital is excited
by Denver’s popula-
tion expansion and
corporate presence
in the area. Over
54 percent of the
buildings in the central business dis-
trict were delivered in the ’80s, with
little development over the last 25
years. Developers see the lack of new
product and extensive corporate user
interest as significant demand drivers
for new developments.
In addition, unlike major cit-
ies such as San Francisco and Los
Angeles, there are still major growth
opportunities in Denver from a geo-
graphic perspective. River North is the
Blending the Generations
Experts in Design Mixology
Tenant Planning Services
1660 Lincoln St, Ste100, Denver, CO 80264
303.861.4800 l
Contact us to learn more
Peter Merrion
Director, HFF,
Denver
Jacob P. Bock
Analyst, HFF,
Denver
Mark B. Katz
Senior managing
director, co-head,
HFF, Denver
HFF Research, Moody’s Analytics