Colorado-Real-Estate-Journal_421031

How Soft is the Denver Office Mar- ket? Denver Office Vacancy at ALL TIME HIGH! Work from home is here to stay! Office is dead Landlords are giving space away! There is more vacant space than occupied space in Denver W e have all seen these national and local head- lines about how empty office buildings are in abundance. Just how des- perate are investors and landlords? According to Savills Research Q2 2024 Office Report, the Denver metropolitan overall vacancy rate is 29% with an overall asking rate $34.56 per square foot. These statistics are certainly not ideal for anyone in the office mar- ket food chain. Landlords, leasing agents, lenders, general contrac- tors, cabling and furniture vendors, moving companies, coffee shops and restauranteurs are all feeling the effects of a softer office market. Long removed are the go-go days of a robust and exciting office market. How soon, if ever, will they return? We decided to put this concern- ing situation to the test. To simplify, we decided to utilize several of our cur- rent client needs for this experi- ment and have broken them into the following cat- egories: Client A: In search of 20,000-25,000 sf in central Denver (including Platte, RiNo, Uptown) Client B: In search of 100,000-plus sf in the southeast suburbs (north Denver Tech Center to Meridian) Client C: In search of 3,000-5,000 sf in greater Cherry Creek (including Glendale) Client D : In search of 9,000-11,000 sf in Boulder County When we run generic searches for each of these requirements, they yield the following results: Wow! Seventy options to choose from in downtown Denver? Eighteen 100,000-plus sf options southeast? Twenty-three in Cherry Creek and 37 in Boulder? That is a lot of options to choose from. And what tenant in today’s market will pay $67 and $75 per sf (all-time record highs) to a desper- ate landlord? Where do you start to sift through 70 downtown options? We recall past cycles where we could count options for all of these submarkets on one hand. Perhaps the news headlines are right and tenants that are willing to buck the work-from-home trend and man- date in-person work attendance can truly name their lease rate and achieve low occupancy costs for their business. Are these options all one size fits all, and can they offer the same tenant experience and amenities as the next? Before we overwhelm ourselves with the idea of taking on these large quantities of options, let us discuss what our clients are hoping to achieve by committing to a new office lease in hopes of getting their workforce back to the office. Yes- terday’s office for most companies was straightforward: place to park, building lobby, stairs and/or eleva- tor to get to your floor, reception, kitchen, conference room, privates offices for some and workstations for others. Pretty simple. While that was the norm for years, it may not cut it for tenants in a post-COVID world. Generally, today’s tenant is look- ing for an office experience that attracts employees to their place of work, where they can be more productive and successful: fitness centers, coffee kiosks, common areas both indoors and outdoors equipped with Wi-Fi enabling options to work on-site but away from their desks. Walk to various restaurants for meals and bars to socialize in after work, secure loca- tions to store your bike for those who ride to work, walkable public transportation options and 24/7 security. These are some of the fea- tures today’s tenants are demand- ing of their employers to return to the office each week. Now if we rerun the aforemen- tioned searches with this revised set of criteria, we see a vastly dif- ferent and slimmed down list of results. To be clear, we are setting the following filters: Class A or B, direct lease (not sublease), built (not proposed nor under construction), INSIDE Remodeling? PAGE 12 Dream team: The work of a successful project does not rely solely on the architect September 2024 PAGE 15 PAGE 18 E-commerce Half-full: E-commerce drives continued demand in Denver’s industrial market Changing market Nuanced landscape: Rising vacancy, small-space demand, new construction Please see Bante, Page 14 M. Gregory Bante Executive managing director and market leader, Savills Vacancy: Read the fine print, not the headlines Connor Monahan Associate director, Savills