Denver’s office market continues to shift, with availability rates hitting a record high while top-tier spaces see the majority of tenant interest. Denver’s overall availability rate jumped from 28.7% in fourth-quarter 2023 to 30.2% by fourth-quarter 2024. This climb highlights the ongoing challenges faced by many office landlords, especially those with either aging or financially challenged properties. At the center of this trend is downtown Denver, specifically the central business district submarket, which holds a record high availability rate of 44.5%. Leasing activity, however, has remained steady at 1.9 million square feet in the fourth quarter of 2024, signaling that demand has not disappeared entirely. Determined to secure tenants, well-capitalized landlords have been offering substantial concessions, including extended freerent periods and generous tenant improvement allowances, thereby allowing face-rates to remain elevated even as availability climbs. Moreover, another factor impacting the downtown market has been the ongoing reconstruction of the 16th Street Mall, which has simultaneously been both an obstacle for office owners as well as a project with potential future benefits. This ambitious multiyear project has caused disruptions for many businesses as both pedestrian and vehicle traffic have been rerouted to accommodate the construction, although the phased reopening has already begun driving foot traffic back. Once completed, the revitalized mall is expected to improve the downtown area’s appeal, expectantly bringing new businesses and stimulating demand for office space by offering a more “live-work-play” atmosphere in the area. Asking rents continue an upward trend despite high availability INSIDE Demanding PAGE 8 High-quality, amenity-rich spaces are increasingly important to tenants March 2025 PAGE 12 PAGES 15-23 Upgrading Implement cost-effective design when upgrading older office space Industrial Industrial markets up and down the Front Range likely to see growth Please see Deckys, Page 26 Flight to quality defines Denver’s office market Rachel Deckys Senior research analyst, Savills
Page 2 — Office & Industrial Quarterly — March 2025 www.crej.com OFFICE CONTENTS 4 Turning point comes amid bifurcation, headwinds Marc Perusse 6 There is a shortage of investment opportunities Hilary Barnett, Larry Thiel, Sean Whitney & Mark Katz 8 In demand: High-quality, amenity-rich spaces Caitlin Ellenson & Howard Schmidt 10 A market being relandscaped: Cautious optimism Christian Smith & Craig David 12 Use cost-effective design to upgrade older office Kim Hoff OFFICE RENOVATIONS FACILITY SERVICES AUTOMOTIVE HEALTHCARE ADVANCED TECHNOLOGIES bryanconstruction.com SECURE FACILITIES The LaVie Institute InƂnity Systems Engineering Toyota of Colorado Springs INDUSTRIAL 15 North I-25: From undiscovered to powerhouse Tyler Reed & Blake McVean 16 Positioning speculative industrial development Brian V. Dietz 18 Tenants send mixed signals for logistical real estate Paul J. Ruff 20 Denver fundamentals point to successful year Peter Merrion & Rob Key 21 Planning for Front Range industrial market growth Jeff Heine 22 Surging Springs market: Falcon Commerce Center Randy Churchill Dowis & Megan Mechikoff 23 Beyond tilt-up: Exploring tilt insulated panel system Andrea Grace 24 Leverage AI in CRE: Enhance efficiency, opportunity Earl Duffy
March 2025 — Office & Industrial Quarterly — Page 3 www.crej.com TYPE OF CAPITAL SOURCE OF CAPITAL EXPLANATION RATES / SPREADS LTV / COVERAGE TERM AMORT. FOCUS TRENDS LIFE INSURANCE COMPANY • Insurance premiums • Annuity and GIC sales • Non-Recourse • Longer-term fixed rate loan • No structure 140-200 bps over the comparable US Treasuries • Up to 65% LTV, majority of lenders quoting in the 55%-60% LTV range 5-30 Years 25-35 Years Standard is 30 years Partial to fullterm interest only available at lower leverage points • Market rate properties in major metro areas • B quality properties and above • Debt service coverage ratio is more important and can limit leverage, sizing to 1.15x-1.20x DSCR on 30yr amortization • Life companies active in pre-stabilized multifamily with some loan structure (funding at 1.0x DSCR interest only) • 90 Day forward rate lock capability and step down prepayment options • Life companies can underwrite commercial income for ground floor retail or mixed-use components • Half to full-term I/O available at lower leverage points AGENCY • Sales of mortgage-backed securities with implied government guaranty • Non-Recourse • Longer-term fixed rate loan 130-190 bps over the comparable US Treasuries • Up to 65% LTV • 1.25x Minimum DSCR 5-10 Years Interest Only to 30 Years • Market Rate • Age-Restricted • Affordable/Workforce • Major metro areas • Secondary/Tertiary Markets • C quality properties and above • Both Fannie & Freddie have a $73B volume cap and 50% mission-driven minimum for 2025 • "Mission driven" pricing can lower the spread ~2550bps inside of traditional spreads; "green" pricing also lower spreads 15-20 bps, can underwrite based off of a 35-year amortization for certain sponsors • 1.25% fee rate buydown can reduce spread by ~30bps, Borrowers utilizing rate buy downs to increase proceeds CONDUIT (CMBS) • Sales of mortgage-backed securities through public markets • Non-Recourse • Longer-term fixed rate loan 175 - 225 bps over US Treasuries • Up to 65% LTV • 1.25x Minimum DCR • 8.5% Minimum Debt Yield 5, 7 & 10 Years Interest Only to 30 Years • Market Rate • Second tier properties • Secondary/Tertiary Markets • C quality properties and above • Full-term I/O is the most common structure • Originating a lot of 5-year business, demand in the securitization market has allowed for this • Most competitive at higher leverage in secondary and tertiary markets • Focused on debt yield as an important metric BANK • Corporate Debt • Deposits • Recourse (some nonrecourse available) • Shorter-term fixed and floating rate loans Interest rates range between 6.25% - 7.50% • Up to 65%-70% LTC for term loans and 50%- 60% LTC for construction loans Up to 7 Years Fixed, Most max out at 5 Years Interest Only to 30 Years • Market Rate • Age-Restricted • Affordable/Workforce • Major metro areas • Secondary/Tertiary Markets • B quality properties and above • Leverage scaled down significantly due to DSCR constraints combined with elevated interest rates • Lenders more conservative on underwriting untrended rents and / or minimal rent