CREJ

Page 2 — Office & Industrial Quarterly — June 2021 www.crej.com Letter from the Editor I n personal and professional conversations, I’m amazed at how frequently the topic of construction costs come up. While up until this issue, my references have been mainly anec- dotal, several articles within this issue address the topic, which is causing headaches for both office and industrial properties. Office tenant improvement proj- ects are key to wooing tenants back into the workplace, as several work- place trend articles discuss within this issue. However, getting the timing right and the costs in line for projects requires a lot of careful work – as well as quick deci- sion-making. According to Nick Groeger with Taurus Build- ers, over a three-week period of contract negotiations, one ten- ant improvement project saw the budget increase 3% for metal stud framing, 9% for plumbing, 7% for HVAC and 5% for electrical, he writes on Page 10. Meanwhile, rather than slow- ing things down on the industrial side, rising construction costs are prompting developers and investors to be more aggressive in order to expedite projects, Cara Stamp with Cushman & Wakefield writes on Page 28. According to the two articles, prices have jumped for all of the following materials: • Lumber, • Steel/hot-rolled coil, • Copper, • Electrical wire, • Gypsum and • Aluminum. Both articles share the view that the cost of these raw materials, and the overall cost of projects, won’t be coming down anytime soon. Stamp references a report from Alcorn Construction that actually predicts prices may rise another 5% to 6% over the course of the year. However, it’s not all doom and gloom. This issue marks a notice- ably more optimistic tone when discussing the future office market. Several articles stress that now is the time for tenants who have been hesitant to commit to space to do so, or lose out on the benefits cur- rently being offered. The sentiment seems to be that office absorption and unemployment should be back to pre-pandemic levels by the end of this year or early 2022. Consider- ing the roller coaster of the past 17 months and the historical timelines for past economic recoveries, it’s a positive outlook indeed. Michelle Z. Askeland maskeland@crej.com 303-623-1148, Ext.104 Rising construction costs boost decision-making urgency OFFICE 4 6 8 10 12 Boulder rebounds as employees head back work Beau Gamble How growing biz applications impact owners Melissa Wylie Strategies to address newly remeasured assets Becky Hanner Timing is everything in office construction right now Nick Groeger Design-bid-build project advantages & challenges Laura Kingfisher 14 14 15 15 23 24 26 28 Recent sales activity highlights Colorado’s robustness Larry Thiel and Carmon Hicks Denver sees record-high deliveries, strong metrics Sam Dragan Financing themes revealed by common questions Paul Donahue and Cooper Williams Will rising construction costs impede development? Cara Stamp 30 32 34 36 INDUSTRIAL Contents 3 considerations for planning your office return Amy Aldridge For hybrid work plans, no 2 companies are the same Martin Goldstein Foundations of high- performing placemaking Emmy So and Adam Guli Wellness-based design and the future of real estate Rami Vagal E-commerce, migration fuel metro industrial market Justin Rayburn and Lowrey Burnett Don’t turn a blind eye to what tenants are storing Patty Gage and Mary Hashem Industrial construction along the Front Range Dan Feagans Data centers are opting to use precast concrete Rachel Schiebout