CREJ - Office Properties Quarterly

12 / 32

Page 12 — Office Properties Quarterly — April 2015
T he official slogan for Den-
ver’s River North Art District
should be “Up and Coming.”
It seems to be the phrase of
choice whenever the bur-
geoning neighborhood is referred
to in almost any context. And why
not? It is a perfectly fitting descrip-
tion of the commercial growth
going on in the area across virtually
all property types.
While RiNo is most notable for
its profusion of artists, designers,
architects, art galleries, studios and
other things creative, it does, in
fact, have an office presence. It cer-
tainly bears no resemblance to the
central business district’s sparkling
towers or Cherry Creek North’s
upscale shops and café. It is not as
universally appealing or accessible
as Lower Downtown’s brick-and-
lumber charm. But RiNo doesn’t
need any of that, nor would its resi-
dents and employers stand for it.
The area’s identity was forged
decades ago by location and indus-
try. It is nestled just north of down-
town Denver, with Interstate 70 and
Interstate 25 to its north and west,
respectively, Arapahoe Street at its
eastern border and Park Avenue
North to its south. When connected
on a map, those boundaries take on
the rough shape of a bowtie, which
is what much of the real estate
community calls it.
RiNo’s history is as uneventful
as its location is isolated. Until the
resurgence began at the turn of
the last century, RiNo was sparsely
populated with warehouses, small
factories, industrial shops of vari-
ous types and
a smattering of
residences. Aban-
doned rail yards
and the Platte
River accounted
for the balance of
the area.
It wasn’t until
2000 that Zep-
pelin Develop-
ment decided to
gamble on what
the district could
offer by convert-
ing a former Yellow Cab central
office into the aptly named “Taxi 1.”
The 25,000-square-foot brick office
building proved to be the corner-
stone on which RiNo would expand
unabated, save for a brief period
during the recession. Today’s office
market numbers are no less impres-
sive.
Predictably, vacancy reached its
peak of 19 percent during midreces-
sion in 2008. Quick to rebound, RiNo
showed positive absorption in every
year since, as vacancy rates fell by
12.6 percentage points, according
to CoStar Group commercial real
estate services. Average rental rates
ticked up by 22 percent over the
same period, which is a clear indi-
cation that developers believe in the
long-term potential of office space
among an admittedly offbeat collec-
tion of urban mixed-use properties.
And those existing office spaces
continue to perform well amidst
significant new growth.
RiNo’s current office building
inventory stands at 863,585 sf in
48 buildings, with 123,000 sf of
that being new product, and a net
absorption of 119,131 sf. Percentage
of vacancy, quarter to date, is 6.4,
the lowest since 2011.
Average rental rates have stabi-
lized at $28.80 QTD, a 1.8 percent
drop from 2014’s year-end mark,
which can be traced to 183,000 sf
of new product delivered since
summer 2014. Lease rates have
risen and vacancy rates have fallen
steadily since 2008, even with the
recession’s lag and nearly 256,000 sf
of new space added to the market
over that period. RiNo is nothing if
not resilient.
This is not to say that the dis-
trict doesn’t have issues. Despite
its central location geographically,
it is still very much a “destination”
area, slightly off the beaten path,
although transportation improve-
ments are ongoing, including the
expansion of light rail to the area.
Income demographics are low
– about 49 percent earn less than
$50,000 a year – but expect that
to change as commercial growth
continues to stimulate housing
construction. The whole of RiNo is
often referred to as gritty, which is
what attracted people there in the
first place. That industrial lineage
won’t be compromised.
Strength of the current funda-
mentals will continue to spur office
space growth on its own, as will
the fixed market drivers surround-
ing the area. RiNo is surrounded by
LoDo, the central business district
and the National Western Com-
plex. There is still vacant land to be
developed there, and a number of
existing properties to be rehabili-
tated.
Sustainability is critical to the
district. Reuse of materials from
within RiNo and other areas of
metro Denver lend credibility to the
sustainable movement as a whole,
cut construction costs and preserve
the authenticity of the district’s
roots. Rust can be a good thing, and
there’s no shortage of it in RiNo.
As the nation’s economy strength-
ens and the metro area continues
to stimulate job growth, new office
space will find a place in RiNo. It’s
already there, and the demand is
real. The look and feel of the place
might not be for everyone, but suf-
fice it to say, it’s way beyond “up
and coming.”s
Darrin Revious
Broker, NAI
Shames Makovsky,
Denver
HFF DENVER | 1125 17th Street, Suite 2540 | Denver, CO 80202 | (303) 515-8000
hfflp.com
proven results
in real estate cap ital markets solut ions
Raytheon Campus
Investment Sale/Financing
Two Buildings
175,924 SF
Office
Aurora, CO
The Confluence
Construction Financing
288 Units
Multi-housing
Denver, CO
One Cherry Center
Investment Sale
155,984 SF
Office
Glendale, CO
ON THE MARKET CLOSED TRANSACTIONS
For investment sales, financing, distressed debt/REO, loan sales, equity recapitalization,
restructuring services or advisory services, contact HFF.
ON THE MARKET CLOSED - FEB 2015
CLOSED - FEB 2015
BrockYaffe
Debt & Equity Placement
(303) 515-8034
Josh Simon
Debt & Equity Placement
(303) 515-8002
Jeff Haag
Multi-housing Investment Sales
(303) 515-8004
EricTupler
Debt & Equity Placement
(303) 515-8001
Jordan Robbins
Multi-housing Investment Sales
(303) 515-8010
John Jugl
Investment Sales
(303) 515-8018
Mary Sullivan
Investment Sales
(303) 515-8019
Leon McBroom
Debt & Equity Placement
(303) 515-8008
Leasing Market
RiNo’s current office
building inventory
stands at 863,585 sf
in 48 buildings, with
123,000 sf of that
being new product,
and a net absorption
of 119,131 sf.