Competition For Denver Office Real Estate Is Driving Up Prices And Renovations

October 26, 2019
Downtown Denver skyscraper reflections.
Downtown Denver skyscraper reflections.
Hart Van Denburg/CPR News
Downtown Denver skyscraper reflections.

Office landlords are feeling pretty good right now.

Denver lease rates spiked and vacancies fell in the last quarter. CBRE, a commercial real estate firm, reports the direct asking lease rate rose to an all-time high of $28.80 per square foot. Lease rates have gone up for nine consecutive quarters now.

"I've seen a major uptick in demand," CBRE vice president Hilary Barnett said.

That drive is coming from a mix of companies moving to Denver and existing companies here expanding, Barnett said.

Vacancies in Denver area offices dropped to their lowest level since the Great Recession, just 11.5 percent according to CBRE data.

There were concerns that Denver's growing business sector would run out of office space. But there's been enough new construction as well as improvements to older buildings to satisfy demand for now.

There is currently 2.9 million square feet of new office space under construction. Five buildings alone broke ground recently. Almost half of all that recent construction is in downtown Denver.

But that means landlords with older properties have had to step up their game to compete. They've poured money into renovations which has "brought up a whole new revitalized stock to the office market," Barnett said.

Tech companies represent the largest share of new tenets as Denver continuing to pull businesses from Seattle and San Francisco. Office rents are 58 percent and 163 percent more expensive in the Bay Area than in the Mile High City, according to data from real estate researcher Reis.

It's not just a cost equation, since there are cheaper markets still. But Denver's high marks for quality of life make the city what Barnett calls "sticky" for workers, meaning companies believe they can attract and retain talent in here.

And many companies signing long-term leases, she said, are betting on that.