growth given large amount of supply coming online • More flexible prepayment penalty options • Sizing to a 1.0x+ as-is and 1.25x+ as-stabilized • Full or partial recourse more common than previous years, more emphasis on depository relationship DEBT FUND / BRIDGE LOAN • Private Capital • Institutional Capital • Non-Recourse • Shorter term bridge loans for acquisition and/or repositioning SOFR + 250-400 bps • 60-70% LTC • Going-in 6.0% Debt Yield 1 - 5 (3+1+1) Interest Only • Market Rate • Secondary/Tertiary Markets • C quality properties and above • A lot of liquidity available in the market for multifamily transitional loans at varying costs of capital • Lenders sizing to agency take out; will build in interest reserve to service debt • Underwriting lower rent growth for transitional assets • Pricing depends on leverage, property quality, existing cash flow, sponsor strength, and capital source • Lender fees are typically 0.50%-1.00% upfront, 0.50% at exit SOFR - Secured Overnight Financing Rate This information is intended to illustrate some of the lending options currently available. Other options may exist. While Essex strives to present this information as accurately as possible, no guarantee is made as to the accuracy of the data presented, or the availability of the DCR - Debt Coverage Ratio LTV - Loan to Value Ratio LTC - Loan to Cost Ratio Recent OfČce Transactions 2401 E. 2nd Avenue #600 , Denver, CO 80206 | www.essexreca.com PAUL DONAHUE Principal (303) 843-4021 pdonahue@essexreca.com COOPER WILLIAMS President / Principal (303) 843-4581 cwilliams@essexreca.com AIMEE LOVE Principal (303) 843-6002 alove@essexreca.com BLAIRE BUTLER Senior Vice President (303) 843-4024 bbutler@essexreca.com PRENTICE POINT TERM LOAN BANK $15.6M PRIMECENTER @ NORTHRIDGE TERM LOAN LIFE COMPANY $12.6M BRIDGE LOAN LIFE COMPANY $28.0M CAMPUS AT WATERVIEW OFFICE PROPERTIES QUARTERLY Financing Sources Matrix
Page 4 — Office & Industrial Quarterly — March 2025 www.crej.com OFFICE — INVESTORS DRIVEN TO BUILD BRINKMANCONSTRUCTION.COM MULTI-FAMILY | OFFICE HEALTHCARE | COMMERCIAL INDUSTRIAL | TENANT FINISH After years of declining values, major institutional investors are signaling that office real estate has finally hit its floor. Blackstone, the world’s largest alternative asset manager, has declared that office is once again a viable investment opportunity, a stark shift from the market distress of the past three years. However, this recovery is far from universal. The office sector is evolving, with demand concentrating at two ends of the spectrum – best-in-class buildings commanding top rents and well-located, updated buildings offering affordability for cost-conscious tenants. Blackstone’s return-to-office real estate marks an important moment. The firm, which previously avoided the sector, now believes select opportunities are worth pursuing. “Office has bottomed, particularly in stronger markets and betterquality buildings,” said Blackstone President Jon Gray. Blackstone is a bellwether investor – where it goes, others follow. Its move signals confidence, prompting others to reenter the sector simply because Blackstone is in. This shift could also encourage lenders to start providing debt on office assets again. Other institutions, including Brookfield and New York Life, have also started deploying capital into office properties. In early 2025, office investment volume rebounded in select markets. However, demand remains highly bifurcated, focusing on either ultra-premium, best-in-class buildings or welllocated properties that have already undergone significant capital improvements. The strategy for investors is not to take on buildings requiring major upgrades but to acquire properties where prior owners have already made those investments. In some cases, buildings can be purchased for less than the capital invested by the previous owner. Assets renovated in recent years with upgraded lobbies, modernized systems, and enhanced amenities are in demand because they offer move-in-ready space at a discount to new developments. No buyer today can justify purchasing an outdated property and sinking millions into improvements, but buying a recently upgraded asset at a steep discount makes sense. This investment strategy is playing out in Denver, San Francisco, Atlanta and Dallas, where investors are targeting repositioned buildings that can be leased competitively without requiring additional major capital expenditures. Some of these properties still need spec suites to accommodate tenant demand, but the major renovations – mechanical system replacements, lobby overhauls and common area improvements – are already complete. Tenants are increasingly drawn to these buildings as a middle ground, offering strong amenities, security and professional environments at competitive lease rates, without the luxury pricing of new Class A-plus developments. Even as office valuations stabilize, significant macroeconomic risks persist. Chief among them is the increasing likelihood of a recession, fueled by tariff wars, geopolitical uncertainty and the aggressive downsizing of government office leases under the Department of Government Efficiency. Tariff policies have introduced stagflationary pressures. While tariffs are often seen as inflationary, they can also be deflationary if wages fail to rise alongside increasing costs. If living expenses climb without corresponding wage growth, consumer spending slows, corporate profits shrink and businesses delay hiring and expansion – including leasing office space. This feedback loop further pressures office demand. DOGE’s aggressive cost-cutting initiatives are also accelerating federal office downsizing. The General Services Administration is now considering reducing its leased office space by up to 50%. As the agency consolidates its headquarters and shrinks its overall footprint, entire office buildings once leased by the government could become vacant. This will put additional pressure on already struggling office markets, particularly in cities like Washington, D.C., where government tenants have historically been a stabilizing force. Despite efforts to cut real estate exposure, the federal government is still mandating a full return to the office for its employees. This shift isn’t limited to the public sector. Private companies are also reversing remote work policies, enforcing return-to-office mandates to focus on collaboration, culture and productivity. JPMorgan, Goldman Sachs and even tech firms that once championed remote work are now pushing for full-time office returns. Remote and hybrid work’s limitations are becoming apparent, and the need for in-person interaction is driving a new wave of office demand. However, as companies bring employees back, their approach to office space varies – some are willing to pay whatever it takes for the best buildings with top-tier amenities, while others are prioritizing cost efficiency, seeking well-located, functional offices at a significant discount to peak pricing. The wave of GSA lease terminations could leave millions of square feet vacant, deepening office distress in these markets. Investors must be selective, focusing on best-in-class properties or recently Turning point comes amid bifurcation, headwinds Marc Perusse Founder and CEO, E2M Ventures Please see Perusse, Page 26
