CREJ - Office Properties Quarterly - January 2015
Denver has established itself as a primary market for real estate capital. Foreign and domestic institutional capital has confidence in Denver. This is due to the diversification of our economy, the in-migration of millennials, our highly educated workforce, our growing mass transit system and Colorado’s outperformance of the national economy in terms of job growth and unemployment rate. In 2014, we experienced a new benchmark in sales price per square foot in the central business district. Class A office lease rates reached record levels in the CBD and the southeast suburban market, and investors’ yield requirements continued to compress as new capital flooded into the market. Denver’s office market fundamentals will continue to gain momentum this year. We are fortunate to have several years of upside and runway ahead of us. Economic Trends Foreign and domestic capital is targeting Denver due to the diversification of our economy, and the job growth we have experienced in energy, technology, health care and financial services. No single standard industry classification code represents more than 16 percent of the state’s job market. Additionally, Colorado has one of the most diverse energy economies due to its significant employment in natural gas, renewable/clean technology and liquids/oil. Through October, Colorado created close to 70,000 jobs, and the state’s preliminary unemployment rate estimate is 4.3 percent versus the national average of 5.8 percent. Our year-todate job growth is 2.7 percent, making us the seventh-fastest growing state in the county. Denver continues to receive positive press and encouraging economic rankings. The media coverage enhances and supports capital’s desire to be here. Recent press includes Urban Land Institute’s ranking of Colorado as the No. 4 state for commercial investment in 2015, Business Insider’s forecast of Denver being the No. 1 economic growth city in 2015, and U.S. News and World Report’s ranking of Colorado as the fifth-best state to do business in.