The Denver market for commercial real estate continued to be healthy in 2015. This market posted positive leasing activity to close 2015- the 23rd consecutive quarter it has done so. According to CBRE released data, the expense of renting space has now surpassed the peaks set prior to the recession.
Booming office space rents
The office market in Denver is kept afloat by the rapidly expanding technology industry. Analysts opine that sky high expenses in California and Silicon Valley are permitting an increased number of technology firms to turn their gaze at Denver and other similar markets. Companies like ProtectWise, Four Winds Interactive, Ibotta and Altitude Digital have been nicknamed “Denver Gazelles” for their quick expansion.
Rents in Denver are also on the rise. The median direct asking rent in fourth quarter was about $25 per square foot. This is a rise from the $24 per square foot in 2015. The rate of office vacancy in Denver area dropped to 13.1 percent in latest quarter from the 13.8 percent during the same period in 2015.
The incidence of low supply and high demand across Denver has pushed the median industrial lease rate to about $7 per square foot triple net in fourth quarter. This is an increase of 4.2 percent over consecutive years and about 2 percent from third quarter.
According to Jeremy Ballenger of CBRE Industrial Investment Properties, the 2015 headline should be continuous improvement in the real estate market . The starting point was a base which was on or near record levels. He described 2015 as an incredible period.
Demand and future
Jessica Ostermick of CBRE said that this positive trend should continue all through 2016 for the commercial market's three real estate sectors. All three-industrial, retail and office witnessed the increase of lease rates in 2015.
From the industrial point of view, a total of 151,841 square feet got absorbed during the fourth quarter, despite the vacancy of a 1.1 million sq feet distribution hub in north metro area. Yearly absorption surpassed two million square feet. The list of companies leading the drive includes big names from the food sector. Companies engaged in residential construction also generated substantial demand.
Industrial space of approximately 2.7 million sq feet is presently under construction. About 90 percent is being constructed sans preleasing. A majority of new construction is big bay buildings constructed for the use of large scale users. It is not made for smaller users who require 100,000 sq feet or less- and which make up about 93 percent of local market.