Metro Denver’s commercial real estate market is showing signs of a return to normal following a rocky few quarters caused by the COVID-19 pandemic. There’s no question that there are still challenges to overcome as the marketplace tries to right itself after an unprecedented shock, but a few glimmers of hope for the office market popped up in the third quarter of 2021.

Perhaps the most encouraging statistic from the most recent quarter is the positive net absorption of office space, the first time this figure has ventured into positive territory since 2019. In the third quarter of 2021, the office market experience positive net absorption of nearly 240,000 square feet, including both direct and subleasing.

This figure marks a shift back to more normal leasing activity in the office market, coupled with fewer companies leaving their office space. Companies leased more than 2.3 million square feet of office space in metro Denver in the third quarter, an increase of 43% over the third quarter of 2020, when leasing activity was largely stifled by COVID-19.

Economic activity has crept back in metro Denver with the proliferation of COVID-19 vaccines, and offices are slowly reopening. This bodes well for the office market, where confidence was shaken when huge swaths of office workers were sent home to work for more than a year.

But there’s a long road back to where we left off in 2019. Before the pandemic, the metro Denver office market was cooking, with average rents approaching $30 per square foot, new product under construction and vacancy rates holding steady at sub-10%, even with new buildings coming online.

Now, the total vacancy rate is 14.3%, up 4.4% from its pre-pandemic position. The amount of space under construction has halved, although a big reason for that is the delivery of major office buildings like Block 162 earlier this year, which added more than 600,000 square feet of office space to the downtown market. Historically, buildings like that don’t come around in Denver very often, so it’s not out of the ordinary for many years to lapse between the construction of a major new downtown office building.

Direct gross office rents have held steady on average, ticking up by almost $1 to $29.60 per square foot year-over-year. Rents for sublease space, on the other hand, reflect the rush of sublease space that hit the market during the pandemic, dropping more than $2 to $24.08 per square foot on a gross basis.

Many companies placed their space on the sublease market throughout 2020, with the total vacant sublet space more than doubling over the course of the year to 2.4 million square feet. Today, there are more than 3 million square feet of vacant office space available for sublease.

What all this means for office tenants is that now is the time to act. Right now, owners are more open to negotiating various concessions like tenant improvement dollars, shorter term leases or discounted rental rates. Using a trusted brokerage like Tributary can help you secure these concessions and more when making your next real estate decision.