CREJ

Page 4 — Office & Industrial Quarterly — June 2021 www.crej.com OFFICE — MARKET UPDATE P re-pandemic, nearly 70,000 commuters came to Boulder each workday. COVID-19 forced remote-work strate- gies, which, in turn, have had a significant impact on Boul- der’s economy. As the vaccine is being distributed and as infection rates begin to drop, portions of the workforce are beginning to return to their places of business. For the last 12 months the majority of com- panies have been evaluating, and continue to evaluate, the best strat- egies that encompass productivity, culture, retention, recruitment and, of course, safety. With that in mind, what does that mean for the health of Boulder’s office space as we head into the second half of 2021? On a positive note, the phone is ring- ing again in brokerage offices and people seem to be ready to go back to the office. To restate the obvious, Boulder sits in a unique marketplace where developing is difficult and the supply chain is constrained. This historically has paved the way for Boulder’s economy to recover faster than the rest of Colorado and, in turn, kept vacancies at a lower rate and lease rates stable. In order to really understand where the office market is heading, let’s start with what we do know. According to Leeds School of Busi- ness, at the end of the first quar- ter, total employment in Boulder was down to 185,700, compared with 200,700 in first-quarter 2020. Unemployment more than doubled from first-quarter 2020 (2.4%) to first-quarter 2021 (5.7%), and office vacancies jumped to almost 16% year-end 2020 from 9% year-end 2019. Every industry type is struggling to fill open jobs and the majority of compa- nies polled by the Boulder Chamber of Commerce in May indicated only 50% of employees are currently back in the office. While the major- ity want to get back to the office, in all likelihood, the hybrid model is here to stay. While that information can be somewhat bleak, remember we are talking about Boulder, a city that some might say operates in a bubble. The reasons many compa- nies want to work and be in Boulder have not changed with the pan- demic – i.e., it is located at the base of the Flatirons, with hiking trails five minutes away, some of the country’s best road and mountain bike trails, world-class skiing less than two hours away; it is home of the University of Colorado; and it offers a diversified economy that includes start-ups to Fortune 500s and the list goes on. Boulder will remain one of the country’s best places to live, work and play. For those reasons, there is good news about Boulder’s office space. In April, Apple announced it was hiring an additional 700 employees to its Boulder engineering team and Google announced it intended to double its workforce. On the small- er scale, companies like Work In Progress, Trade Desk, Tecomet and Longpath expanded their footprints. Colorado (including Boulder in large part thanks to University of Colo- rado’s reputation as a world-class research institution) is now one of the country’s emerging life science markets. While this use does not typically occupy true office space, the growth of this industry cer- tainly will attract other companies supporting those life science com- panies. Since existing life science space is very limited, the demand for smaller office space and con- verting to life science has increased dramatically for those landlords in a position to make that pivot. The end of the first-quarter indi- cated office vacancy was slightly increasing and rates were slightly decreasing. The market is not expected to see any significant changes to this trend until the mid- dle of 2022, when companies will have returned to the office and are able to fully evaluate what a hybrid model will look like. While Zoom meetings might be convenient at times, we don’t always love them. Humans crave connection and that connection cannot always be made through a computer screen. If you combine that human desire data point with the quality of life Boul- der offers it certainly bodes well for a strong office market recovering to pre-COVID-19 numbers or even bet- ter by year-end 2022. Consumer confidence cannot be overlooked when talking about the office market, and according to Leeds, 64% of the respondents believe the state economy will return to positive growth by year- end. Historically Boulder always has outperformed the rest of the state in the recovery process, and I don’t think this time will be any different. s beaugamble@deancallan.com Boulder rebounds as employees head back to work Beau Gamble Broker associate, Dean Callan & Co. If you combine that human desire data point with the quality of life Boulder offers it certainly bodes well for a strong office market recovering to pre-COVID-19 num- bers or even better by year-end 2022. 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