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May 20, 2024
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Denver’s Office Market Looking at a Slow Recovery, While the Industrial Sector Remains Strong


This update provided by real estate services firm Avison Young

Denver’s office market recovery continues to be in line with peer cities regarding return-to-work. The area’s office utilization rate sits at roughly 57% as of the week following Labor Day which has been about the same for the past year. Meanwhile, Denver continues to be an important logistics hub for the Rocky Mountain states, with 26 Amazon distribution facilities in the area. The region is also evolving into a hub for biotech, aerospace, and clean energy innovations. These are the take-aways from Avison Young’s just-released Third Quarter 2022 Office and Industrial Market Reports for Denver.

“While Denver is experiencing a slow recovery in the office sector overall, there are certain parts of the region that are seeing strong rents and a significant amount of leasing activity including the Cherry Creek submarket which has a low vacancy of just 6.7%. With impressive in-migration numbers and jobs growth, we continue to be bullish on the long-term future of this incredible city that we have the privilege of calling home,” said Marcy Moneypenny, Principal and Managing Director for Avison Young’s Denver office.

Despite office vacancy being at an all-time high, average asking rents for direct space are holding at $31.48 per square foot (psf)/full-service, having risen by 4.6% since Q4 2021. Landlords are now offering a discretionary allowance in addition to a tenant improvement allowance and more flexible lease terms to attract new occupiers. Landlords choosing to renovate and enhance the tenant experience by highlighting convenience, wellness and lifestyle amenities are starting to recoup their investment via multiple lease signings.

With more than 13 msf of industrial product under construction in the region, the first three quarters of 2022 experienced 7 msf of deliveries, accounting for 3% of the total inventory and more than typically delivered historically. These projects are preleasing by up to 15%, with Boulder and Weld counties experiencing the highest leasing velocity for new developments. Industrial leases are taking nine to 12 months on average to build-out which is prompting tenants to begin their site selection process earlier than normal. Tenants have also been impacted by rising interest rates, adding a constraint to their cost of goods purchasing power.

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