Shedding Light on the Return to Office

As companies navigate their long-term workplace strategies, one thing remains clear: hybrid work environments are here to stay. What remains unclear for many companies, however, is how to navigate the return to office and what the new normal for in-person work looks like.

Knowing that each company’s strategy will uniquely reflect the interests of its business and employees, we’ve broken down trends and best practices to help guide companies returning to the office.

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Shedding Light on the Return to Office2022-06-01T17:37:40+00:00

2022 Denver Office Market Outlook

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.

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2022 Denver Office Market Outlook2022-02-10T22:52:08+00:00

Q3 2020 Denver Office Market Outlook

In a year that has been anything but predictable, it’s safe to say we’ve all been navigating quite a lot. Companies across Colorado have had to face many difficult decisions, including what to do with their current office space. During Tributary’s recent “Denver Office Market Outlook” virtual panel moderated by Partner and Managing Broker Andy Cullen, local industry experts weighed in on the current state of the Denver office market and what’s next for the Mile High City. Below, you’ll find a full recording of the panel as well as some key takeaways. If you have any follow-up questions, please don’t hesitate to reach out to us directly.

Economic Impact of COVID-19 on Denver – Randy Thelen, Vice President of Economic Development, Downtown Denver Partnership

  • Denver has consistently ranked as one of the best-positioned cities to recover from COVID-19 due to multiple pre-pandemic factors including a strong economy.
  • Millennials are continuing to move to Denver at a high rate, even without jobs lined up.
  • Large tech companies are continuing to locate to Denver where there is access to top young talent.
    • One of the most recent companies to announce a move is Palantir, which is relocating to Denver from Silicon Valley.
    • Other-high profile tech companies like Facebook, Amazon, Google and Snowflake also have offices in the Denver metro area.
  • Restaurants and retail are feeling the impact the most:
    • Downtown’s restaurants heavily rely on foot traffic from conventions, events, sports games and more. With many of these events already canceled well into 2021, it will be a challenge for restaurants to attract the same customer base to drive sales.
    • Leaders are looking for ways to drive regional visitors back to the Downtown core with events such as a modified 9News Parade of Lights.
    • Destinations like Larimer Square have helped their businesses adapt to the challenges of the pandemic by closing their streets to traffic and allowing restaurants to expand their patios to allow customers to safely dine outside.

How Denver Office Tenants are Shifting Their Mindset – Amy Aldridge, Partner, Tributary Real Estate

  • Tenant perspectives continue to evolve week by week.
    • Regardless of their circumstance, most companies are trying to reduce costs and operating expenses at some capacity.
    • Many companies are either subleasing their space or looking for subleases while they wait to make a long-term decision on office space.
  • With the expectation that by next July we will be in some type of new normal, tenants should plan ahead and take opportunities while market rates are low.
  • Flexibility is key when it comes to rethinking the office of the future. Many offices are testing out a hybrid work environment where employees can choose whether they want to work virtually or in-person at the office.
  • Companies in large high-rise buildings have been more hesitant to return to the office because of the number of touchpoints for employees between their homes and desks – including traveling in elevators and using common areas with other companies.
  • With slowing activity in Downtown Denver, we are seeing more leasing activity in suburban submarkets. Low-rise buildings with large doors or operable windows are attractive workspaces right now.

Managing Office Decisions at a Culture-Driven Company – Todd Panella, Chief Operating Officer, Zivaro

  • Our company has seen outstanding productivity with remote work that requires solo heads-down concentration. But we still need face-to-face interactions in order to build business partnerships and get our product out in the market.
  • It is important for organizations to look past 2021. Now is the time to invest in a new space and continue building your culture so that you are in a good position when things are back to normal.
  • Being remote for so long has reinforced the need for in-person interaction with coworkers and employees.
  • Many companies are exploring a “free address” workspace, which are spaces without assigned seating. With fewer desks than total employees, this approach helps companies keep a smaller footprint and cut down on unused space.

