CREJ

Page 2 — Office & Industrial Quarterly — December 2021 www.crej.com Letter from the Editor B efore we saw the world change in the face of the pan- demic, market statistics often were compared to previous economic challenges. The burst of the dot-com bubble and the Great Recession were the two flash points often referenced when discuss- ing past cycles and trying times.While both of those had devastating impacts on the commercial real estate world, the speed at which COVID-19 liter- ally and figuratively turned off the lights on office properties put most office real estate profession- als in uncharted territory. There was a sense of free fall with no clear bottom in sight. However, recent activity seems to be signaling that we may have hit the bottom in the middle of the year, and the office sector is now starting to dust itself off. In Denver, the third quarter saw the strongest leasing demand since the fourth quarter of 2019, availabil- ity plateaued and the overall supply of available sublease space fell to its lowest level since the third quarter of 2020, according to a third-quarter Savills Denver office market report. The national outlook for strong new absorption in 2022 seems positive as well, according to a recent report from NAIOP. While the free fall may be behind us, the time it will take to recover is undetermined. The Savills report may have said it best, “While economic conditions have improved across the Denver region, the long-term impact of work-from-home policies may stunt a rapid recovery in the Denver office market.” The pandemic recovery is different for office than almost all other parts of the commercial real estate world. As the articles beginning on Page 19 can attest, industrial hardly skipped a beat. The same can be said about multifamily and much of health care. It seems even retail had a softer land- ing as many retailers struggling pre- pandemic left the market and those remaining have adapted and know the path forward. But in the office sector, debates still continue regarding how remote and hybrid work will be incorporated into long-term company growth. According to the NAIOP report, office access data collected by Kastle Systems across 10 large metropolitan areas indicated an average office utilization rate of 36.8% in late October as compared to near- full utilization in early March 2020. Clearly, there’s still a long way to go, and answers about who will be using that space and how remain to be seen. With new construction remaining tight, sublease space decreasing and a new year with new company objec- tives ahead of us, there’s reason the believe 2022 will answer many of our questions about the ways in which Coloradans will chose to work. Michelle Z. Askeland maskeland@crej.com 303-623-1148, Ext.104 Surviving the office free fall Denver office market shows signs of growth again Andy Cullen Northern Colorado office market remains resilient Ron Kuehl and Jamie Globelnik Denver office sector is rebounding as year ends Chris Phenicie User-occupied building acquisitions on the rise John Becker Expect greener, wellness-focused office buildings Stephanie Lawrence Contents 4 6 8 10 12 Bulk distribution and last-mile facilities target Denver Todd Witty State of the market: Industrial activity in Denver M. Chandler Lisle Experts wonder: How low can cap rates go? Larry Thiel and Carmon Hicks Outdoor storage users feeling the NIMBY pinch Alexander F. Becker Zoning changes prompt new owner consortium Ryan Searle The Rocky Montain region’s case for industrial Pat Blasdell and John Layton Last-mile delivery primes activity beyond Denver Mindy Rietz 2021’s industrial revolution brings about evolution Tim Morris Construction: Looking back for a view of the future Chris Alcorn Colorado remains leader for cannabis measures Bryan McLaren OFFICE INDUSTRIAL 19 20 22 24 26 27 28 29 30 31