CREJ

27 / 32

September 2017 — Office Properties Quarterly — Page 27
Silverstein
ness services, government, finan-
cial activities and information.
These four supersectors represent
nearly 43 percent of metro Denver’s
employment and were responsible
for the addition of about 10,600
workers during the first half of this
year, or 31 percent of the employ-
ment growth. Even with continued
employment growth, the office
vacancy rate is expected to increase
in 2017 as newly constructed office
space comes on the market.
Industrial users are concentrated
in transportation/warehousing/utili-
ties, manufacturing, wholesale trade,
and natural resources/construction,
representing about 20 percent of
total employment and 13 percent of
new job growth. While the indus-
trial vacancy rate also is expected to
increase in 2017, continued demand
for logistics space will keep the mar-
ket healthy.
Retail users are found in retail
trade, leisure and hospitality, and
other services. These three super-
sectors represent 25 percent of the
region’s employment and were
responsible for 32 percent of the
employment growth, representing
the addition of 11,200 jobs. Limited
new retail construction is ensuring
that the market remains stable as
space is repurposed for uses other
than traditional retail trade. s
of office space has lowered office
vacancy 50 basis points during the
last four quarters to 14.7 percent,
the lowest rate this cycle.
Unlike increases in national
urban vacancy, downtown Denver
recorded a 100-basis-point decrease
in the rate since last June. Suburban
demand also remains strong as sev-
eral submarkets in the suburbs post-
ed declines greater than 100 basis
points. These submarkets include
North Denver, Parker/Castle Rock
and West Denver.
Tightening vacancy metrowide
and demand for quality office space
has sparked a rise in office con-
struction, with completions more
than doubling from the prior year.
The majority of deliveries will be
located within the suburbs along
major transit routes as workers seek
shorter commute times and walk-
able access to public transportation.
To meet the public transport needs
of residents, three FasTrack lines
have opened since 2016, along with
the Flatiron Flyer Rapid Bus Tran-
sit Service, connecting numerous
neighborhoods and expanding com-
muting options. This year, nearly
a third of all completions will be
located within a half-mile of the E,
F and R lines in southeast Denver,
highlighting demand moving into
the suburbs. Notable deliveries in
the area include the 227,000-square-
foot Panorama Corporate Center and
the 212,000-sf Inova Dry Creek 1,
which are both fully leased and were
completed during the first half of
the year.
The heightened pace of con-
struction will not hamper vacancy
improvement this year as demand
keeps up with supply. Vacancy will
tick down 10 basis points to 14.9
percent by year end, contributing
to a modest increase in the average
asking rent. s
Smith
tries. Potential tax reforms to incen-
tivize companies to hire locally in
addition to policies limiting the abil-
ity for foreign workers to obtain visas
could mean even more competition
for the best domestic talent.
Many companies are factoring in
real estate in their quest to differenti-
ate from competitors and attract the
best employees. Some companies are
willing to take on higher lease rates
in exchange for being downtown or
in a similarly urban environment,
something they can leverage with job
candidates.
Other companies are taking a cam-
pus approach, like Charles Schwab,
which recently opened a new Colo-
rado office in Lone Tree that can
accommodate up to 4,000 workers.
The campus, which sits on 47 acres,
offers access to impressive perks like
rooftop gardens, a cafeteria and high-
tech workspaces.
From a bird’s eye view, the market
is another important part of the real
estate equation. As mentioned at the
beginning of this article, part of the
reason why financial services firms
are targeting Denver is so that they
can offer their employees a lower
cost of living and improved quality of
life versus coastal cities.
As Denver continues to claim a
larger share of the financial services
industry pie, the impact of these
challenges will reverberate deeper in
our city. Financial services companies
would be wise to factor in the role
their real estate can play in helping
them achieve their business objec-
tives in an ever-changing world. s
Cox