Metro Denver business tenants vacated some 430,000 square feet in the second quarter, bringing the vacancy level up to 18.8% -- the highest it has been in at least 11 years, according to a report from CBRE.
That’s still an improvement from the 1.1 million square feet vacated in the first quarter, the Marketview report authors note.
“Class B office properties were the catalyst for this quarter’s change, recording approximately 336,000 square feet of” new leases, according to the report.
Average direct asking lease rates jumped $1.55, or 5.3%, from the first quarter to $30.96 per square foot. Those rates are up $2.15 year-over-year.
New product helped spike the rates in the central business district, with Block 162, McGregor Square and Market Station all opening, with almost 900,000 square feet of new office space being delivered.
Block 162, 675 15th St. by developers Patrinely Group, “delivered 10.5% preleased with $55 per square foot” (full service gross or FSG), according to the report.
“Despite the job losses suffered last year as a result of the COVID-19 pandemic, office-using employment showed strong improvement in May, recovering nearly 33,000 jobs since the trough in July 2020,” the report authors noted. “Professional and business services, which accounts for the largest share of office-using jobs, is back to pre-pandemic levels.”
Developers had 1.3 million square feet under construction last quarter, with “only one” office property breaking ground, according to the report.
That’s a 238,000 square foot office development called The Current, River North is a planned 12-story building at 3615 Delgany St. in the RiNo Arts District. Denver-based developer Craft Cos. is partnering with Schnitzer West.
Some of the big sales of the second quarter included Pearl East in Boulder at 4780-4999 Pearl East Circle. Unico Properties sold the 11-property portfolio for $190 million, or $365.41 per square foot.
“Office investment sales activity continued to strengthen in the second quarter of 2021, posting a total volume of $591.1 million across 12 transactions for an average price per square foot of $240.40,” the report states. “Encouraging investment sales activity through 2021 offers a positive outlook for Denver as capital continues to flow.”
The report authors noted the “strengthening fundamentals” and expected the Denver office market to bounce back sooner than other similar-sized cities.
“Denver continues to attract large technology, life science and financial service users,” according to the report. “Out-of-state interest from occupiers remains heavily persistent as Denver looks to rebound quicker than most do to its highly educated workforce, favorable pricing, diverse industry pool and quality of life.”