Q2 2012 Denver, Colorado Office Submarket Trends

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Q2 2012 Denver, Colorado Office Submarket Trends

Downtown and LoDo-Central Platte Valley

  • Denver’s 26-million-square-foot Central Business District (CBD) submarket includes the peripheral Lower Downtown (LoDo) and adjacent Central Platte Valley (CPV) areas. It comprises the Union Station redevelopment area at the CPV-LoDo boundary (the station fronts Wynkoop Street) as well.
  • Ross describes LoDo as “the micromarket with highest demand, extremely limited supply of large blocks of available space and Class A rates high enough to support new construction.”
  • More kudos. “More evidence has emerged that Denver’s LoDo is one of the most coveted areas for office-space users not only in the region, but nationally, with the recent sale of 1660 Wynkoop Street,” the Denver Business Journal reported in July. See Transaction Analytics for more on this high-priced sale.
  • “Companies looking for blocks of Class A space in excess of 20,000 square feet in the CBD continue to face the stiffest challenges,” reports Studley, Inc. As of mid-year, only eight blocks of Class A space larger than 50,000 square feet were available in the CBD, this source reports.
  • With no new supply delivered, net absorption in the CBD submarket through the first half of 2012 as counted by Reis was very strong at 651,000 square feet, 183,000 of which occurred during the second quarter.
  • A temporary setback. July followed with negative 53,000, an effect of the evacuation of space by Qwest/Century Link at 1801 California Street. In phases, Qwest has evacuated some 900,000 square feet at the building since the fourth quarter of 2010. According to Ross, the latest evacuation completed the process.
  • A robust outlook. “With this loss of occupancy behind us,” adds Ross, “the CBD will enjoy robust absorption in the final two quarters of 2012.”
  • Second quarter vacancy was 13.0%, down 70 basis points for the period, down 220 year-over-year.
  • At $27.11 psf and $21.87 psf, asking and effective average rents for the second quarter were down 0.3% and 0.2% for the period following gains in the vicinity of 1.0% the quarter before.
  • Construction. Now moving forward is the 10-story 16M mixed-use development at 16th and Market streets downtown, “near the white-hot LoDo area,” the Denver Business Journal reported in August.
  • More. A total of 130,000 square feet of office space will accompany four floors of apartments and ground-level retail. Downtown Denver Partnership (DDP) expects groundbreaking this year. Elevation Group LLC, Integrated Properties and Sage Hospitality are the developers. The building has received “a tremendous amount of activity by way of calls from potential office users,” according to the report.
  • Union Station. Construction began in April on the $32 million, five-story IMA Financial Group headquarters building at Wynkoop and 18th (1751 Wynkoop, running from 17th to 18th), a part of the Union Station redevelopment project. The company expects to fill 108,000 square feet at the building. Completion during the fourth quarter of 2013 is expected.
  • The 270,000-square-foot DaVita Inc. headquarters building completed construction in July 2012 at 2000 16th Street within the CPV. Construction began in February 2011.
  • An August 2012 groundbreaking for the five-story, 110,000-square-foot One Union Station building at 1701 16th Street (at Wewatta Street) has been announced following a 70,000-square-foot commitment by Antero. Union Station Neighborhood Company, composed of developers Continuum and East West Partners, is the developer.
  • Other projects in the pipeline include East West Partners 11-story, 200,000-square-foot 16 Wewatta at 16th and Wewatta, also in the CPV.
  • At the same corner, Jordan Perlmutter and Hines are planning the 10-story, 280,000-square-foot 1601 Wewatta, according to Reis and DDP.
  • Nearby, East West also has plans for the 18-story, 320,000-square-foot 16 Chestnut building at 16th and Chestnut.
  • The largest major recent completion was the April 2010 finish of the $192 million, 22-story, 495,500-square-foot 1800 Larimer building from Westfield Development. Officespace.com reports availability in the building at 11.9%. Utility company Xcel Energy occupies 330,000 square feet.
  • DDP has returned Callahan Capital Partners’ $300 million, 837,000-square-foot, 43-story Two Tabor tower at 17th and Larimer to the “on hold” list, where it has spent a number of years.
  • Buzz Geller’s 250,000-square-foot Bell Tower office project at Market and Speer, just on the border of the CBD and Midtown submarkets, also is on hold, reports DDP.
  • Jones Lang LaSalle reports a second quarter lease renewal by Kutak Rock LLP for 66,210 square feet at 1801 California (see above for more on this building).
  • Promontory Financial Group leased 62,586 square feet at 1999 Broadway during the quarter.
  • At 1900 16th Street (cited above), First Western Trust Bank, relocating from downtown’s Tabor Center, leased 49,584 square feet during the quarter.
  • Outlook. The 677,000 square feet of net absorption projected for the CBD market for 2012 requires positive activity at about 80,000 square feet over the last seven months of the year.
  • Vacancy is expected to end 2012 at 12.9%, down 260 basis points for the year as a whole. Gains of 1.3% and 2.3% are projected for the mean asking and effective rents for the year.
  • The LoDo-CPV area, including Union Station, should remain a significant focus of demand and development.