March 2025 — Office & Industrial Quarterly — Page 5 www.crej.com
Page 6 — Office & Industrial Quarterly — March 2025 www.crej.com OFFICE — INVESTMENTS INTERIOR ARCHITECTURE all together now. acquilano.com / 303.893.5355 The demand for large assembly spaces to host town halls and all-hands gatherings is rising. Acquilano’s designers excel at creating flexible solutions while expertly navigating high-occupancy permitting challenges. Let us help you plan your hub with confidence. Managing Shareholders Jennifer Stenman and Amy Ruhl 720.975.0466 · reinhartlaw.com Deep Experience. Insightful Counsel. Reinhart, a nationally recognized law firm with strong ties to Denver’s development community, is dedicated to helping clients successfully navigate today’s most important commercial real estate issues. There’s a growing list of private capital, high-networth investors and syndicators who are actively looking to place their bets on Denver. They see a window of opportunity to buy quality real estate at a historically low basis before institutional buyers reenter the market. That window is already closing in markets such as New York, San Francisco, Miami and Seattle. The problem Colorado is facing is that there have not been enough office investment opportunities in the first two months of 2025 to match the increasing appetite from noninstitutional buyers. The lack of new opportunities launching to market is not specific to office; it’s across all product types. One can speculate the reasons for the delay in new offerings; borrowing rates have remained elevated and volatile, and some market participants are hoping for cheaper cost of capital later this year. Perhaps potential sellers are waiting to see the effects that newly instituted government policy will have on the economy. Tariffs, the reduction in the federal workforce and the termination of Government Services Administration leases from the Department of Government Efficiency could put pressure on vacancy and unemployment rates. In fact, the GSA has already identified hundreds of assets it intends to dispose, 23 properties in Colorado. It is also terminating 355,000 square feet of leases at the time of this article. Whatever the reason, the optimism generated by a strong end of year in 2024 for transactions has been put on pause. For office investors, the delay in new deal launches comes after the most active quarters in Colorado since first-quarter 2023; 63% of the office transactions closed in 2024 occurred after Labor Day. Currently, JLL is only tracking 23 office deals on the market and seven under contract. The volume of deals is down roughly 30% from this time last year. But the tide is turning, and the demand will soon be met. In the last 60 to 75 days, our office team has completed more broker opinions of value than any other time since the pandemic struck in February 2020. This volume of BOVs is a precursor for more actionable deals coming to market. While we are still seeing a large percentage of lender-driven BOVs of commodity office, we are also seeing a higher level of quality in the assets we are underwriting. Whether an investor is looking for opportunistic, value-add or core-plus profiles, we expect to see opportunities for all these investment strategies escalate over the course of 2025. Throughout the history of investment cycles, private capital, highnet-worth investors and syndicators have been willing to take on more risk in the early stages of recoveries compared to institutions, and they are rewarded. Most recently, the highest five-year returns in the last 25 years were achieved in investments with a 2009 to 2011 acquisition date, according to JLL research. In Colorado, over the last 24 months, buyers of office have been almost exclusively private capital, users and developers. For users, it’s hard to think of a better time in recent history than now to buy. And in 2024, we saw just that. Thirteen of the 40 (32.5%) transactions last year were purchased by an owner-user, relative to 2023 when that stat was three out of 27 (11%). The cost savings are significant relative to the cost to lease, and we expect users to continue to lean into the marketplace in 2025. Developers purchased five office assets last year representing 12.5% of all office sales. JLL expects developers to remain active in 2025 and are tracking three conversions or redevelopments opportunities currently under contract, with more anticipated. Institutions will start to acquire office in Colorado, and Denver specifically, if they see one of two things: 1) super high-quality, newer-vintage or significantly reimagined offerings; or 2) a return of consistent and strong leasing fundamentals proven out over several quarters. Denver’s leasing fundamentals remain challenged. As an example, tenant demand (tenants in the market) in Denver’s central business district is roughly half of 2019’s 2.2 million sf of requirements. However, we are seeing pockets of improvement in certain microlocations or asset classes. For example, the Denver Tech Center has seen positive absorption over the past three years. Also, a metrowide trend we are seeing is tenants focusing on neighborhood locations and signing leases in top-tier assets or in assets that have been recently acquired at an adjusted basis. In other markets, like Houston, Phoenix, New York and even Chicago, the leasing momentum is picking up significantly. Denver is trailing these markets, presenting a longer window of opportunity for noninstitutional buyers to strategically acquire office buildings and ultimately be rewarded when Denver’s office market bounces back. The stage is set for an active year in Denver’s office market, with potential rewards for those willing to invest ahead of the curve. s Hilary.Barnett@jll.com Larry.Thiel@jll.com Sean.Whitney@jll.com Mark.Katz@jll.com There is a shortage of investment opportunities Larry Thiel Managing director, JLL Capital Markets Hilary Barnett Senior diretor, JLL Capital Markets Sean Whitney Senior diretor, JLL Capital Markets Mark Katz Senior managing director, JLL Capital Markets