Supporting Tenants While Fulfilling Obligations to Investors and Lenders – Jon Buerge, Chief Development Officer, Urban Villages

  • There is a great need for adaptability during these uncertain times.
    • Not typically a fast-moving industry, real estate companies have had to quickly make decisions to navigate the challenges of the pandemic. We can no longer lean on the best practices of 2019.
    • COVID-19 has been an accelerator of change, and you see that no more clearly than with retail. We are seeing a wave of entrepreneurs test out new concepts that they wouldn’t normally be able to do. For example, Larimer Square has signed nine short-term leases to small businesses.
  • Flexibility of lease terms is a pivotal way to help struggling tenants.
    • Right now, tenants are typically not willing to sign long-term leases as there is still uncertainty as to how the pandemic will play out.
    • When managing tenant lease terms, a blanket policy won’t work. It is important to fully understand the fundamentals of each tenant’s business so that you can create a customized, individualized strategy to provide the best help and assistance.
  • The importance of partnerships.
    • Keep close contact with tenants, lenders and investors right now – these partners need to be a large part of the dialogue when it comes to decision-making.
    • Developers are seeing a lot of inside flexibility from lenders and investors. Don’t be afraid to ask for what you need.

How Landlords are Thinking About Office Space – Allison Berry, Vice President, CBRE

  • While rental rates are remaining steady, landlords are open to additional tenant concessions like free rent and more TI dollars.
    • Office tour activity has picked up over the past month in downtown Denver.
    • Landlords are continuing to explore ways to incorporate more safety measures into their buildings, including increased air filtration, UV light sanitizers, increased janitorial staff and more.
    • Landlords are taking advantage of lower construction costs to build out spec suites and undertake additional improvement projects in common areas.
  • Tenants should not limit their decisions based solely on COVID. There’s more opportunity to negotiate favorable multi-year leases now than there will be once a vaccine is released.
    • With more than 2 million square feet of sublease space available in Denver, there is increased competition for direct lease opportunities.
  • As larger tech firms sign office leases in Denver, there is an increased interest from smaller tech companies who serve in adjacent support roles.
  • Owners and landlords continue to look for the right ground-floor retail as an amenity for their office tenants.

Final Thoughts – Making Decisions Moving Forward:

  • If your company is able to, now is the time to take advantage of the market. Once there is a vaccine, that opportunity will be lost as activity and rates pick back up.
  • A company should not make a decision strictly based on COVID-19. You could be inhibiting your company’s future growth.
  • Keep in mind that people still want to work in great workspaces. While we can get our work done at home for heads-down work, we are missing that human connection that comes with in-person collaboration.
  • With challenges onboarding new employees and maintaining team culture virtually and the natural transition with leases, there will be a large pent up demand for office space in Denver by Q3 2021.
  • Now is the time for entrepreneurship. Take advantage of the flexibility and unique leasing opportunities that are available in the market right now.
Q3 2020 Denver Office Market Outlook2020-10-29T18:47:44+00:00

Re-Opening Your Office Space Recap: Video + Key Takeaways

Re-opening office spaces across Colorado requires thoughtful planning, clear communication and patience for employers, employees and property managers alike. During Tributary’s recent “Re-Opening Your Office Space” virtual panel moderated by Partner Amy Aldridge, local industry experts weighed in on what it looks like for companies to create and implement a successful re-entry plan. (more…)

Re-Opening Your Office Space Recap: Video + Key Takeaways2020-05-15T19:59:38+00:00

Decade in Review: Denver’s Commercial Real Estate Cycle

Since the global financial crisis over a decade ago, Denver has solidified its status as a city where people – and businesses – want to be. As high-profile companies relocate their headquarters and key operations here, the Mile High City continues to have undeniably strong economic fundamentals. In fact, Denver has consistently ranked among the Top 10 recession-recovered cities for the past few years.

As a result, Denver has become an attractive market for investment. Over the past decade, commercial real estate has seen a steady influx of both domestic and foreign investment – with few signs of slowing down – adding to the city’s already-booming economic growth. While looking to the future is imperative, it’s also valuable to look at the factors that influenced our rise in order to capitalize on best practices.

Here are 5 key commercial real estate trends from the past decade that have helped shape our present industry and will inform the next chapter of development and leasing activity for Denver.

1. The Rise of Secondary Markets

Across the U.S., secondary markets are gaining the attention – and dollars – of investors looking to diversify their portfolios and increase their growth potential. According to CBRE’s Americas Investor Intentions Survey 2019, investor interest in secondary markets grew for the fifth year in a row. Advancing for the third year in a row, Denver tied with Atlanta for the #5 spot. Multifamily remained the primary focus for investors with 42.8% of total 2018 sales volume, while office came in second at 25.8%. Investor interest is expected to remain high in 2020.