Other Denver

  • At Washington Street and Ringsby Court in the River North (RiNo) area of north Denver, near the I-25/I-70 interchange, Zeppelin Development broke ground recently for Drive, a 38,000-square-foot speculative office project, the sixth at the 20-acre Taxi campus. Reis expects completion in December. BOA Technology has preleased 23,000 square feet in the project. The existing 172,200 square feet in the Taxi complex is 100.0% occupied, the Denver Business Journal reported in March.

Southeast Suburban

  • With 29.4 million square feet of existing inventory, the Southeast Suburban submarket is metro Denver’s largest. It contains the huge Denver Tech Center (DTC) complex, along with other major high-end business parks—Inverness, Greenwood Plaza and Meridian. Also included are areas to the east along the E-470 corridor and, at the submarket’s northern extremity, the Fitzsimons bioscience redevelopment project in Aurora.
  • The large high-tech tenant base has contributed to the volatility characteristic of both the southeastern suburbs and the smaller Northwest suburban submarket (see below). Transit-oriented development (TOD) projects also have been a significant factor.
  • Construction remains subdued. No general purpose, multi-tenant office projects were underway per the date of this report.
  • Net absorption for the first half of 2012 was strong at 323,000 square feet. The total for second quarter alone was 293,000square feet.
  • Second quarter vacancy was high at 21.7%, down 100 basis points for the period, down 160 year-over-year.
  • At $20.01 psf and $14.71, asking and effective averages for the quarter were up 0.5% each for the period following respective gains of 1.1% and 1.2% the quarter before.
  • Current construction consists solely of the 186,000-square-foot owner-occupied first phase of health care software firm TriZetto Group headquarters in the Meridian business park. Construction began in April. Jones Lang LaSalle cites a May 2013 completion date.
  • TOD. Following several years of economy-driven delay, development at Belleview Station is again underway—beginning with an apartment complex, the Denver Business Journal reported in late August.
  • More. Interestingly, however, a recent office property purchase at Bellevue Station by Westfield Development Company (see Transaction Analytics) was accompanied by the acquisition of a 6.4-acre parcel of land. “Land is typically not included in an investment sale, unless the buyer believes a development cycle is occurring or near term,” stated a broker active in the sale.
  • The 500-acre Horizon Uptown mixed-use development, planned for a site in Aurora proximate to the E-470/I-70 interchange, a newly developing region with abundant undeveloped land recently opened to development by the construction of E-470, has proposed 2.9 million square feet of office space and 1.25 million of retail, according to developer Lend Lease.
  • National Bank Holdings will relocate its headquarters and about 150 jobs from Boston to Greenwood Village, according to Studley, Inc.
  • Jones Lang LaSalle reports a 103,318-square-foot second quarter relocation-expansion lease by Merrick & Company at Greenwood Plaza I, near the Orchard Road light rail station.
  • AIMCO renewed for 43,522 square feet during the quarter at Stanford Place III in the DTC area.
  • Outlook. Net absorption is expected to run slightly negative over the second half of the year. Vacancy could remain stuck above 21.0% through next year. Gains of 2.1% and 2.6% are projected for the mean asking and effective rents for 2012.


