Colorado Real Estate Journal - May 6, 2015
Technology is the second most active industry in office leasing in the Denver region, with Boulder and Fort Collins-Loveland among the top 10 metro areas for high-tech startups, according to a recent report by CBRE. The Denver-Boulder market recorded more than 3 million square feet of technology leasing activity since 2011, or 13 percent of the total activity by square footage, CBRE said in its report, Colorado Tech Book: Changing Landscape of Tech Real Estate in Colorado. Transactions greater than 100,000 sf included Aircell, Truven, Healthcare Analytics and TriZetto Group. Venture capital has increased significantly, with $488.5 million invested in Colorado tech companies last year. Research of leases 10,000 sf or greater showed the average tech lease transaction over the last four years, including expansions and renewals, was 37,300 sf. However, the average deal size may be smaller given the entrepreneurial and startup nature of the industry, which frequently sees deals of 500 to 5,000 sf, particularly for companies located in co-working or creative office space. Leases in the most active industry – financial services – averaged 37,800 sf. Tech companies with the largest Front Range footprints are Oracle, HP and Agilent, each of which occupies more than 600,000 sf. Boulder traditionally has captured the full spectrum of the tech industry, from startups to mature and legacy companies like Rally Software and IBM. Communities along the U.S. Highway 36 corridor have benefitted from Boulder’s position, attracting tech businesses that require larger footprints. Yet tech companies are increasingly drawn to downtown Denver because of an overall shift to urban environments coupled with new amenities and redevelopment, notably Denver Union Station, that have re-energized downtown. In fact downtown, with companies including Zayo Group and SendGrid, along with periphery markets like River North, the Golden Triangle and South Broadway, shows some of the strongest potential for technology growth, CBRE tech experts said in a Twitter chat following the report’s release. A major tech occupier would solidify Denver’s position as a dense tech hub, CBRE said during the chat, which generated 8,564 impressions. “There is interest in downtown from major occupiers outside of the Denver market. 2015 will be a big year … Boulder will also see big expansions in 2015.” The technology footprint varies along the Front Range. Colorado Springs’ technology industry is characterized less by startups and more by large entities involved in aerospace and defense, as well as hightech manufacturing. Fort Collins, with its ties to Colorado State University, cultivates tech startups in the software, biotechnology and energy sectors. Tech companies are drawn to the state’s highly educated workforce and relatively affordable real estate costs, according to CBRE. Denver had the 13th highest office lease rate of CBRE’s Tech Twenty markets in the fourth quarter of 2014. Rates averaged $23.15 per sf full service gross, while San Francisco averaged $63.24 per sf. “In comparison to coastal markets, we remain affordable. However rising housing costs are a challenge to address,” CBRE said. High-tech employment growth outpaced the Denver-Boulder market’s robust employment growth from 2011 to 2013, producing nearly 13,000 new jobs, or 7.8 percent of the total jobs added. Growth has been strongest in the DenverBoulder region, with Colorado Springs and Fort Collins yet to return to or surpass 2003 levels. More than three-quarters of Front Range tech jobs are in the Denver-Boulder area. Colorado Springs had the highest technology job concentration, 5.3 percent, as of the second quarter of 2014, compared with 4.8 percent in Denver-Boulder and 4.7 percent in Fort Collins. Although the number of technology jobs dropped during the recession, as did other sectors of the economy, they rebounded more quickly and strongly, according to CBRE. Jessica Ostermick, director of research and analysis for CBRE, and research analyst Garrik Gibbings-Issac authored the report.