March 2025 — Office & Industrial Quarterly — Page 7 www.crej.com Suite 275N Suite 120S Suite 220S Suite 250S Suite 300S 5500 South Quebec Street Greenwood Village, CO 96,000 SF AVAILABLE For Lease DOUG WULF Executive Managing Director +1 303 312 4218 doug.wulf@cushwake.com DAN MILLER Managing Director +1 303 312 4272 dan.miller@cushwake.com ANDREW MCCABE Director +1 303 312 4253 andrew.mccabe@cushwake.com HIGHLIGHTS Outstanding mountain views Convenient covered parking (4.0:1,000 SF overall ratio) 5 minute walk to Orchard Light Rail Station Walkable area with numerous amenities immediately nearby Expansive outdoor plaza Renovated lobby Suite 120S 10,763 SF Suite 250S 21,707 SF Suite 220S 12,502 SF Suite 275N 13,873 SF Suite 300S 36,930 SF
Page 8 — Office & Industrial Quarterly — March 2025 www.crej.com OFFICE — MARKET UPDATE Now more than ever, community and connection are critical. Questions about Membership? Michelle Martinez, VARI | Membership Chair | colorado.corenetglobal.org As a global association for corporate real estate professionals, CoreNet Global has been connecting people, and the corporations they represent, through professional development, networking, and best practices for more than 20 years. Broaden your reach and influence within your corporation and amongst your peers by joining the global network with a local footprint in more than 50 countries around the globe. • Bring real estate into partnership with corporate strategy • Create value for the corporations you serve • Do your job better and help your company produce better results • Earn “trusted partner” status with key clientele and the C-suite • Advance your company and your career Your CoreNet membership brings you global access with local engagement. Please renew by March 31, 2025... You gain a network of more than 10K+ members from 50+ countries and 45+ chapters worldwide! It’s been our experience that since the pandemic, the demand for move-in ready office spaces in Denver has seen significant growth, particularly among tenants seeking spaces of 10,000 square feet or less. This shift in preference can be attributed to several shifting trends in the commercial real estate office market, where businesses are prioritizing flexibility, high-quality Class A buildings, and ease of commute access. Smaller tenants, especially those with limited office space needs, are increasingly looking for workspaces that require minimal to no upfront investment and can support their operational needs without the need for extensive renovations. This demand for move-in ready spaces allows tenants to quickly occupy and begin their operations without delays. It also lessens concerns associated with construction costs and budgetary limitations. This allows tenants to focus on their business operations while improving their overall business agility. n Tenant spaces. Many of the tenants we currently represent, whether downtown or the Denver Tech Center, have a growing focus on higher-quality office spaces, which is largely driven by the changing expectations of today’s workforce. We have found that businesses are no longer merely concerned with basic functionality; instead, they seek office environments that foster productivity, collaboration and employee well-being. As remote and hybrid work models become more widespread, companies are looking to create office spaces that serve as a draw for employees to return. High-end finishes, state-of-the-art technology, and aesthetically pleasing designs have become critical factors in attracting and retaining talent. Anyone would agree office buildings that offer such premium features are seeing higher demand, making them more competitive in a changing real estate market. n Safety and security. Safety and security have also become paramount in tenants’ decision-making processes, especially depending on location. In the wake of the pandemic, health and safety protocols were top of mind. Post pandemic, we’ve found tenant security has become of the utmost importance. Tenants are increasingly seeking spaces that can accommodate safety requirements without requiring them to make substantial investments in upgrading older office buildings. (Again, another reason why spec suites are trending.) Denver office spaces that offer integrated safety features – such as card/app access, turnstile solutions, and smart elevator technology and 24-hour security – are becoming more desirable. It’s significant to mention, sustainability and a low carbon footprint continue to grow in importance as the makeup of the generational workforce shifts. n Transportation. We have found transportation accessibility is another changing consideration for tenants in Denver. Again, with a growing emphasis on sustainability and reducing commuting time, businesses are prioritizing office locations that are easily accessible by various modes of transportation, including public transit, biking and walking. Denver’s ever-changing transit network is making efforts to promote sustainable commuting options to influence office space decisions. Companies are increasingly locating their offices in areas that provide ease of access. Other options may be areas that are wellserved by light rail, bus routes and bike paths, ensuring that employees have multiple, convenient ways to reach the office. In turn, office buildings with strong transportation connectivity are becoming more attractive to smaller tenants seeking to provide convenience for their workforce. n Building amenities. Lastly, In demand: High-quality, amenity-rich spaces Caitlin Ellenson Vice president, Avison Young Howard Schmidt Vice president, Avison Young Lobby space and open area Please see Ellenson, Page 26
March 2025 — Office & Industrial Quarterly — Page 9 www.crej.com Let’s shape the future of real estate © 2024 Jones Lang LaSalle IP, Inc. All rights reserved. jll.com/denver
