CREJ - Office Properties Quarterly - October 2015
As we wrap up the fourth quarter of Office Properties Quarterly, one theme sticks out about the rest – it’s a good time to be in the office properties market in Colorado. Developers in Colorado’s office market will complete 2 million square feet of additional stock this year, according to a report from Marcus & Millichap. Roughly 1.1 million sf was delivered in 2014. Even though this is a large volume of new stock, industry reports don’t appear fearful of overbuilding. Brian Smith takes a look at some of these reasons in the article on Page 17. Some indicators of demand are the declining vacancy rates, which will see the lowest year-end rate in nearly eight years, and soaring net absorption, which is expected to surpass 2.5 million sf, according to the report. Of the available vacant space, most is second-generation space under 100,000 sf. This is because these spaces are not large enough to entice companies to relocate, said a DTZ report. Larger vacant spaces are leasing more quickly. As of the end of the second quarter, there were only 10 buildings offering 100,000 sf of contiguous vacant space, of which only three were located in the central business district, the report states. This increase in development is a welcomed update for much of the metro area. “Across the entire Denver market, the average age of properties is 35 years,” said JLL’s office insight second-quarter report. “Downtown, seven of every 10 square feet was built at least three decades ago.” One of the major projects that broke ground this year is a 40-story tower by Houston-based Hines Group, located at 1144 15th St. Once completed, the 662,000-sf office tower will be the fifth tallest in Denver and the tallest built since 1985. Another project, 1601 Wewetta, will deliver 283,000 sf of office and 17,000 sf of retail space, making it the largest project scheduled for delivery in 2015. Of the millions of sf under construction, about 50 percent is preleased. Some recent groundbreakings did so without any leases, the Marcus & Millichap report said. The importance of preleasing for a project’s success is explained in Kyle Ramstetter’s article on Page 15. While many of these statistics are Denver-specific, the positive office trends are not limited to the capital city. Office product in Glendale and Aurora reported the strongest annual rent gains, while the highest rents remain downtown. Beginning on Page 10, we highlight several other Colorado markets. Next year looks to be as busy a year as 2015, and I look forward to covering it. Please send me your feedback on what you’d like to see covered. Michelle Z. Askeland maskeland@crej.com 303-623-1148, Ext. 104