Previous Page  21 / 32 Next Page
Show Menu
Previous Page 21 / 32 Next Page
Page Background

September 2017 — Office Properties Quarterly —

Page 21

Market Insights |



NAIOP Colorado—Where Deals Get Done™


















Visit our website a


to view the Mentor & Mentee Pairings for 2017!

Major DL Program Sponsor

Sustaining Sponsor

Wrap-Up Sponsor

Supporting Sponsors


s a commercial real estate bro-

ker for the past 19 years spe-

cializing in office leasing and

sales and a Denver native, I

have seen several boom times

as well as busts, but I have not seen

such a sustained period of prosperous

times as we are currently in right now.

Colorado has one of the most educated

populations in the country. Combining

high education with great weather and

a plethora of outdoor activities makes

the state an attractive place to live and


New employers are entering the Den-

ver metro market to capitalize on the

highly educated and savvy workforce.

At the same time, existing employers

are expanding operations and growing

their office space.The office market

is benefiting from job growth from a

diverse industry base, resulting in low


The question I am often asked is,

“How long will this market continue?”

My response is that now is the time to

position your assets and businesses for

long-term growth and stability.

Increased professional and indus-

trial diversification has allowed the

office market to withstand some of the

issues that were devastating in decades

past.When oil and gas prices recently

dropped, the office market was able to

offset these losses and remain strong

because of the influx of technology,

financial, health care, bioscience and

aerospace companies entering the

market.This diversified industry base

along with a thriving economy has

led to speculative office development

that is in full swing, with most proj-

ects concentrated in the lower central

business district with projects like the


40-story, Class AA

office tower current-

ly under construc-

tion at 1144 Fifteenth

St. by Hines and the

290,000-sf, 22-story

office tower at 1401

Lawrence St., devel-

oped by First Gulf.

Other development

in the downtown

market and the sub-

urban markets close

to light-rail stations

are in high demand.

Secondary markets like Cherry Creek

and emerging markets such as River

North have seen a significant amount

of new office construction relative to

their size.

One of the drivers for the spec office

development is a “flight to quality”

from tenants. Employers are competing

for educated employees and the office

space they occupy often is a huge sell-

ing point to attract talent.The profes-

sional workforce, which consists of the

millennial generation as well as older

generations, wants more of an experi-

ential work life.They want to live, work

and play in the same areas.That is why

so many new projects have a mixed-

use component or are within close

proximity to amenities to enhance the

work-life balance.

Suburban office developments such

asVillage Center Station I and II and

One Belleview Station are prime exam-

ples of transit-oriented developments

that offer excellent amenities, includ-

ing close proximity to mass transit as

well as being walkable to lots of restau-

rants and entertainment.

On the flip side of the flight-to-

quality trend are tenants who are tired

of continual rent increases year after

year, who are deciding to purchase

their office space rather than lease it.

Purchasing is a great option for busi-

nesses that remain relatively steady

year over year and don’t fluctuate in

size dramatically. Lending institutions

like to make loans on owner-occupied

real estate and offer very competitive

programs for this type of buyer.

Certain segments of the office market

– such as the office mansions in Capitol

Hill and the smaller office buildings in

areas like Littleton, Lakewood, Arvada

and Highlands Ranch – have greatly

benefited from office users looking to

mitigate rising lease rates and take

advantage of the benefit of owner-

ship.These types of buyers tend to be

professional companies such as insur-

ance agents, attorneys and medical

practitioners. Purchasing is not only

beneficial because of the equity cre-

ated through principal reduction and

appreciation, but also because it offers

benefits from depreciating the asset as

well as the tax deduction of the mort-

gage interest. Furthermore, these prop-

erties can serve as profitable passive

investment properties upon retirement.

Many of my clients sell their business

after structuring long-term leases,

while holding onto the real estate as

an income-producing property during


Although the office market is thriv-

How to take advantage of our strong market

Eric Shaw

Senior adviser,

Pinnacle Real

Estate Advisors,


Please see ‘Shaw’ Page 30

The asking price per square foot for owner-occupied real estate in the Denver metro

market over the past decade, as defined by CoStar.