Page 10 — Office & Industrial Quarterly — March 2025 www.crej.com OFFICE — MARKET UPDATE THE BUSINESS OF Owning Managing Leasing Acquiring Building Renovating Rampart Plaza 6855 S Havana Street Centennial, 80112 300 S Jackson St #500 Denver, Colorado 80209 kewrealty.com At KEW, we’re dedicated to the art of nurturing, crafting, and transforming commercial spaces. From owning and managing to leasing, acquiring, building, and renovating properties, it’s all about creating environments where businesses thrive and communities flourish. BDO Denver 303 E. 17th Avenue, Suite 600 Denver, CO 80203 303-830-1120 Accountants and Advisors www.bdo.com © 2021 BDO USA, LLP. All rights reserved. What’s Next? Business resilience is being tested daily. At BDO, our team of experienced professionals provides the knowledge and proactive guidance necessary to overcome the evolving challenges construction facing companies of every size. From ever-changing tax and reporting regulations, unstable surety and banking markets, to labor issues and unrelenting competition, we’re here to help the clients we serve, wherever they do business. www.bdo.com/construction No one reading this will be a stranger to the notable office market fluctuations in recent years caused primarily by evolving work patterns and economic shifts created by the COVID-19 pandemic. The complexity of the current landscape, further complicated by rising vacancy rates, adaptive reuse initiatives, the interest rate environment and a wide range of differing regional activity, has made it nearly impossible to forecast short- or long-term horizons. Ground zero for Colorado being the metro Denver area, we’ve got some catching up to do, relatively speaking. Denver’s central business district, in particular, owns a 34.9% office vacancy rate, greatly surpassing the current national average of 19.7%. We’re all lucky to live is such a great state, with easy access to beautiful wilderness, outdoor recreation and vibrant urban environments, but those charms have largely led the workforce to prolong the enduring impact of hybrid and remote work programs. Quarter after quarter, we hear the good news that people will be returning to the office, and quarter after quarter, the “trickle back to the office” happens slower than we expect. Will the office environment soon reflect pre-pandemic levels of occupancy? Not likely. Will a combination of adaptive reuse, flexible landlord/ownership, settling interest rates and burgeoning industries (quantum, AI, etc.) keep us on the road toward increased and sustainable occupancy? Yes, we believe it will. To combat these rising vacancy rates, developers and landlords have made monumental efforts to work with municipalities to explore adaptive reuse strategies, most notably, the conversion of aging, vacant office buildings into residential units. Easier said than done, but savvy and experienced developers have been able to navigate these waters somewhat successfully, and we will see major projects come on line toward the end of 2025 and into 2026. And while the downtown Denver office market was hit hard by the pandemic and ensuing years, certain areas have shown incredible resiliency – Cherry Creek, for example, currently boasts an impressive 8.5% office vacancy rate. Northern Colorado has also shown impressive adaptability. While Loveland, Greeley and Fort Collins did post negative absorption for 2024 of approximately 90,000 square feet (out of roughly 10.5 million sf of net rentable area), the direct vacancy rate hovers around 6%. With almost no new product under construction, the market figures to continue its relatively strong performance. While the Boulder County office market was significantly impacted by the abruptly transforming workforce, with a current office vacancy rate of 23%, it has remained relatively steady over the previous 12-24 months – indicating strong fundamentals and a readiness to capitalize on its highly educated workforce. The diversity of Boulder County’s economy is a real strength, with significant players in the tech, aerospace, natural foods and products, and research and development spaces. The University of Colorado continues to fuel innovation, attracting startups and major companies to the area. Incentives and shorter-term lease deals offered by landlords are helping to buoy a market that was not immune to a workforce seduced by work-from-home flexibility. In addition, office vacancy rates are forecasted to decline in the short term with several significant office projects being converted to life science/ lab space. But as of the first quarter, more than 20% of Boulder workforce continues to work remotely or from home. Workspace utilization continues to evolve in this unique market. From an investment perspective, capitalization rates on Colorado office sales continue to rise, providing motivation for opportunistic buyers. And while volume is down, anyone who works in the office investment world would say pencils are not down. The buyers are there, patiently looking for opportunities. We still have a significant expectation gap between buyers and sellers, but the gap is narrowing in real time and transactions are closing. A timely example, Lone Star Funds (you guessed right, out of Texas) recently closed on the Seventeenth Street Plaza in downtown Denver. The 709,402-sf office tower was purchased for $132.5 million, indicating a national appreciation for the Denver market and a belief in the future of office product. Investors appear focused on well-located, high-quality office properties with strong tenant profiles – or the ability to add value and bring in credit tenants for the long term. The future of our regional markets hinges on more factors than are trackable, and they are rapidly evolving – but the Colorado office markets have largely displayed obvious signs of innovation and resiliency. The success of suburban markets with live-work-play amenities has gained traction and provides investors and developers with a road map to success. Thanks to a strong and educated workforce, the target market is there. And thanks to skillful developers and patient investors, the means are there. Optimism for the future trajectory of property values and lease rates is warranted, but as always – proceed with caution. s Christian@deancallan.com craig@deancallan.com A market being relandscaped: Cautious optimism Christian Smith Senior commercial broker, Dean Callan & Company Inc. Craig David Commercial broker, Dean Callan & Company Inc.