2. The Explosion of Population and Business Growth

The Mile High City has long been a magnet for transplants. Since 2010, the Denver metro area’s population has grown more than 15%. With a growing highly educated workforce, the city has captured the attention of major corporations looking to attract top talent.

In the past two years alone, 24 companies have relocated their headquarters or expanded into Downtown Denver, according to the Downtown Denver Partnership. Additionally, hundreds of new companies are founding and growing their businesses here, employing thousands of people and raising hundreds of millions in capital. To meet demand, developers have delivered millions of square feet of office space. In Downtown Denver alone, more than 1.4M square feet of new office space was delivered in 2018.

3. The Evolving Role of the Conventional Office

A decade ago, “going into the office” was largely synonymous with driving to work, clocking in, sitting in a high-walled cubicle, clocking out and driving home. Today, it can mean a variety of activities in a variety of places. As technology has transformed the way we do business, many employees have the flexibility to plug in from the comfort of their couch or work from a local coffee shop.

As companies choose to access a global talent pool, traditional office set-ups have evolved to accommodate remote or partially remote workers. This often means a smaller physical footprint, and, of course, an increased demand for coworking spaces. Denver is currently the 7th largest flexible office space market in the country, according to CBRE. (Read more about the traditional vs coworking office space here.)

4. A Shift in Workplace Functionality

While the size and number of conventional office spaces have generally decreased, the design of in-person workspaces has become more important as companies look to appeal to the elevated expectations of today’s workforce, and attract and retain employees in an increasingly competitive job market. As developers and brokers, it’s been essential for us to become experts in accommodating a variety of work styles and preferences across multiple generations.

While the need for open, flexible layouts has not changed in recent years, there has been a noticeable shift among tenants requesting “heads-down space” for employees for quiet, focused work. Solutions have included huddle rooms, call booths and “zen dens.” As Generation Z enters the workforce, there will undoubtedly be another shift in design trends to meet new demands while supporting productivity across the entire spectrum of the workforce.

5. Changing Tenant Expectations

What tenants expected 10 years ago is not the same as what they expect today. And for good reason. Businesses operate in a completely different world, thanks in large part to technology advancements that have changed how we connect with one another and get work done.

Accordingly, connectivity is an increasingly important decision-making factor for companies looking for office space. As more and more ‘smart buildings’ come online, older assets will need to adapt to keep up with new infrastructure demands.

So, what hasn’t changed in the last decade? Tenants still highly value both location and amenities. Denver continues to see steady development within or close to the city center. Walkability, access to transit and nearby housing options all play crucial roles for buildings looking to attract tenants for the long-term.

Value-add amenities packages – think top-notch fitness facilities, locker rooms, showers, bike storage and common spaces that encourage community-building – are taking on increasingly important roles as elements of experiential, hospitality and residential design make their way into workplace design. We expect to see a continued blurring of the lines over the next decade as a new generation redefines what work looks like.

While no one can predict the future, by looking to best practices from the past decade and remaining flexible in the face of change, the CRE industry can continue to thrive in one of the longest CRE cycles this city has experienced.

Decade in Review: Denver’s Commercial Real Estate Cycle2019-12-18T17:59:51+00:00

9 Reasons to Use a Commercial Real Estate Broker

One of the most frequently asked questions by potential clients is why they should use a broker like Tributary to secure an office lease. As a business owner, you may assume that you can reduce the amount of time, energy and costs it takes to find a commercial space by navigating the process on your own. In reality, a talented broker can make the process easier for you.

At Tributary, we understand that real estate is one of the highest expenses of running a business and that it has a significant impact on your business goals. We believe in serving and advocating for you throughout the lease negotiations, providing robust market knowledge along the way to secure the best terms possible. (more…)

9 Reasons to Use a Commercial Real Estate Broker2019-12-10T17:17:18+00:00

5 Workplace Trends to Know in Denver

No two companies are alike. With so many differences in size, industry, operating style, growth strategy and culture, it takes a certain kind of care and attention to identify what a company needs in terms of their real estate. It’s part of the challenge of a being broker, and one we gladly take on each and every time we work with a new client. (more…)

5 Workplace Trends to Know in Denver2019-05-08T17:22:48+00:00

Get to Know Team Tributary

We guarantee you won’t find a team of brokers, developers and investors who enjoy what they do quite as much as us. We love Denver, and make it our job to know the ins and outs of this market so we can make informed decisions that maximize value for our clients and partners. Plus, we have fun doing it. Our customized approach to Denver brokerage, development and investment is built on strong relationships and data-driven insights. Watch this video to get to know who we are and what we’re all about!

