CREJ

Page 8 — Office & Industrial Quarterly — March 2022 www.crej.com OFFICE — MARKET TRENDS 1501 W. Mineral Ave. Medical Office Newly Renovated! Littleton, Colorado Class A MOB Opportunity Located in Southeast Littleton, 1501 W. Mineral Ave. provides close proximity to some of the region’s leading hospitals, including Littleton Adventist Hospital, UC Health and Children’s Hospital Colorado. Anchored by Colorado Eye Consultants/ Corneal Consultants of Colorado , this two- story Class A building is ideal for medical offices of all sizes. • Up to 20,000 SF for lease • Flexible floor plans • Highly visible signage • ADA compliant, full sprinkler system, updated HVAC and full building water filtration For inquiries, please contact: Dann Burke, CCIM (720) 528-6362 | daniel.burke@cbre.com Stephani Gaskins ( 720) 528-6346 | stephani.gaskins@cbre.com 1501 W. MINERAL AVE. COUNTY LINE RD. MINERAL AVE. S. BROADWAY T he appeal of working in Den- ver’s central business district is diminishing. Tenants have been migrating toward other submarkets of downtown Denver and out of downtown alto- gether. In a new-look world heavily altered by the pandemic, in some situations companies and workers have been forced and, in other situa- tions, have been drawn, from the CBD to suburban and uptown locations. Despite the notably consistent yearly increases of asking rents across Den- ver for the last decade, rates remained flat in 2021 at $39.70 per square foot full service. Feelings about safety and comfort in certain central neighbor- hoods, as well as lifestyle and work- place preferences, have changed sig- nificantly in recent years and especially since the pandemic began. Desires for walkability, open spaces, easier park- ing and work-from- home options have all been major driv- ers for the tenant migration through- out Denver. Even law firms, which typically leased expansive offices for their partners with lavish lobbies and couches, are opt- ing for more effi- cient layouts with smaller offices and shared spaces. The CBD, also once the marquee location for the oil and gas industry, is seeing tenants jump ship for smaller spaces. A major shift in priorities for busi- nesses and workers is occurring, and the office landscape in the city is conse- quently transforming to incorporate these new preferences. Almost all new development in downtown Denver is in the Central Platte Valley and River North. For perspective, there has been no new construction in the CBD since 2019, with only one 59,000-sf property cur- rently under construction. In the River North and Platte River submarkets, 769,000 sf of office space is under construction and slated for delivery later this year and in 2023. Vacancy percentages and time frames in the CBD also stand out among the other submarkets. CBD vacancy is the high- est across metro Denver at 23.9%, with suites in the submarket having an average vacancy time of 18.5 months. Suites in Lower Downtown, on the other hand, have an average vacancy time of 12.4 months, with Denver as a whole seeing an average time of 13.6 months. Outside of downtown, it was south Denver that was the frontrun- ner for total space leased in 2021. The submarket saw 11 transactions that each totaled over 50,000 sf last year. Newer Denver industries, like aero- space, defense and bio/life sciences, continue to forego downtown and are occupying space in the southeast, Aurora and Broomfield markets. Yok Space Systems leased 138,000 sf at 6060 S.Willow in the Denver Tech Center, a newly renovated build- ing with inviting outdoor space, a fitness center and electric vehicle charging stations. Tenants are start- ing to ask questions about building safety, whether the HVAC system was recently installed or renovated, and how the building is conducive to envi- ronmental and personal health con- cerns. LEED certifications will no lon- ger win you more tenants as a land- lord since they have become standard practice in construction, so as a result, not having these certifications will cause you to lose tenants.With much less new construction in CBD, new amenities oriented around personal and environmental health are harder to come by. For example, only 29% of office buildings in the CBD are LEED certified. Another trend happening across the market is downsizing into more mod- est, close-to-home offices. Tastes have changed, and tenants are less willing to put up with the current high rates of, for example, $26 operating expense triple net in the CBD for product built in the 1970s and ’80s. Downtown was the marquee location for law firms, and the oil and gas industry and is losing a few of the biggest play- ers in the respective industries. DCP Midstream, a Fortune 500 oil firm, is Tenant activity emphasizes migration from CBD Jack Ellis Broker associate, Transwestern Cheryl Casserly Senior vice president, Transwestern Market and asking rates remained steady throughout the entirety of 2021 in the metro Denver area Please see Ellis, Page 16