CREJ

Page 2 — Office & Industrial Quarterly — March 2021 www.crej.com Letter from the Editor T o help understand the nation- al outlook, two associations, NAIOP and Society of Industri- al and Office Realtors, released information from their Janu- ary member surveys, which indicate sentiment for both asset classes. Some good news: • Rent collections. Rent collections improved across most sectors, includ- ing office, where 87% of respondents reported that 90% or more of their office tenants have paid rents in full and on time, which is the highest reported collection rate for office prop- erties since April, when NAIOP first conducted its Coro- navirus Impacts Survey. • Deal activity. No surprise. There’s been strong growth in industrial deal activity. Meanwhile, deal activ- ity in the office sector “remains more robust than it had been before Sep- tember,” the NAIOP January Coronavi- rus Impacts Survey reported. • Rent relief. Additionally, Janu- ary saw the sharpest decline in rent relief requests from office tenants – only 19.7% of respondents reported that more than 10% of their tenants requested relief, the report states. • On-time transactions. Across the board, on-time transactions increased in the fourth quarter, according to the SIOR Snapshot Sen- timent Report. For office, 52% of all transactions are now on time, up from 38% the previous quarter; 74% of industrial transactions are on time, up from 51% in the third quarter. • Asking rents. According to the SIOR report, asking rents are improv- ing from the start of the pandemic across the board, but they still are nowhere near prepandemic levels and there’s large variance between the gains for office and industrial. However, some news remains stark- ly divided, based on asset type: • Confidence. Industrial confidence continues to rise, now measuring a 6.9 out of 10. Office confidence con- tinues to decline, now at its lowest confidence level of 4.7, the SIOR sur- vey found. • Leasing. “The difference before office and industrial leasing activ- ity is extreme, with office specialists reporting 88% of lower leasing activity in Q4 versus only 34% for industrial,” the SIOR survey reports. • Tenant concessions. For industrial, 58% of the SIOR respondents said landlords had the bargaining power and were offering little to no conces- sions. Only 2% of office respondents felt the same. • Vacancy. Likewise, only 22% of industrial specialists reported higher vacancy in the fourth quarter, while 60% of office respondents reported higher vacancy rates. These surveys, in addition to the articles in this issue, support the claim that industrial already appears to be through the worst of the COVID- 19 challenges. However, the road to recovery seems much longer for office. Michelle Z. Askeland maskeland@crej.com 303-623-1148, Ext.104 Insights from national surveys OFFICE 4 6 8 10 12 Denver’s resilience will drive investment activity Larry Thiel and Jason Schmidt Health crisis redefines submarkets attractiveness Brian C. Smith The sales market recovery is underway in Denver Darrin Revious How we’re evolving to meet new leasing demands Stephanie Lawrence Spec suites may be best option amid pandemic Rick Roberts 13 14 15 16 16 19 20 22 2020: A tale of diverging markets in Northern Colorado Joe Palieri E-commerce boom shows no sign of slowing Paul Kluck Market fundamentals show industrial’s strength Tim Morris and Michael Coppola 24 26 28 INDUSTRIAL Contents Building managers: How square are your feet? Becky Hanner 3 office market trends to watch as year unfolds Andy Cullen Tweaking coworking models for the next generation Reid Freeman Embrace flexibility to build the office of the future Michael Brumley Mothers' rooms make big impact in small spaces Kasia Bulkowski Multiuse logistics assets become investor darling Peter Kroner What’s next in the industrial development dance? Nick Rice Streamline leasing to keep up with market realities Kyle Waldrep