CREJ - Office Properties Quarterly

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Page 16 — Office Properties Quarterly — April 2015
C olorado maintained its ranking
as a top 10 state for employ-
ment growth during 2014 and
is expected to post a strong 2.7
percent increase in employ-
ment in 2015.The employment base is
expected to reach 2.5 million workers
in 2015, representing the addition of
over 66,000 jobs.
More than 60 percent of employ-
ment in Colorado is located in the
seven-county metro Denver region.
Metro Denver job gains accelerated
during 2014, finishing out the year
stronger than expected with the addi-
tion of 46,200 jobs. An additional 45,000
jobs are expected to be added in 2015,
representing a 3 percent growth rate.
Metro Denver will experience particu-
larly strong employment growth in the
education and health care services,
professional and business services, and
leisure and hospitality supersectors.
About 120,000 workers were located
in downtown Denver during the first
half of 2014, based on the boundaries
defined by the 2007 Downtown Area
Plan. Using data from CoStar Realty
Information, this region includes about
20 percent of all office space in metro
Denver, or about 35.1 million square
feet. Employment data often is dis-
cussed in terms of 11 supersectors, or
combinations of employment sectors.
To simplify the discussion, employ-
ment in downtown Denver has been
further combined into six categories.
When viewed in this manner, a pic-
ture of the major users of office space
begins to emerge.
Nearly one-third of downtown Den-
ver’s employment falls in the profes-
sional and business services category.
This category includes the whole array
of business services, such as legal,
accounting, archi-
tecture, engineering,
computer systems
programming and
design, business
administration and
management, and
advertising.These
companies tend to
be office users, so
the expected strong
growth in this super-
sector bodes well
for downtown office
occupancy.
About 22 percent
of downtown Den-
ver’s employment
consists of federal, state and local
government workers, as well as educa-
tion and health care providers.This
category is also a large user of office-
type space in the central business area,
although much of the space occupied
by these workers is in landmark build-
ings such as the Colorado State Capitol
and the Denver City & County Build-
ing. Sustained economic growth and
increases in tax collections provide a
positive outlook for employment in this
category in 2015.
The third-largest category, represent-
ing 21 percent of the employment base,
includes all of the retail, leisure and
hospitality workers.These workers are
found in the hotels, museums and per-
forming arts spaces, as well as the 3.3
million sf of retail space in downtown
Denver. Only about 4.4 percent of the
downtown retail space was vacant at
the end of 2014. Leisure and hospital-
ity also is expected to be one of the
fastest-growing supersectors in metro
Denver in 2015, so downtown Denver
employment in this category should
remain robust.
The remaining roughly one-quarter
of the workers fall into three categories:
financial activities (12 percent), natural
resources and construction (9 percent),
and information, transportation and
utilities (5 percent).
Financial activities consist of banking
and finance, insurance, investments
and real estate.These office users
have experienced mixed results with
generally decreasing employment in
metro Denver’s banks, but increasing
employment in investment services.
About 60 percent of investment ser-
vices employment in metro Denver is
located in Denver and Arapahoe coun-
ties, with much of the Denver employ-
ment found in the Cherry Creek area.
Based on these mixed trends, minimal
change in financial activities employ-
ment in downtown Denver is expected.
About 78 percent of the natural
resources and construction employ-
ment in downtown Denver comes from
oil and gas companies, which tend to
occupy office space. Although the natu-
ral resources sector represents just 1
percent of metro Denver employment,
direct oil and gas employment rep-
resents about 7 percent of the down-
town Denver employment base, or
about 8,300 workers. As oil prices have
plunged from $106 per barrel in June
2014 to $47 in January 2015, oil and gas
companies are responding by decreas-
ing exploration and extraction activ-
ity. Depending on how long oil prices
remain low, a decline in oil and gas
employment in downtown is likely.
The smallest employment category
in downtown Denver, representing
about 5 percent of total employment,
consists of manufacturing, transporta-
tion, warehousing, utilities and infor-
mation companies. Information was
Patricia
Silverstein
President and
chief economist,
Development
Research Partners,
Littleton
Market Drivers