CREJ

Page 8 — Office & Industrial Quarterly — December 2021 www.crej.com OFFICE — OUTLOOK INTERIOR ARCHITECTURE acquilano.com 303.893.5355 acquilano.com / 303.893.5355 Locally owned and operated since 1986, Acquilano Inc. is celebrating its 35th year in business! Thank you Denver for your support over the years. We look forward to helping our community safely return to the workplaces we love. 9.10.2021_QuarterPg CREJ Ad.indd 1 12/6/2021 2:47:33 PM GriffisBlessing.com info@gb85.com 303.804.0123 Your full service property management specialists for 35 years and counting. We make it our business to manage yours Over 6 Million Square Feet under Commercial Management T he pandemic disrupted many sectors of commercial real estate – from retail to hotels and, of course, office space. While the theme of 2021 has been lingering uncertainty, 2022 is anticipated to be a game-changing year for the office sector. At the start of 2021 many compa- nies attempted to firm up plans for a summer or Labor Day return to the office. Unfortunately, the surge of the delta variant put those plans on hold. Now the goal post has been set for the first quarter of 2022. With this in mind, we already are start- ing to see signs of recovery in metro Denver’s office sector. Leasing activity in the third quar- ter totaled 1.4 million square feet in metro Denver, marking two straight quarters of the highest activity since the onset of the pandemic. Sublease availability decreased metrowide, falling 9.8% quarter over quarter. The decline was even greater downtown, which saw a 15% decrease in sublease availability. Nineteen office transactions occurred in the third quarter, post- ing a total volume of $1.1 billion, indicating strong investor confi- dence in the future of Denver’s office market. Downtown Denver set a new price per sf sale record with the sale of 1551 Wewatta. Investor confidence is supported by lease rates. Average asking rates are at historically high levels, exceeding $30 per sf full-service gross for the first time ever in metro Denver. Direct rental rates also are up with an increase of $2.45, or 8.4%, year over year. Part of what is driving the strong performance of Denver’s office market is the tech industry. This may come as a surprise to many people as tech firms have been some of the loudest propo- nents for remote work. At the same time, these firms have been scoop- ing up office space in markets across the country. The tech indus- try alone is responsible for leasing 1 million sf in metro Denver through the third quarter of this year, the front-runner among all industries. CBRE recently released its annual Tech-30 report, which looks at the impact of the tech industry on the office markets of North America’s 30 leading tech hubs. The report found that tech is leading a national rebound in U.S. office leasing activ- ity. Tech firms account for 22% of all U.S. office leasing activity in the second and third quarters, up from 17% in 2020. The share is even high- er in metro Denver, where tech has claimed 28.5% of all office leases executed through the third quarter of this year. The tech industry has fared partic- ularly well over the past two years, as the pandemic increased demand for services like e-commerce and those that promote the ability to work from home. The success of these businesses has triggered employment growth. High-tech employment is metro Denver grew by 11.5% over the past two years, ranking 11th among the top 30 tech hubs. Even before the pandemic, tech firms were expanding outside their headquarters markets in an effort to diversify their workforces. Since 2013, tech companies based in the San Francisco Bay Area have leased 2.1 million sf across Denver. Remote work has only accelerated this trend. While tech firms have led leasing activity in metro Denver and are contributing to our office sector’s rebound, they are not alone. Metro Denver’s office market remains well diversified with several other industries also active in recent leas- ing. Following technology’s 28.5% share of office leasing activity year to date, business services account for 13.5% of activity, followed by energy (12.5%) and financial services (11.2%). What all these industries are likely to have in common looking ahead Denver office sector is rebounding as year ends Chris Phenicie Senior vice president, Denver, CBRE Jim Havey/Havey Productions Nineteen office transactions occurred in the third quarter, posting a total volume of $1.1 billion, indicating strong investor confidence in the future of Denver’s office market. Downtown Denver set a new price per sf sale record with the sale of 1551 Wewatta. Please see Phenicie, Page 14