March 2025 — Office & Industrial Quarterly — Page 11 www.crej.com The Point Inverness 8310 SOUTH VALLEY HIGHWAY | ENGLEWOOD, CO CAPITALIZED NEW LEASING Inverness’ Top Trophy Office Building 4.3/1,000 SF Total Parking Ratio JAMIE GARD 303-260-4341 WHITNEY HAKE 303-260-4202 GRACE LESSARD 303-260-4210 For oce leasing information: Virtual Tour of 5,300-SF Spec Suite Virtual Tour of 1,975-SF Spec Suite
Page 12 — Office & Industrial Quarterly — March 2025 www.crej.com jordyconstruction.com New Builds. Remodels. OfÀces Done Right. For more information, contact: Kristin Kyser Director of Business Development & Marketing 303.880.3770 kristin.kyser@jordyconstruction.com OFFICE — DESIGN Upgrading older office buildings can present a unique set of challenges, especially when balancing budget constraints with the desire to modernize and meet the demands of today’s tenants. Whether you’re a property manager, building owner or broker, the key to success is knowing how to approach renovations strategically. With the right design solutions, it’s possible to enhance both the functionality and aesthetic appeal of an older office building without breaking the bank. Here’s a look at some costeffective strategies for upgrading older office buildings while maximizing value. n Prioritize functionality over full renovations. Instead of committing to a fullscale renovation, which can be expensive and disruptive, start by identifying key areas that will make the most significant impact on tenant satisfaction and building efficiency. Focus on improving the building’s functionality in ways that align with current trends, such as flexible workspaces and collaborative areas. Upgrading areas such as common spaces, restrooms, and breakrooms can make a notable difference without requiring major structural changes. Consider reconfiguring existing layouts to make them more open or adaptable. Simple design interventions such as removing partitions to create more open spaces, updating flooring or adding versatile furniture can instantly transform a space without costly construction. n Repainting and refinishing surfaces. One of the most cost-effective ways to breathe new life into an older office building is with color! Repainting can dramatically alter the appearance of space and is a lowcost way to update tired, outdated interiors. Consider using neutral tones for walls to create a more modern look while allowing tenants to personalize their spaces with minimal effort. In addition to repainting, refinishing existing surfaces – such as wood paneling, flooring and tile or stone – can also help reduce costs. Existing stone tiles can be updated with a new façade of painted drywall or wallcovering to totally transform a space. Door panels can be changed with applied film to change the overall look, and it keeps the old doors out of the landfill. n Upgrade lighting for energy efficiency. Lighting plays a critical role in setting the mood and functionality of office spaces, yet outdated lighting systems can be both unattractive and energy inefficient. Swapping out old fluorescent fixtures for modern, energy-efficient LED lighting is an affordable upgrade that can have a significant impact on both aesthetics and operational costs. LED lighting offers longer lifespan and lower energy consumption, which can ultimately lower utility bills for building owners and tenants. Additionally, incorporating adjustable lighting controls or smart lighting systems further enforces the efficiency of the lighting systems and can allow for different lighting scenarios to suit the needs of various tenants. n Add or enhance green elements. Incorporating elements of biophilic design, such as indoor plants, green walls or natural wood finishes, is another affordable way to enhance the interior of an office building while promoting a healthier and more inviting atmosphere. Green design elements can increase the sense of well-being for employees and tenants, contributing to a positive work environment. Indoor plants are particularly costeffective – simply place potted plants in high-traffic areas or common spaces to add a touch of nature and freshness. If budget allows, more elaborate green features like living walls can be installed in communal spaces, offering both aesthetic and air-purifying benefits. Start with reviewing existing greenery and containers. Could the containers be changed to be more on trend? Make sure to work with a professional to maintain healthy plants and select appropriate varieties. n Focus on efficient HVAC systems. Older buildings often have outdated HVAC systems that can lead to inefficiencies in energy use and comfort. It’s an obvious area that may require an investment to maintain tenant satisfaction. Consider upgrades that reuse components to help save costs. It’s a Use cost-effective design to upgrade older office Kim Hoff Principal, Kieding Please see Hoff, Page 27 One of the most cost-effective ways to breathe new life into an older office building is with color.
March 2025 — Office & Industrial Quarterly — Page 13 www.crej.com APPRAISAL Avison Young Aaron Anderson, MAI, Al-GRS Aaron.anderson@avisonyoung.com 720-612-1905 www.avisonyoung.com BROKER (TECH REAL ESTATE) Avison Young Howard Schmidt Howard.schmidt@avisonyoung.com 303-884-8910 www.avisonyoung.com CBRE Ryan Link ryan.link@cbre.com 303-628-1771 Will Hightower will.hightower@cbre.com 303-628-1775 www.cbre.com Cushman & Wakefield Steve Billigmeier steve.billigmeier@cushwake.com 303-292-3700 Sid Dixon, Rob Bain www.cushmanwakefield.com JLL Ken Gooden ken.gooden@am.jll.com 303-390-5202 www.us.jll.com Newmark Andrew Blaustein Andrew.Blaustein@nmrk.com 303-892-1111 Josh Pons www.nmrk.com Raise Alex Hammerstein alex@raise.work 303-324-1660 BROKER (TENANT REPRESENTATION) Avison Young Howard Schmidt Howard.schmidt@avisonyoung.com 303-884-8910 www.avisonyoung.com Benchmark Commercial Real Estate Tanner Mason tanner@crebenchmark.com 303-395-0112 www.crebenchmark.com CBRE D Bergin DW.Bergin@cbre.com 425-462-6961 303-628-1700 www.cbre.com Anthony Albanese anthony.albanese@cbre.com 303-628-1758 Nic Weld, Andrew Swetnam www.cbre.com Doug Bakke doug.bakke@cbre.com 720-528-6307 Lee Diamond lee.diamond@cbre.com 720-528-6408 www.cbre.com Colliers International Chris Wiley chris.wiley@colliers.com 