Total vacancy rate Average asking rent
Colorado Office Market
*As of third-quarter 2017
Denver office market
Vacancy rates in Denver’s office market have been on the decline since
2012, while asking rents have been on a steady upward slope, according
to real estate services company JLL. Going forward, a report by Cushman
& Wakefield says the pace of rent growth is expected to slow, given that
some 3. 6 million square feet of new office space was under construction
as of third-quarter 2017. The bulk of the new office construction in
Denver is Class A space, Colliers International reports.
Three new office buildings totaling 639,000 square feet came online in
Denver this past third quarter, with two involving build-to-suit leases
for Google and Arrow Electronics. The “flight to new construction” by
tenants is expected to continue, Cushman & Wakefield says, given that
existing Denver office properties of 100,000 square feet or more are
30 years old, on average. JLL points out that these market dynamics are
giving some tenants leverage to negotiate better deal terms.
What the locals say
“Denver is doing pretty well for itself, when you look at the new
office product and the new companies going into the crème
de la crème properties. But we’re at the point in the real estate cycle where tenants, if they can wait it out, they should,
because we do see the market shifting from landlords to
being more favorable to tenants. It won’t be a dramatic seesaw,
but savvy investors and smart tenants see it [coming].”
By Bill Conroy
Entrepreneurial spirit drives the Centennial State.
Colorado, also known as the Centennial State, boasts a well-diversified
economy that recorded 2 percent growth in gross domestic product (GDP)
in 2016, the most recent full-year figure available. That eclipsed the 1.5 percent national GDP growth rate for the same period.
The state’s GDP growth rate in 2016 was actually slower than the pace set
over the prior five years and follows a 3 percent growth spurt the prior year,
the fourth best among the states. Over the long term, according to federal
figures, however, Colorado’s economic growth has significantly outpaced
the nation’s growth rate. The state posted a compound annual GDP growth
rate of 1.8 percent between 2006 and 2016, which crushed the national
figure of 1.2 percent.
The Centennial State’s prosperity over the past decade is reflected in its per
capita personal income, which stood at $51,999 in 2016, U.S. Department
of Commerce figures show. That compares to the national mark of $42,246.
A Wells Fargo report on Colorado’s economy points out that the state’s economic prosperity is propelled by its many competitive advantages, including a “highly educated workforce, a widely sought-after quality of life and an
abundance of rapidly growing industries.” The engine of Colorado’s economy has multiple pistons. Some eight different industry sectors account for
about half of the state’s GDP. These include oil and gas, technology, manufacturing, construction, broadcasting and telecom, finance, health care and
aerospace, according to multiple industry reports.
The Centennial State, according to a 2017 report from the Leeds School of
Business at the University of Colorado, also has a high proportion of new
and young companies — defined as those five years old or less — compared
with other states. During the economic expansion that played out between
2010 and 2014, the most recent figures available, the Leeds report found
that 36.2 percent of all businesses in the state were five years old or younger. The report concludes that this startup landscape is the byproduct of “an
entrepreneurial culture and population of risk-taking individuals, as well as
a business climate that supports new businesses and a diverse base of growing industries.”
That entrepreneurial and risk-taking culture is evidenced by the fact that
Colorado was one of the first two states in the nation, the other being Washington, to legalize recreational marijuana. The still-fledgling industry, according to a report from the Marijuana Policy Group, has since created some
18,000 jobs in Colorado and has an annual statewide economic impact exceeding $2.3 billion. n
Vice president and director of research
JLL Rocky Mountain Region