Colorado Real Estate Journal - June 1, 2016
Technology companies may love downtown Boulder, but many are moving east. A number of tech companies have traded downtown’s amenities and culture for large blocks of space, parking and affordability in East Boulder over the last 18 to 24 months. “Our clients in particular, which are primarily technology companies that are growing rapidly, are choosing their workplace to attract and retain employees,” said CBRE Senior Vice President Alex Hammerstein. “Downtown Boulder has always been very appealing because of the access to amenities and the culture of innovation and entrepreneurship,” he said. “East Boulder has historically been less appealing for these companies.” But that is changing. Growing tech tenants are having a hard time securing 20,000 to 40,000 square feet downtown, rental rates are high, and “they’re finding it’s actually difficult to recruit and retain employees because of the lack of parking,” said Hammerstein. “Parking downtown has become nearly impossible,” said Scott Kokotan, chief financial officer of IMM, a digital media company that relocated to Flatiron Park last July. Kokotan said when IMM was downtown, some employees were walking eight or more blocks to the company’s office, which was not only inconvenient, especially in bad weather, but also a safety concern. Overriding reasons for IMM’s relocation were the rising cost of downtown rents and difficulty finding a large block of contiguous space, which always has been a challenge in downtown Boulder. “We were bursting at the seams at 15,000 square feet,” said Kokotan. Kokotan said most downtown landlords seem to want to cater to smaller companies, and rent can be twice as much downtown as it is in East Boulder. That’s partly due to a shift toward institutional ownership; Hammerstein said rents have risen by as much as 30 percent for some assets. “Cost preservation is key for these companies. They’re trying to balance cost and culture, and usually cost wins out,” he said. East Boulder locations such as Flatiron Park, Pearl East Business Park, Tierra Business Centre and others offer less expensive space, and Kokotan said Flatiron Park was flexible with regard to build-out. Chris Boston of Gibbons-White Inc. in Boulder said he has heard a lot of talk about tech tenants relocating to the east but that there also are tenants that have moved the opposite direction. “I don’t think you can say it’s a trend,” he said. “I think some companies do that, but others continue to grow and expand and locate in downtown Boulder. I think it’s a very company specific decision.” SolidFire expanded to 60,000 sf at PearlWest; however, rates in that downtown project are significantly higher than many other locations, including East Boulder. And Boston agreed that there are “very few” spaces of 10,000 sf or more available downtown. Penton Media/New Hope Network, Pellucid Analytics, Ship compliant and sovrn all have relocated from downtown to Flatiron Park. “We’ve really been creating space that is attractive for the tenant base,” said Steve Eaton, vice president of Goff Capital Partners, which owns 716,000 sf of office/creative office space in Flatiron Park. Working with vacancies and tenant turnover, the company has assembled large, open blocks of creative, dynamic office space. At 5541 Central Ave., it doubled the size of a former warehouse and converted the building to creative office space. “We had tenants committed prior to construction for all of that space,” Eaton said. Flatiron Park also added amenities over the past few years, including Ozo Coffee and an Upslope Brewing Co. taproom. Kokotan said IMM uses those amenities for meetings, and they also have helped camaraderie with employees hanging out together after work. “In Flatiron Park, we’re really been place making. We’ve created a very dynamic place for office tenants to relocate,” said Eaton, who noted there are three to five food trucks in the park each day. Kokotan said employees have had to adjust to not having as many lunch choices as they did downtown, and IMM responded by providing company sponsored lunches three times a week and increasing the types of snacks available. IMM also provided a Smart car and bicycles for employee use. Although it’s easy to access by car or bike, Kokotan said a downside is a lack of good public transportation in the area and especially into Flatiron Park. The growth of technology tenants to East Boulder has created “a nice little tech community,” which is another attraction to growing companies, said Hammerstein. “They’re surrounded by other forward-thinking people.” But availabilities are shrinking, just as they are downtown. “That’s still a challenge anywhere in Boulder. There’s not a lot of vacant space,” he said.