Newmark Grubb Knight Frank Research Outlines Denver's Robust Office Market
Company Forecasts CBD Class A Rental Rates Will Achieve All-Time High by
DENVER, Oct. 15, 2013
DENVER, Oct. 15,2013 /PRNewswire/ -- Newmark Grubb Knight Frank (NGKF)
released its third quarter research figures on the Denver office market, which
reveal that the sector continues to enjoy a healthy recovery. According to the
report, year-to-date absorption totaled more than 1.0 million square feet –
topping full-year absorption for 2012 and sending a clear signal that Denver's
office market is firmly in expansion mode. Additionally, the trend of
declining vacancy stretched into its 15^th quarter, with overall vacancy
falling slightly to 16.3%, down year-over-year from 17.7%.
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"Denver's office market has exceeded our high expectations for a breakout
year, with compelling activity throughout the third quarter," said Kevin
McCabe, executive vice president and regional managing director. "By year-end,
Class A rates in the CBD may very well reach the previous all-time high of
$32.00/sf seen in 2008. This would echo the new high of $24.55/sf for Class A
rates the Southeast Suburban (SES) submarket recorded in the second quarter of
Mr. McCabe continued, "The local investment market is also on track to beat
2012's totals, both in activity and volume, and more development projects are
in the works."
"Denver is one of just a handful of office markets, along with Boston, Dallas,
Houston and San Francisco, where rental rates have approached or surpassed
their pre-recession peaks," explained Robert Bach, director of research –
Americas for NGKF. "The two hottest economic sectors and drivers of office
demand are well represented in Denver: technology and energy. The strong
downtown, the expanding light rail system and, of course, the area's natural
beauty are combining to attract younger, educated workers to the region."
Absorption slowed a bit during the third quarter, and this was most notable in
the CBD and SES submarkets. The beginning of a phased return of GSA tenants to
the Byron G. Rogers Federal Building tempered absorption in the CBD, while in
the SES, the bankruptcy of a financial services firm and subsequent giveback
of 75,000 square feet contributed to moderate quarterly absorption of just
under 100,000 square feet. Still, year-to-date absorption in both of these
submarkets remained positive and, in the CBD, Class A rates increased
moderately to $30.85/sf from $30.75/sf in the previous quarter.
"Steady, sustainable growth bodes well for continued expansion in Denver as
companies lease more space in preparation for increased staffing," said
Executive Managing Director Jamie Gard, who is currently leasing 16M, a
mixed-use project with 130,000 square feet of Class AA office space near Union
Station in the hot LoDo micromarket.
Morgan Stanley Smith Barney Financing and others have pre-leased approximately
50,000 square feet at 16M, which is scheduled to deliver in 2014. This is one
of many examples that illustrate the shift from traditional CBD office space
to the trendy LoDo neighborhood – one filled with Class AA mid- and high-rises
and historic red brick buildings – which has accompanied the overall market
recovery. Additional insight and history is documented in Denver's CBD and
LoDo: Past, Present and Future, an NGKF white paper.
"Companies are waiting for space to be built in LoDo because there is nowhere
to locate. With approximately 200,000 square feet of Class A space available,
and virtually no Class C product to speak of, tenant demand is driving new
development," said Executive Managing Director Jeff Castleton. "An indication
of this dynamic is the newly announced 1401 Lawrence, 21-story office tower.
However, classic LoDo 'brick and timber' office space – mostly Class B space –
will always be limited, pushing up rents and keeping vacancy low for this
class of properties, as well."
Denver's investment sector is out-performing recent years with 1.9 million
square feet valued at $452.6 million trading hands in the third quarter.
Year-to-date, 7.1 million square feet has been sold, valued at just under $1.4
billion. NGKF Research forecasts that the investment market is poised to well
exceed 2012's total sales volume of 10 million square feet with a cumulative
value of $1.6 billion.
"Denver has matured into a top 10 market in the country, with national and
international investors committing to the region," said Riki Hashimoto,
executive managing director, NGKF Capital Markets. "Everyone wants to
participate – from core and core-plus institutional groups, value-add and
entrepreneurial equity to local operating partners with both institutional and
private equity sources. We are seen as a stable inland market with good
macro-economics, and a nice alternative to the highly competitive gateway
To download the complete 3Q13 Denver office report, or to access office and
industrial reports for other markets throughout the country, visit
www.ngkf.com. To speak with a NGKF expert, please contact Mira Matic at
About Newmark Grubb Knight Frank
Newmark Grubb Knight Frank (NGKF) is one of the world's leading commercial
real estate advisory firms. Together with its affiliates and London-based
partner Knight Frank, NGKF employs more than 12,000 professionals, operating
from more than 320 offices in established and emerging property markets on
With roots dating back to 1929, NGKF's strong foundation makes it one of the
most trusted names in commercial real estate. Its integrated services platform
includes leasing advisory, global corporate services, investment sales and
capital markets, consulting, program and project management, property and
facilities management, and valuation services. A major force in the real
estate marketplace, NGKF serves the local and global property requirements of
tenants, landlords, investors and developers worldwide. For further
information, visit www.ngkf.com.
NGKF is a part of BGC Partners, Inc. (NASDAQ: BGCP), a leading global
brokerage company primarily servicing the wholesale financial and real estate
markets. For further information, visit www.bgcpartners.com.
SOURCE Newmark Grubb Knight Frank
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