Colorado-Real-Estate-Journal_318723

Page 8 — Office & Industrial Quarterly — December 2022 www.crej.com OFFICE — CHERRY CREEK W H O S E T S U S A PA RT ? Banking products provided by Wintrust Financial Corp. banks. As our footprint continues to grow after our rst year in Colorado, Wintrust is pleased to announce Jason Weimer to the Commercial Real Estate team. With his unparalleled commitment to service and banking expertise, Jason will join a fast-growing, highly accomplished team to help serve the Front Range commercial market. Welcome, Jason! JASON WEIMER SVP - Commercial Real Estate jweimer1@wintrust.com wintrust.com/denver I n January, I started work- ing with a new client who requested about 10,000 square feet of Class A office space in Cherry Creek. It had already found one candidate space whose landlord was not negotiating to its satisfaction, and it wanted to explore other options. Its criteria: a true Cherry Creek North location (going east of Steele Street was too far), off-street parking and outdoor space. I dove in and found very lit- tle, so I started searching off-market and found but one new space in shell condition that could be ready for move in later this year. The price tag: $43 for base rent and $28 for triple net. The terms: a tenant improvement allowance that would not cover an office build-out of any standard and a minimum 10-year term, take it or leave it. The exercise was enough to quickly underscore the value of the other space my client had previously found, and it took it. This was not the Cherry Creek I knew from a couple years ago. The flurry of headlines this year underscoring the health of Cherry Creek’s office market hasn’t stopped: Schnitzer West is build- ing Antero Resources Corp., which plans to leave Union Station, a new office at 201 Fillmore. Havenly left River North for 3200 Cherry Creek Drive S. Broe Real Estate Group is knocking down a beautiful 15-year- old building on Clayton to build a much larger office property because there was a waiting list for its new 200 Clayton project. Meanwhile in greater downtown, Robinhood has listed its 120,000- sf office at 1701 Platte St. for sub- lease before mov- ing in; Chipotle was still subleas- ing parts of its for- mer headquarters at 1144 15th St. earlier this year after leaving in 2018; and from the correspon- dence this broker receives from the downtown office listing brokerages, incentives to tenants and their brokers alike are increasingly generous in exchange for what appears to be a marginal absorption rate. Looking at the data, Cherry Creek’s average rental rate is $38.19, compared with Denver’s $28.93. (Cherry Creek office submarket. CoStar Group, Dec. 8, 2022.) Vacancy in Cherry Creek is 6.9% compared with Denver’s 14.8%. And down- town’s vacancy rate is 24.9%, with an average rental rate of $34.30. (Central business district office sub- market. CoStar Group, Dec. 8, 2022.) Note how the vacancy rates for Cherry Creek and downtown cor- related until 2020, when a massive divergence in Cherry Creek’s favor began. Since 2020, commercial real estate professionals have been using the term “flight to quality” to describe how companies are choosing nicer offices because they believe a great Cherry Creek vs. downtown: One soars, one slumps Alexander F. Becker Principal, Real Estate Consultants of Colorado Cherry Creek’s 200 Clayton St. is in demand. Please see Becker, Page 16 Net Absorption, Net Deliveries & Vacancy (40K) (20K) 0 20K 40K 60K 80K 100K 120K 140K Net Absorption & Net Deliveries In SF 160K 180K 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Vacancy Rate 22% Forecast 17 18 19 20 21 22 23 24 © 2022 CoStar Realty Information Inc. 12/8/2022