  • The strong high-tech orientation of the small, 7.6-million-square-foot suburban Northwest submarket has made it highly vulnerable to trends in that volatile business sector. Interlocken business park, Broomfield, anchors the submarket.
  • Clean energy, deemed a potential major growth sector for the future, likely is expected to play a significant role here.
  • No space completed construction in the Northwest in 2011 or the first half of 2012. A substantial spec project delivered in August, however (see below).
  • Total first half 2012 net absorption was negative 264,000 square feet following positive 211,000 last year. The total for the second quarter alone was minus 227,000 square feet. A positive turn is expected for the second half of the year.
  • Vacancy ended the latest quarter at 21.0%, up fully 300 basis points for the period, up 310 year-over-year.
  • At $20.30 psf and $15.86 psf, second quarter mean asking and effective lease rates were up 0.4% and 0.3% for the quarter following small losses the quarter before.
  • Construction. The last major completion in this submarket was the 2010 delivery of the 298,000-square-foot Central Park Tower at 385 Interlocken Crescent, Broomfield. The building remained 40.3% available as of June 2012, according to Officespace.com.
  • Spec. The 186,000-square-foot EOS at Interlocken building at 250 Interlocken Boulevard, the first large-scale speculative project in metro Denver since 2007, according to sources, completed in August. Construction started in September 2011.
  • More. The building was 100.0% available as of mid-year, according to Jones Lang LaSalle and Studley, Inc. Three similar buildings are planned for the complex, Studley, Inc. reports.
  • Commentary. “The new building will make it challenging for existing property owners in Interlocken and surrounding areas to retain their current roster. Some owners will either have to make major capital improvements to their buildings or lower rents and increase concessions,” remarks Studley, Inc.
  • More. Reis reports a planned February 2013 start date for the 240,500-square-foot second phase of the Eos complex. Completion would follow in July 2014.
  • Trimble Navigation broke ground in June for a 125,000-square-foot, four-story single-tenant campus in Westmoor Technology Park, Westminster, according to
  • Reis and industry sources. Jones Lang LaSalle expects a May 2013 completion.
  • The 180,000-square-foot 575 Interlocken remains in the planning pipeline. Broomfield Economic Development Corporation reported no preleasing in the building as of April.
  • Update. Phillips 66 has “no immediate plans” for development at the 432-acre former StorageTek site in Louisville, the Denver Business Journal reported in May.
  • In a renewal-expansion deal, White Wave leased 137,040 square feet during the second quarter at Building 4 in Mountain View Corporate Center in Broomfield, reports Jones Lang LaSalle.
  • Sold. The 461,438-square-foot Mountain View complex was sold in May. See Transaction Analytics for more information.
  • Dot Hill Systems leased 87,664 square feet during the quarter at 1351 S. Sunset, Longmont, reports Studley, Inc.
  • Outlook. Reis’ forecast calls for a modest positive net absorption total for the remainder of the year along with a decline in the vacancy rate to 18.9%. Rent growth is expected at slightly above 1.0%, down notably from 2011.

West Central

  • In metro Denver’s West Central submarket, which includes Lakewood and Golden, a new light rail line is under construction for completion in May 2013. The line runs from central Denver west through Lakewood to Golden parallel to and a few blocks south of Colfax Avenue (for the most part).
  • Net absorption in the first half of 2012 alongside no new supply was positive 158,000 square feet, 146,000 of which occurred during the second quarter.
  • Quarter-end vacancy was 16.8%, down 240 basis points from a quarter earlier, down 190 year-over-year.
  • At $18.75 psf and $15.54 psf, mean second quarter asking and effective lease rates were up 0.3% each for the period following gains at about 1.0% the quarter before.
  • One competitive general purpose office project was under construction per the date of this report: completion in January is scheduled for the 100,000-square-foot West Colfax Development at W. Colfax Avenue and Garrison Street, Lakewood.
  • One general purpose project completed construction in 2011: the 31,800-square-foot first phase of Garrison Station delivered at Colfax and Garland (a short block from Garrison) in Lakewood in July that year. A 115,000-square-foot second phase has been proposed.
  • A 150,000-square-foot medical office project completed in February as part of the relocation of St. Anthony’s Hospital from northwest Denver. The 100,000-square-foot Building 1 completed in June 2011.
  • Outlook. Modest positive net absorption over the remainder of 2012 should produce a year-end total of 176,000 square feet. Vacancy is expected to close the year at 16.5%. Gains of 2.2% and 2.5% are forecast for the mean asking and effective rents for the year.
  • The new West Corridor light rail can be expected to influence development patterns on the west side.