Get to Know Team Tributary2019-02-05T18:01:25+00:00

Building Sale Basics: Rising Costs

When a building changes hands – a trend all too familiar in Denver right now – it’s hard to understand exactly how it will affect you and your business as a tenant. That’s why we’re continuing our “Building Sale Basics” series with this next installment that breaks down how a building sale can potentially increase your cost exposure.

As commercial real estate continues to increase in value, buildings are selling at record prices. There are multiple factors that feed into this increased value, including a rise in land prices, construction costs and mostly assessed taxes. In our current market, many buyers are willing to pay a higher price tag because they know they can get a good return on their investment.

Here’s how: During the due diligence process of a building purchase, owners create a proforma, which is a set of calculations that projects the financial return that a proposed real estate project is likely to create. Proformas are typically used to determine cash flow for the investment and assess operational costs, including potential for capital improvements for the building. Along with other elements, this helps determine a price point any buyer is willing to pay for the property.

So, what does that mean for you?

When a new owner purchases a building at a high price, they typically find a way to pass that expense onto the tenants throughlease agreements, and specifically as it relates to the operational costs for the building.  These expenses are passed through as triple net (NNN) expenses. That means in addition to your base rental rate (which might increase just due to the market), you are also responsible for covering NNN expenses, which are property taxes (largest contributor to the increases seen today), property insurance and common area maintenance. In short, you’re helping cover your proportionate share of the operating costs of the building.

In the past, the majority of office leases in the Denver market operated on a gross lease model, where the operating costs of a building were rolled into your rental rate year one and you paid a minimal passthrough each year thereafter based on actual expenses. Now, it’s more typical to see NNN leases that separate lease rates and operating costs. For example, two buildings in Lower Downtown might both be listed with a lease rate of $30/sf NNN. However, they could easily have different NNN expenses, meaning your all-in might be $41/sf for Building A vs $46/sf for Building B. We recommend working with a tenant rep broker who understands how to break it down so you’re never caught off-guard with respect to this additional operating cost exposure in a lease.

How to protect yourself against rising costs

While it might seem like you have zero power when your building sells to control these cost increases, there are a few steps you can take to protect you and your business.

  1. Leverage your size. If you are a large enough tenant, there is potential for you to cap the amount of NNN expenses you pay. You can negotiate this in your lease terms upfront typically.
  2. You can relocate. If your lease is nearly up (within 12-18 months), you can make the executive decision to move elsewhere and leverage the market in your favor. There are plenty of options in Denver that can meet your specific business needs like location, amenities and type of office space.
  3. Negotiate more tenant improvement (TI) dollars. Depending on where you are in your lease term, you might be able to get additional TI dollars through a lease restructure. Most owners want to pump a certain amount of capital into building improvements, and they might consider putting that into a tenant space like yours. Oftentimes, they require some sort of lease extension in return, but it’s all contingent on the value the new owner sees in you as a long-term tenant.

While rising operating costs are a concern for every business, remember you have choice in how you approach your commercial real estate decisions. If and when your building sells, reach out to a trusted broker who understands your options and will work in your best interest to mitigate your risk and explain all of your options.

Interested in learning more? Click here to read the first blog post in our Building Sale Basics series about Estoppel Certificates and what you should do with them.

Building Sale Basics: Rising Costs2018-11-27T23:41:03+00:00

Pros and Cons of Coworking Spaces

As the Denver market continues to grow, one particular type of real estate seems to be popping up everywhere you turn: Coworking spaces.

Designed for flexibility and ease of use for startups, freelancers and even established companies looking for interim or flexible workspace options, coworking spaces are attracting major attention and making headlines almost weekly. No longer just a fad, this type of office space is a force to be reckoned with. (more…)

Pros and Cons of Coworking Spaces2018-09-28T18:59:28+00:00
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