CREJ - Office Properties Quarterly - January 2015
I believe downtown’s thriving economy over the past few years has impacted top-tier law firms, who are committed to recruiting and retaining the best-in-class professionals in the region. Home to more than 17,500 residents, downtown Denver has flourished over the past decade, witnessing a 142 percent residential spike since 2000. This drastic residential growth naturally resulted in a prevalent boom in business. Between late 2009 and mid-2013, office vacancy in downtown Denver fell sharply from a high of 18.3 percent to 13.8 percent. With employment levels rising 4.5 percent and 1.4 percent in the first quarters of 2013 and 2014, respectively, office vacancies fell by an additional 1.2 percentage points between the third quarters of 2013 and 2014. With more than 27 million square feet of office space and an additional 2,526,000 sf of office space currently planned or under construction, downtown Denver has the capacity to handle this spike in business and is attracting the young talent needed to sustain such growth. As working professionals drive 31 percent of downtown Denver’s economy, I’d like to take a closer look at the movement and activity in the commercial real estate sector – particularly the traction and success I’ve noticed involving law firms. Only a couple of years ago, many law firms would be reluctant to sign long-term leases or expand in more locations. Now law-firm transactions downtown, including seven deals we’ve closed over the past year and a half, all suggest that law firms are an imperative component to the commercial real estate landscape. Recently ranked by Forbes as No. 4 best place for business and careers, the city’s high quality of life, relatively affordable living costs and favorable environment for job seekers is a major draw for millennials between the ages of 20 and 34. This increase in a younger, talented workforce drives competition up among law firms, encouraging them to consider newer spaces that are convenient to public transportation and offer better amenities to attract the talent. Firms are taking advantage of various concessions and amenities along with the significant abatement paired with long-term leases in newer developments or redevelopment projects. Two major downtown construction projects help reinforce the growth of the market and suggest why top-tier firms are finding opportunities to maximize on the thriving economy. The law-firm leasing activity at 1401 Lawrence St. and 1801 California St. further substantiate the notion that law firms will continue to serve as important anchor tenants, even in new developments. The development at 1401 Lawrence St. is a 290,000-sf, 21-story office tower with ground-floor retail and 347 parking spaces. Polsinelli signed a long-term lease for 86,664 sf of space at the property, becoming the first significant tenant to commit to the development. Polsinelli will move from 1515 Wynkoop St. and will gain parapet Interstate 25-facing signage at the new location, which is extremely important to the firm. This trend of brand recognition importance is an indication that recruitment and retention are becoming integral components in firms’ business strategies in the upswing of the city’s economy.
1801 California St., the former Qwest Tower, is undergoing a state of-the-art redevelopment. It has successfully recruited big name law firm tenants, such as BakerHostetler, Butler Snow, Fairfield and Woods PC, and Merchant & Gould PC. Combined, these firms have leased 118,065 sf over the past 18 months. The Wells Fargo building, however, was able to retain clients with enhanced concessions and abatement packages in order to stay relevant in the market. Faegre Baker Daniels LLP, Spencer Fane & Grimshaw LLP, and Fennemore Craig renewed last year for 96,000 sf on floors 31-34; 23,678 sf on the 20th floor; and 18,000 sf on the 24th floor of the property, respectively. Additional law-firm activity in Lower Downtown includes the recent renewal and restructuring for Ritsema & Lyon PC for 22,181 sf of space at 999 18th St. The firm was offered an attractive concessionary package by the landlord in order to compete with nearby buildings. A new lease also was signed for MiletichCohen PC for 5,415 sf at 1660 Wynkoop St. These examples signify the strength and growth of Denver’s market and confirm the need for outstanding concessions and rapidly improving packages for tenants as regional and local law firms continue to compete for top talent and dynamic workplace environments.