As we enter our third year of the COVID-19 pandemic, the Denver office market is beginning to look more familiar to those of us who have been here awhile – even if we are far from the boom we were experiencing prior to the pandemic. Leasing activity picked up considerably in the latter half of 2021 as vaccination rates increased and companies expressed higher confidence in returning to the office. With little to no signs of that changing as we enter a new year, it’s still very much a tenant’s market.
While current leasing activity within Denver’s office market is still dominated by short-term leases, co-working spaces and downsized office spaces, we’re seeing companies starting to evaluate more long-term strategies. Taking into account market uncertainty, high construction costs, and the growth of hybrid work environments, many companies are thinking about their real estate and its impact on their operations in new ways that allow for continued growth.
Knowing there’s no one-size-fits-all solution, Denver’s submarkets have been experiencing different levels of leasing activity, which is expected to maintain this year. Here’s a breakdown:
Downtown Denver: As of the fourth quarter of 2021, the vacancy rate in downtown Denver was at 25.4%. However, activity is starting to pick up, with many companies engaging in short-term leases. This includes co-working spaces like WeWork and furnished spec suites. Many companies that once occupied larger office spaces are downsizing, providing opportunities for smaller companies to scoop up some great locations.
Denver Tech Center: Throughout the pandemic, there has been an exodus of companies from the Central Business District (CBD) and Lower Downtown (LoDo) to the DTC. Even so, the vacancy rate in this submarket was second only to Northwest Denver in the fourth quarter of 2021 at 26.2%. Similar to downtown Denver, companies that are leasing offices are pursuing short-term leases.
Northwest Denver: This area continues to attract businesses from the Boulder market, many of which are biotech, data science and laboratory/research companies. While vacancy rates in this submarket were the highest in the fourth quarter of 2021 at 26.4%, demand for quality office spaces in this location will continue to drive activity this year.
Cherry Creek: This submarket continues to suffer from low inventory. Demand remains strong and new office buildings are often fully leased before even breaking ground. Vacancy rates were the lowest among the six submarkets in the fourth quarter of 2021 at 14.5%.
Colorado Boulevard / I-25 Corridor: Leasing activity remains low in this submarket, with vacancy rates at 22.3% in the fourth quarter of 2021. Expectations that overflow from Cherry Creek would drive demand in this submarket have failed to come to fruition, and landlords are suffering as a result. Many buildings need improvements, and investors have begun to divert their assets into less risk-adverse properties.
West Denver: Like the Colorado Boulevard / I-25 Corridor submarket, leasing activity in West Denver remains low. Property owners are not offering tours on subleases and have been slow to engage tenants. Vacancy rates were at 24.4% in the fourth quarter of 2021.
While leasing activity is largely picking up across the metro area, new construction in Denver has, and will likely continue, to exacerbate the already high vacancy rates. Block 162 in Denver’s Central Business District, for example, offers a staggering 595,000 square feet of space within a 30-story, Class A office building, and was completed in 2021. Currently, 95,000squarefeet is leased, with another 250,000 square feet out for signature. The Current, a 12-story, 235,000-square-foot office building in RiNo is set for completion in the first quarter of 2023. Similarly, T3, also in RiNo, will add 235,000 square feet of office space and is slated for a third quarter 2023 completion.
We know that navigating long-term strategies in this uncertain office market can be challenging and burdensome, and we have the resources to help. Our team of brokers has decades of experience and superior market intelligence to help you evaluate the best strategy for your company.