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Page 18 — Office & Industrial Quarterly — March 2021 www.crej.com Amazon after it announced a greater commitment to Detroit, Denver, Phoenix and San Diego, which could act as a catalyst for other companies that are looking at expansions. Suburban office is rivaling down- town office. A pullback in leasing pushed vacancy higher in central business districts and office space rates climbed in the suburbs. Sub- urban office construction has been more aligned with demand in recent years, maintaining stable perfor- mance and closing the vacancy gap with the urban core. Large cities face an employer exo- dus. Primary markets are likely to face greater hurdles in the quarters ahead as companies reassess space needs and move to shore up financial reserves. More expensive markets like New York City, San Francisco and Seattle-Tacoma could take longer to recover, particularly with large tech companies giving their workers more freedom to work elsewhere. San Francisco could face more hurdles as the market has a higher share of startup firms that are unable to weather the crisis, resulting in avail- able sublet space. Employers already were considering leaving larger markets due to high costs of living. The pandemic will strengthen this movement through its favoring of low-density, less expensive second- ary markets. Now, let’s look at the Denver metro area specifically. n Completions and absorption . On a local level, supply additions will test demand in core submarkets. Office developments in downtown Denver and adjacent neighborhoods are positioned to place upward pressure on vacancy in the coming quarters. In fact, the central business district accounts for half of recently complet- ed office space. Vacancy in the urban core has jumped, suggesting projects slated for delivery could struggle to secure tenants. Companies with pro- visional lease agreements also may pull out, similar to WeWork’s passing on more than 200,000 sf. n Price and cap rate trends. Although office sales activity remains subdued, recent deal flow is promising. Subur- ban office properties have accounted for a high percentage of transaction volume. • Average price per sf has increased to slightly over $212. • Average cap rate fell slightly to 6.6%. • Suburban Class B assets of less than 50,000 sf have upheld deal flow throughout the pandemic, while most of these transactions have closed for less than $200 per sf. s brian.smith@marcusmillichap.com Smith Continued from Page 6 test how remote working may fit into the post-pandemic office philosophy.” At the very least, spec suites almost always are in a landlord’s conversation when trying to reduce high vacancy in a distressed market, regardless of the cause.Yes, the pandemic is unprec- edented, but landlord tactics essentially are the same in a correction cycle. So, the build-out of new spec product is not as risk adverse as other potential short-term investments may be. In any event, it looks like those risks are pay- ing off. “Numerous building owners rolled the dice and chose to proactively spend during the pandemic down- time to create high-end spec suites to attract new tenants and to retain existing occupants to their buildings,” Rayburn said. “Those landlords now are showing a willingness to transact short-term deals of one to two years to land tenants who are likely to renew for a longer term within the first six to 18 months of their leases.” This is not a new idea. Landlords have employed spec suites as a highly successful office space model for at least a decade, and competition is fierce. Typically, landlords must com- pete for tenants in both existing and new buildings in the marketplace. And spec suites have served as a hedge against uncertain market conditions, but not a pandemic. COVID-19 presents a whole other layer of challenges, and nobody can say when those will be diminished significantly. Additionally, construction prices are not coming down anytime soon. The construction industry has been dealing with manpower short- ages and supply chain disruptions well before March 2020. Landlords can mitigate those types of risks by using economies of scale, when available, especially for long-lead items. The win-win here is that spec suites are a nearly perfect match for smaller tenants not yet sure of their footing in this pandemic era. Landlords can offer spec suites as flexible, high- performing spaces to a wide range of potential tenants. For now, COVID-19 vaccines should inspire confidence in a market craving normalcy. And spec spaces can offer some measure of cer- tainty in a fundamentally uncertain environment. s rroberts@aberdeenconstruction.com Roberts Continued from Page 12 The central business district has long driven office leasing activity in metro Denver, but since the pandemic set in, the area has struggled the most out of any submarket. That likely will improve as 2021 goes on. The Denver Tech Center also is picking up steam, along with the western part of the metro area. Micromarkets like Lower Downtown and River North are outper- forming the CBD while Cherry Creek stood up to the pandemic’s challenges better than nearly any other part of the market, likely thanks to a high con- centration of well-capitalized financial companies with office space in that submarket. As the vaccine rollout continues, driving the virus back and helping stir the economy back to life, now is the time for companies to reconsider the plans they shelved or reevaluate their decisions to pull back on office space. As the year goes on, we’re likely to see leasing activity in the metro area increase even more, which will make it more difficult to find the same kinds of opportunities that are available now. s andy@tributaryre.com Cullen Continued from Page 14 Finally, the ideal mothers’ room is a space supported by internal policies and practices. Any lactating mothers, who can expect to use it two to three times per day for a duration of approx- imately 25 minutes at each use, should be able to reserve the room. Office pol- icy must prioritize the use of the room for lactation, while recognizing that when it’s not utilized by nursing moth- ers, the room can serve other wellness purposes for all employees – changing clothes, taking private calls, meditating or even just having a quiet moment. Depending on an organization’s size, an employer may want to provide mul- tiple rooms throughout the building. Property managers should consider a mothers’ room as a building amenity, not unlike public restrooms. For larger buildings, property managers could even consider consolidating individual mothers’ rooms into larger mothers’ suites. These spaces might offer priva- cy with individual seating spaces with occupancy indicators and incorporate calming music. Such space can double as a nursing suite in case building users or visitors need a private space to attend to their child’s needs. A rest- room with a changing table within the suite or nearby would be encour- aged. The trends in mothers’ rooms are positive, but there is a lot more that we can do as architects, designers, building owners and employers to ensure that we are valuing the con- tributions of working women in our organizations. Let’s celebrate the great progress we have made, but keep an eye on the bigger picture. Let’s aim to make mothers’ rooms a part of every workplace program. s kbulkowski@moaarch.com Bulkowski Continued from Page 16 interior environments. From desktop surfaces to conference rooms to air filtration, technology-driven solu- tions and creative design are raising the bar on safety. Office workspaces are incorporating simple changes, such as increasing the efficiency of air filters (MERV rating) in heat- ing and cooling systems to provide cleaner work environments. In addition, construction industry pro- fessionals also are looking to new technologies, such as needlepoint ionization, that can help neutralize pathogens and limit the spread of germs. We’ll also see an effort to reduce physical touch points within the workspace. Previously optional improvements – like touch-free sinks – are becoming the stan- dard. Other touch points are being reduced by technology enhance- ments. For example, the prevalence of automatic doors and key cards for access throughout the office, and the integration of nonporous, antimicro- bial materials like copper into the design are all helping to keep offices as clean and sanitized as possible. While there are a number of inte- rior trends to focus on, we also need to look outside the building to ensure the office’s exterior environ- ment is adding value for workers. In places like Colorado that typically experience an abundance of sunny days, there is tremendous opportu- nity to rethink and more fully lever- age outdoor space. This includes the incorporation of outdoor seating, covered patios and extended balcony spaces that can be used as active workspace, accommodating meet- ings and providing employers with functional options to bring their work outside. Building technology and low-voltage systems also are being extended to these outdoor workspaces to help maintain con- nectivity and efficiency. As construction industry profes- sionals, we can look forward to seeing the demand for office space come back strong as we move out of the pandemic. It’s a great time to take a step back and think criti- cally to anticipate the needs from office users of the future to ensure the construction industry is poised to deliver when demand bounces back. s michael.brumley@kiewit.com Brumley Continued from Page 16