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— Office Properties Quarterly — October 2015
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committed to delivering the best to our clients and the
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For more information on how CBRE can assist you with your
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+ 1 720 528 6440
Market Update
I
f the financial crisis of 2008
and the subsequent recovery
revealed anything about Denver,
it’s that Denver is not the same
city it was when it recovered
from the financial turmoil of the late
1980s and the early 2000s. This time
around, Denver is one of the met-
ropolitan statistical areas with the
strongest and steadiest recoveries in
the nation. Denver’s strong recovery
is due to several factors and has led
to a sea change on how people, com-
panies, and commercial real estate
investors and developers view Den-
ver.
One of the key drivers to Denver’s
recovery over the past seven years is
the sheer growth of the city’s popu-
lation. Denver proved to be highly
attractive to educated workers and
millennials especially – so attrac-
tive that Denver ranked third in the
nation among cities that increased
their percentage of college graduates
between the ages of 24 and 35 from
2000 to 2012. There are myriad factors
driving this in-migration but, what-
ever the reasons, this trend continues
today.
As more people have moved to
Denver, so too have more companies.
The past decade has seen Fortune
500 companies including DaVita
and Arrow Electronics make Denver
the home of their corporate head-
quarters. Other large corporations
that have expanded their presence
in Denver include Charles Schwab,
WeWork, Comcast and Fidelity
Investments. As this in-migration
relates to Denver’s central business
district, some prominent companies,
which historically have been based
in the suburbs, are
now planting a flag
downtown. Pro-
Logis and Liberty
Media are notable
examples. Both
companies are cre-
ating a downtown
presence, in part,
to enhance their
ability to recruit top
young talent in the
area.
While tradition-
ally suburban
companies moving
downtown is a trend to monitor, the
big change in Denver’s CBD is the
incredible growth of residential units.
In the not-too-distant past, Denver
had a ratio of only one downtown
resident for every 6½ downtown jobs,
one of the lower ratios of major MSA’s
in the country. During the current
development cycle, however, Denver
is on pace to more than double the
amount of apartment units around
the city’s urban core with more than
10,000 multifamily units ultimately
coming on line this cycle.
The Denver metro area made a
concerted effort to prepare for this
growth through the continual devel-
opment of its transportation infra-
structure. A thoughtful and well-exe-
cuted redevelopment of Union Sta-
tion allowed the 120-year-old depot
to reclaim its spot as the crown jewel
of the state’s mass transit system.
RTD will more than double the size
of the light-rail service area in 2016.
The most exciting of these new lines
has to be the A line, which will offer
service from Union Station to Denver
International Airport and connect
River North, Elyria-Swansea (includ-
ing the National Western Complex)
and Stapleton, among other neigh-
borhoods to the rest of the light-rail
system.
All of these factors caused many
institutional and international real
estate investors to spend more time
evaluating and pursuing investments
in the metro area. New highs have
been set on pricing of office, industri-
al and multifamily properties. Areas
that hadn’t seen much institutional
interest in past real estate cycles,
most notably Boulder, have seen sig-
nificant investment from institutional
buyers during the recovery.
This increased interest in the Den-
ver metro area on an investment
basis has been echoed by developers.
Most of the development in the pipe-
line is in downtown Denver and mul-
tiple product types are seeing growth.
As of July, there were 1,576 hotel
rooms, nearly 4,500 residential units,
more than 2.3 million rentable square
feet of office space and 230,000 rent-
able sf of retail space under construc-
tion in the CBD. That said, develop-
ments in suburban locations like
Village Center Station, Fitzsimons Life
Science District and Belleview Station
are driving growth in areas outside
Denver’s CBD.
While there is a lot to be optimistic
about in the Mile High City, there also
are some warning signs to note. Den-
ver has a more broad-based economy
than ever before, but the turmoil in
the oil and gas market is having an
effect on downtown Denver’s office
market in particular. The amount of
sublease space available downtown
has approximately doubled in the
past year and a half, owing in part to
the uncertainly in the energy mar-
kets.
Further, while relatively affordable
housing was a catalyst to growth over
the past decade, the rise in housing
costs in Denver over the past year
has been the highest in the nation (of
major cities) on a percentage basis, at
a nearly 10 percent increase year over
year. Traffic to mountain destinations
has steadily become more of a deter-
rent to locals heading to the hills.
And legalized marijuana, while an
attractant for some of Denver’s newer
residents, has left some corporate site
selectors with questions as to wheth-
er Colorado is the best long-term
home for their companies or clients.
Overall, what a difference the past
decade has seen for Denver as a city.
Expect the positive trends to con-
tinue and for Denver to evolve as a
city and an economy. The region will
continue to grow in tech, professional
services, health care, aerospace and
other industries as the base of the
economy continues to broaden. Oil
and gas will struggle in the near term
and there will be more attrition to
come. However, the energy markets
eventually will recover with many
companies coming out of the current
downturn leaner and meaner than
their previous incarnations. So-called
“re-shoring” efforts will drive contin-
ued growth in regional manufactur-
ing and distribution jobs. Denver will
solidify its status of having an urban
core that is active 24 hours a day.
Denver will undoubtedly be a fun
place to live and work in the years
ahead.
s
Austin Kane
Vice president and
regional director,
Unico Properties
LLC, Denver