303-283-4588 Matthew Ball Matt.Ball@colliers.com 303-309-3526 www.colliers.com Cresa Denver Rick Door rdoor@cresa.com 303-228-0800 www.cresapartners.com Cushman & Wakefield Steve Billigmeier steve.billigmeier@cushwake.com 303-292-3700 Sid Dixon, Rob Bain www.cushmanwakefield.com JLL Dan McGowan dan.mcgowan@am.jll.com 303-390-5234 Ken Gooden ken.gooden@am.jll.com 303-390-5202 www.us.jll.com Newmark Sam DePizzol sam.depizzol@nmrk.com 303-260-4224 Jim McGrath jim.mcgrath@nmrk.com 303-260-4243 Ben Klimesh ben.klimesh@nmrk.com 303-260-4319 www.nmrk.com Tim Harrington tharrington@nmrk.com 303-260-4245 Alan Polacsek, Clay Jones, Jenn Chavez www.nmrk.com Rare Space Tenant Advisory Services Tom Grotewold tom@rarespace.com 303-296-8800 www.rarespace.com Savills Rick Schuham rschuham@savills.us 303-302-5101 www.savills.us Skye Commercial Real Estate Alec Wynne awynne@skye-cre.com 720-274-8340 www.skye-cre.com FACILITY MANAGEMENT CBRE Judy Duran judy.duran@cbre.com 720-528-6380 www.cbre.com JLL Jill Muckler jill.muckler@am.jll.com 303-628-1000 www.us.jll.com Newmark Meagan Schaeffer meagan.schaeffer@nmrk.com 303-260-4420 www.nmrk.com FURNITURE OfficeScapes Bob Deibel bdeibel@OfficeScapes.com 303-307-3600 www.officescapes.com Workplace Elements Traci Lounsbury tlounsbury@workplaceelements.com 303-471-4334 www.workplaceelements.com Workplace Resource Penelope Bankowski penelope.bankowski@wrcolo.com 303-571-5211 www.wrcolo.com INTERIOR DESIGN See Interior Design Directory pages 40 & 41 DIGITAL CONNECTIVITY AND SMART TECHNOLOGY CenturyLink Traci Mccauley traci.mccauley@centurylink.com 303-909-4173 www.centurylink.com WiredScore www.wiredscore.com Zayo Group Kellen Burl kellen.burl@zayo.com 866-364-6033 www.zayo.com LABOR ANALYTICS CBRE Kevin Major kevin.major@cbre.com 602-735-5317 www.cbre.com MOVING & STORAGE Buehler Companies Tami Anderson tami@buehlercompanies.com 303-667-7438 www.buehlercompanies.com Cowboy Moving & Storage Michael Folsom mike@cowboymoving.com 303-789-2200 www.cowboymoving.com PROJECT MANAGEMENT CBRE Laura Kucharczyk Laura.Kucharczyk@cbre.com 303-528-6484 www.cbre.com Fitzmartin Consulting Donald Fitzmartin Don@fitzmartin.us 303-912-8341 www.fitzmartin.us Task PM heather@taskpm.com 303-809-9500 www.taskpm.com Zanone Project Management Joe Zanone joe.zanone@zanonepm.com 303-335-6417 www.zanonepm.com SUSTAINABILITY / BUILDING EFFICIENCY / COMMISSIONING Ambient Energy Renee Azerbegi razerbegi@ambient-e.com 303-278-1532 www.ambient-e.com Ampajen Solutions, LLC Amanda Timmons atimmons@ampajen.com 720-339-6164 www.ampajen.com E Cube, Inc. Joe Havey jhavey@ecube.com 303-443-2610 www.ecube.com Group14 Engineering, Inc. Susan Reilly sreilly@group14eng.com 303-861-2070 www.group14eng.com TRADE ASSOCIATIONS CoreNet Global Rocky Mountain Chapter 303-748-2231 www.colorado.corenetglobal.org International Facility Management Association Denver Chapter 303-321-8548 www.ifmadenver.org VIDEO COMMUNICATIONS Zoom Ben Volkman Ben.Volkman@zoom.us 720-580-0305 www.zoom.us WELL BUILDING STANDARD® CONSULTING Ampajen Solutions, LLC Amanda Timmons atimmons@ampajen.com 720-339-6164 www.ampajen.com NORESCO Timothy Flynn tflynn@noresco.com 206-805-7035 www.noresco.com If you would like to participate in this directory, please contact Lori Golightly at lgolightly@crej.com or 303-623-1148 ext. 102 RESOURCE DIRECTORY CORPORATE REAL ESTATE AND WORKPLACE
Page 14 — Office & Industrial Quarterly — March 2025 www.crej.com May 6, 2025 (morning) REGISTER NOW www.crej.com/events $115 per person 7:00 – 7:25 a.m. Check-In, Registration and Networking 7:25 – 7:30 a.m. Welcome and Opening Remarks Emcee: Jay Philp - Shareholder, Otten Johnson Robinson Ne + Ragonetti PC 7:30 – 8:15 a.m. How to Win an O ice Property Tax Appeal Matthew W. Poling, CPA - Principal, Property Tax, Colorado, Ryan, LLC Michael Van Donselaar - Managing Director, Property Tax, Kroll Michael Clayton - Managing Director, State and Local Tax, Moss Adams Moderator: Andrew L.W. Peters - Shareholder, Otten Johnson Robinson Ne + Ragonetti PC 8:15 – 9:00 a.m. From Doom to Boom: Bringing Back Denver’s Downtown Andrew Iltis - Vice President, Planning & Community Impact, Downtown Denver Partnership Adeeb Khan - Executive Director, Denver Economic Development and Opportunity David Gaspers - Principal City Planner, City & County of Denver Department of Community Planning and Development Moderator: Austin Kane - Partner, Wall Kane Consulting 9:00 – 9:45 a.m. Networking Break - Food & Beverage in Expo Hall 9:45 – 10:15 a.m. Debt Update and Workouts Eric Tupler - Executive Managing Director, JLL Capital Markets Ann Hambly - Founder & CEO, 1st Service Solutions Michael Muldowney - Vice President - Relationship Manager, PNC Real Estate Banking Moderator: Michael Westover - Shareholder, Otten Johnson Robinson Ne + Ragonetti PC 10:15 – 11:00 a.m. Developer and Investor Perspective: Challenges and Opportunities Barry DiRaimondo - Chief Executive O icer, Steelwave Marcel Arsenault - Chairman, CEO and Founder, Real Capital Solutions Stephanie Lawrence - Senior Managing Director, Granite Properties Chris King - President & CEO, DPC Companies Moderator: Marc Perusse - Founder & CEO, E2M Ventures 11:00 – 11:45 a.m. Mixed-Industry Perspective Listing Brokers, Tenant Reps, Investment Brokers James Roupp - Managing Director, JLL Barry Dorfman - International Director, JLL Tim Richey - Executive Vice Chairman, Newmark Charley Will - Senior Vice President, CBRE | Capital Markets Mark Katz - Senior Managing Director, JLL Capital Markets Moderator: Geo Baukol - President & Partner, Brue Baukol Capital Partners Exhibitor/sponsor registration: Reserve your exhibit space today by contacting Lori Golightly at lgolightly@crej.com Checks, Visa, MasterCard and American Express accepted. 4 hours of real estate continuing education credit have been approved. PRESENT LOCATION The Cable Center 2000 Buchtel Blvd. S. Denver, CO 80210 AND 2025
