Colorado Real Estate Journal - November 19, 2014
2015 will be an exciting year for commercial real estate in Denver if “bold predictions” by CBRE professionals pan out: • There will be five speculative office projects representing 1.2 million square feet under construction in the southeast suburban market – office specialist John Marold. • A Class A industrial asset in Denver will trade for more than $200 per sf – industrial expert Jim Bolt. • A carrier hotel for data communications will be built from the ground up in downtown Denver, representing a $500 million investment – Pat Lynch, Data Center Solutions. • An “uber-core” office asset will shatter records by trading at a sub-5 percent cap rate – leading investment broker Mike Winn. Those and other “bold predictions” were offered at a CBRE market forecast event called Moving Up the Risk Curve in Denver Nov. 6. More than 350 people attended. Drilling down from a positive forecast on the national economy, CBRE Global Chief Economist Richard Barkham said Denver probably has another 18 to 24 months of falling unemployment ahead, which is good news for its already strong local office market. The multifamily, retail and industrial markets are performing better than the country’s as a whole, and based on past cycles, it’s likely neither the U.S. nor Denver markets will enter what he called a “zone of danger” until around 2018. Barkham warned against worrying about geopolitical events, saying they do not cause recessions. Interest rates are a concern, but he doesn’t see the Fed beginning to move up shortterm rates for at least 12 to 18 months. “Everybody is talking about Denver, and that’s a good thing,” said keynote speaker Tom Clark, CEO of the Metro Denver Economic Development Corp. Colorado ranked fourth in the nation in job growth in 2014 (and 11th on the list of the top 20 markets for high-tech job growth), and employment growth should continue to be strong into 2015. Clark said 26 percent of Denver metro employers expect to hire in the fourth quarter of this year. “We haven’t seen numbers like that since the 1990s.” Potential limiting factors to Colorado’s robust economy include Interstate 70 traffic, escalating housing prices and, long term, water availability, he said. CBRE panel discussions regarding commercial real estate users and investments in Denver yielded the following insights: • Energy companies occupy about 4.3 million sf of office space in downtown Denver, or approximately 20 percent of the market – Anthony Albanese. • Boulder, Interlocken, River North and Lower Downtown comprise the four technology submarkets in metro Denver. “I think LoDo’s best tech days are yet to come” – Chris Phenicie. • CBRE’s 20-member Global Corporate Services team, whose clients increasingly are moving toward collaborative work environments, followed suit. “It creates a tremendous amount of energy, which is a huge positive.” – Doug Bakke. • “2015 stands to be another great year for commercial lending.” Volume should increase another 8 percent beyond 2014 – Brady O’Donnell. • Expect continued cap rate compression for core and coreplus retail properties in 2015 – Brad Lyons. • The industrial market has seen unprecedented levels of preleasing in new construction. “This is far and away the best market I’ve been part of” – Jim Bolt. • Rent growth in the multifamily market will moderate in 2015, but investment sales will remain strong – Jessica Ostermick.