Page 10
— Office Properties Quarterly — October 2015
Market Update
B
oasting more than 28 million
square feet of office space,
Colorado Springs is an active
market with notable oppor-
tunity for groups that are
positioned to take advantage of its
higher quality of office space and ris-
ing volume of national credit tenants.
Colorado Springs has seen mod-
erately steady growth this year,
with year-to-date net absorption of
222,352 sf, a vacancy rate of 11.44
percent and an average asking rent-
al rate of $17.23 per sf, full-service
gross. Certain projects in the market
have seen outlier levels of absorp-
tion while pushing rates higher,
such as North Creek at 5725-5775
Mark Dabling Blvd. in the northwest
submarket, which secured more
than 100,000 sf of leases in 2015 at
above-average rental rates.
We have witnessed a continu-
ation of the 2014 recovery and a
steady uptick in leasing rates. Ask-
ing rates for Class A product outside
of the central business district are
approximately $20 to $21.87 per sf,
full-service gross, while non-CBD
Class B asking rates are averaging
$12 to $17 per sf, full-service gross.
CBD tenants should expect to pay
an average of $25 per sf, full-service
gross, for Class A space, and $19.90
per sf, full-service gross, for Class
B space. There continues to be a
discrepancy between the south and
north submarkets, with the north
side of town experiencing higher
rental rates and, generally, more
tenant activity.
Declining unemployment rates
are contributing to the health of the
office market in Colorado Springs,
which continues
to rely heavily on
government spend-
ing and defense
spending, in par-
ticular. The U.S.
Bureau of Labor
Statistics estimates
the unemployment
rate to be 5.1 per-
cent, down from its
high in 2008 of 9.9
percent. Boasting
lower lease rates
and a lower cost of
living than nearby
primary markets,
Colorado Springs is
poised for growth
as sizable national
occupiers continue
to evaluate the
market as a poten-
tial location for
secondary opera-
tions.
Tenants in the
market continue
to command favor-
able lease terms
as Colorado Springs’ double-digit
vacancy rate creates a natural com-
petition among building owners.
Steady growth is a positive attribute
because of its predictability and
sustainability, but it limits the pos-
sibility of speculative development,
which Colorado Springs has not
seen on a large scale since before
the recession. Developers that can
retain a tenant predevelopment are
poised for success in this environ-
ment, but completing a project of
serious magnitude is easier said
than done.
Tenants are able to execute a
venerable flight-to-quality in the
current environment, in which it is
feasible to relocate from a Class B
to a Class A campus with hyperat-
tentive property management and
proactive ownership. Rent is some-
times perceived by tenants as a
necessary expense or sunk cost. But
when these projects are owned and
managed properly, they generate the
ability to leverage tenants’ rent dol-
lars. This can create leverage to ele-
vate employee experiences, which,
in turn, allows companies to attract
Preston Dunn
Vice president,
Transwestern,
Denver
Karen Clarke
Vice president,
Transwestern,
Denver
Colorado Springs office lease rental rates and vacancies
Office activity in Colorado Springs
