CREJ - Office Properties Quarterly - December 2016
Denver’s office market is in the midst of a construction boom the likes of which have not been seen in the past 25 years – over 5.6-million square feet of office space development is underway, according to CBRE Research. While urban submarkets like Lower Downtown and the Central Platte Valley have hosted a large portion of this growth, Denver’s office space boom has not been limited to downtown. Strong construction activity is occurring in Denver’s suburban markets as well, driven by robust demand from key industries and access to a deep and growing labor pool. In fact, construction activity in suburban submarkets is outpacing the development underway in downtown Denver. These trends reflect the same urban revitalization efforts and subsequent economic developments that have transformed Denver into one of the country’s most promising commercial real estate markets over the course of the last decade. A closer look at the state of office development across Denver’s submarkets reveals how one of America’s hippest urban cores has maintained and expanded its unique appeal to developers and employers alike. • Union Station renovation sparks development. It’s not uncommon for urban revitalization to be anchored by iconic architecture. Union Station, located in the heart of LoDo, is playing such a role by piquing the interest of developers evaluating infill opportunities in Denver. Originally constructed in 1881, Union Station was once a major center of commerce prior to the decline of passenger trains following the end of World War II. Major renovations completed in 2014 helped put Union Station back in the spotlight. Sections of the terminal building’s upper floors were transformed into a 112-unit hotel. A light-rail station and underground bus facility were added to reposition Union Station as a transit hub. Additionally, 22,000 sf of ground-level expansion provided Union Station with more space to host independent retail stores and restaurants. Concurrent with the completion of Union Station’s renovations, the LoDo submarket began to experience an uptick in construction activity as office developers recognized the economic transformation taking place in Denver. Today, almost 2 million sf of mixed-use office building development is under construction in LoDo and the Central Platte Valley district. Major projects include 1144 Fifteenth (661,000 sf), 16 Chestnut (428,000 sf), 1401 Lawrence (311,000 sf), Dairy Block (235,000 sf) and Riverview at 1700 Platte (210,000 sf). Demand for new construction is driven by existing Denver companies placing greater emphasis on the office environment, meaningful amenities, access and building identity in order to better recruit and retain employees. Likewise, companies new to Colorado are drawn to the downtown market because of city’s high quality of life, innovative culture, economic environment and an abundance of top talent. • Office spaces head to the suburbs. While office development continues to ramp up in Denver’s downtown submarkets, this growth actually was outpaced in 2016 by construction activity in suburban neighborhoods. Over 2.6 million sf of total construction activity is underway in Denver’s suburbs, led by the submarkets in the southeast. Major projects underway include Village Center Station (306,000 sf), Granite Place at Village Center (300,000 sf) and INOVA I & II at Dry Creek (211,000 sf and 235,000 sf). Several factors encouraged developers to shift more focus toward building office spaces in Denver’s suburbs. Significant demand from key industry sectors such as financial services, telecommunications and health care, reflecting the market’s deep and diverse labor pool, has allowed companies to support a wide range of business lines from one location. Additionally, as a result of improvements made to public transportation, Denver’s urban core is better connected to suburban submarkets, allowing employers to access the region’s available talent base of highly educated millennials.