March 2025 — Office & Industrial Quarterly — Page 15 www.crej.com March 2025 Over the past five years, the north Interstate 25 submarket has rapidly emerged as one of Colorado’s most dynamic industrial areas, drawing the attention of institutional developers, Fortune 500 tenants and investors alike. The submarket follows I-25 north of Denver and spans north of 84th Avenue to the southern edge of the city of Dacono and bounded by Federal Boulevard to the west and Quebec Street to the east, this area has evolved from a modest industrial cluster to a thriving logistics and manufacturing hub. Today, north I-25 boasts approximately 9.4 million square feet of industrial product – up from just 6 million sf in 2019 –underscoring the scale of its ascent. n Locational advantages and labor access. One of the primary drivers behind north I-25’s growth is its strategic location along Interstate 25 and the intersection with E-470. This corridor provides vital connectivity for truck traffic moving between Fort Collins and Denver, as well as excellent access to stable pools of wage labor and experienced engineers. For industrial users, especially those with advanced manufacturing and logistics requirements, the ability to recruit and retain qualified workers is crucial. North Denver’s position allows employers to tap into this robust workforce, fueling operations at scale. The I-25 corridor consistently ranks among the busiest in Colorado for freight movement. According to the Colorado Department of Transportation, north I-25 sees over 10,000 heavy trucks traveling between Denver and Fort Collins daily, with volume climbing 3-5% annually. The interstate’s direct linkage to other highways amplifies north I-25’s reputation as a prime distribution and manufacturing hub. For tenants requiring seamless regional or multistate logistics in the Mountain West, few locations match the submarket’s proximity to thoroughfares and labor density. n Institutional developers and key tenants. A range of institutional developers have recognized north I-25’s potential, spurring a wave of construction and investment. Groups like GID, Hillwood, KKR, Invesco, Sagard, Bow River, McWhinney, Brennan Investment Group and Rockefeller Group have compiled large amounts of institutional capital, advanced design concepts, and top-tier building practices. Their activity has attracted corporate occupiers, including Ikea, Target, Amazon, Brown Note, Meati, Izzio Bakery, Corden Pharma, Mastercraft and Interstate Batteries. Many of these developers are constructing front-park, rear-load buildings on a speculative basis. Projects feature modern clear heights of 28 to 32 feet, along with generous truck courts and trailer storage – amenities for distribution and manufacturing tenants seeking cost-effective, adaptable space. Build-to-suit facilities have also proven popular, with Target pioneering a large-scale freezer/cooler development to gain a strategic foothold in Thornton. n Robust leasing and market activity. Over the past five years, 34 institutional-grade new leases at speculative buildings were completed, representing 1.8 million sf of total leasing volume. Tenants in north Denver typically commit to longterm leases, averaging 96 months since 2020, with an average footprint of 53,000 sf. These extended lease terms underscore confidence in north I-25’s stability and growth prospects. Rents have seen consistent upward pressure, climbing from around $8.50 per sf (triple net) five years ago to $12 per sf today – a roughly 9% compound annual growth from 2021 onward. Notably, 2025 began robustly, with six new leases commencing year to date, totaling 268,435 sf. The average starting rent for 2024 deals was $12.16 per sf, paired with an average tenant improvement package of $27.50. Although the average lease length dipped from 88 months in 2024 to 73 months in 2025, these remain healthy commitments, underscoring the submarket’s staying power. In 2024, net absorption reached 849,681 sf, with newly delivered speculative rear-load properties capturing 492,058 sf of leasing. This rapid filling of new construction signals solid demand – a substantive indicator in the industrial sector. n Construction pipeline and vacancy. Despite these strengths, developers and investors remain cautious about supply and demand. The north I-25 submarket has a current vacancy rate of 10.71%. Meanwhile, more than 1.28 million sf of industrial space is under construction, 528,979 sf (41%) of which is dedicated to build-to-suit projects. Speculative development, though substantial, continues to find receptive tenants, suggesting the pipeline aligns with projected absorption trends. Developers must also navigate rising construction and TI costs. TI packages typically range from $25 to $35 per sf, a critical factor for speculative buildings. Spec office build-outs, increasingly sought by firms needing fast move-in, modern administrative or light manufacturing areas, further inflate project costs. Still, escalating rents and robust user demand have helped sustain developer confidence, supporting additional project starts. n Continued momentum and 2025– 2026 outlook. Looking ahead, several indicators point to continued growth. New projects are scheduled to break ground in 2025 and 2026, signaling enduring confidence in north I-25’s long-term potential. Prospective tenants are actively touring well-located, well-designed buildings, particularly those offering built-out speculative office components. This pipeline of inquiries fuels ongoing lease negotiations, motivating further construction. North I-25’s industrial renaissance rests on its strategic advantages: excellent interstate access, diverse labor pools and a forward-thinking development community adept at meeting tenant demands. With nearly a decade of steady rent growth, robust absorption, and landmark build-to-suit projects, the submarket has cemented its role as a core distribution and logistics hub in Colorado. Despite heightened construction costs and careful monitoring of supply-demand balances, the consensus is that north Denver’s structural fundamentals and upward trajectory will keep it among the region’s premier industrial submarkets. As 2025 unfolds and 2026 looms, institutional developers, corporate occupiers, and investors appear poised to deepen their commitments – securing north I-25’s position as a cornerstone of Colorado’s industrial market. s tyler.reed@streamrealty.com blake.mcvean@streamrealty.com Tyler Reed Executive managing director, Stream Realty Partners Blake McVean Associate, Stream Realty Partners North I-25: From undiscovered to powerhouse
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