Denver office market shows improvement two years after pandemic
Metro Denver’s office market scored a victory in its post-pandemic recovery in the first quarter, with 232,000 square feet of positive net direct uptake – the first time office users have taken up more space than they have released in a quarter since the start of the pandemic.
That’s according to the latest data from CBRE’s Denver office, which reflects stabilization and improvement in the office market two years after the pandemic changed how renters view the type of property on a daily basis.
“Overall, the market is doing pretty well, all things considered,” said Ryan Link, senior vice president of CBRE. “It would be naive to say things haven’t changed, but we are definitely moving in the right direction.”
The vacancy rate in the region is still high at 19.3%, according to the report, but has declined from the end of 2021 after rising sharply after 2020.
Suburbs are recovering faster than downtown, Link said. The data backs up that claim, with a vacancy rate of 17.8% in the Southeast Market, which contains the Denver Tech Center, the largest office market by inventory in the Denver metro area. By comparison, downtown is still facing a vacancy rate of 24.7%.
Downtown also has the most space in the sublease market, with 1.5 million square feet available in the first quarter.
Sublet space began to climb two years ago as companies considered opening or expanding offices as remote working became the norm. These spaces are often available at a reduced rate compared to direct space, and some businesses are attracted to them because they are easy to move into.
Today, many tenants are looking for plug-and-play spaces that don’t require tenant improvements and the associated capital expenditures, Link said. Sublets are popular among this crowd.
But others, looking for an office space that reflects the culture and values of the company in order to both attract workers to the office and help with talent acquisition, want a space of their own from top to bottom, he said.
This is where the city’s new space pipeline comes in.
Block 162, the newest major downtown office tower, was delivered a year ago and has seen some rental velocity, but at 660,000 square feet in total, it has plenty of space to fill. . A joint venture that includes the Rockefeller Group in February opened Paradigm River North, a 200K SF mixed-use development that will include offices, and in Cherry Creek, local developer Matt Joblon intends to launch an office boom in the neighborhood with a 100K SF Project he started earlier this month.
And, in a show of confidence, that demand for office space in downtown Denver will come back strong in the next two or three years. Riverside Investment & Development Co. will break ground on Thursday on Metro Denver’s largest office tower in 40 years, according to a company media alert. the 30-story, 700K SF project, dubbed 1900 Lawrencehas been on the radar in Denver for months but will begin construction this week, marking the start of a planned $400 million investment.
Despite the current downtown vacancy rate, Link said, the building will be needed upon delivery, in part due to a flight to quality in the Denver market that has resulted in high demand for new or newly renovated spaces with a focus on tenant experience and health and wellness.