Office space in downtown Denver is decreasing by the year as the availability declines to 16.9% in the first quarter of 2019 (including new space under construction). A decrease in office space has been a trend for the past eight quarters, even though new office space is being built. In fact, 3.5 million square feet of office space are under development in the metro area, but don’t expect this space to be on the market for too long as companies are being urged to act early.
For instance, The Prism, a building under construction with approximately 95,000 square feet of rentable office space was 25% pre-leased at delivery. Companies must do their research and act fast, especially large companies that are expanding their operations in Denver due to the low price of office space compared to New York, Los Angeles, Boston, and San Francisco.
Take for example, the behemoth Amazon, who just signed a lease for 125,000 square feet at 1513-1530 Wynkoop Street in LoDo. LoDo commands the highest rental rates in the Central Business District (CBD) landing at $46.01 per square foot at the end of the first quarter in 2019. This is largely due in part to the lack of availability in LoDo at a vacancy rate of only 7.8%. Although there was discussion of locating Amazon’s second headquarters in Denver, it ultimately did not happen. Regardless, Amazon has chosen to expand the company into the 303 with one of its main moves being its advertising business on to Pearl street in Boulder.
Another notable company, Sunrun Inc, recently leased an 118,000 square foot space inside of the Johns Manville Plaza at 717 17th street. This large residential solar power company sought out this lease in order to accommodate for its growing workforce in the Denver area. Sunrun has received praise from governor Jared Polis for not only creating hundreds of jobs in the metro area, but for combating climate change and being a leader in the renewable energy sector.
Other noteworthy leases include Crocs’ lease in Broomfield for 88,293 square feet, WeWork’s 61,064 square foot lease in downtown Denver (making it the largest occupier of office space in Denver with more than 700,000 square feet), and the HR and software company, Gusto, with a 53,000 square foot lease across the street from the Tabor Center.
Consequently, as office space availability goes down, gross rent goes up and is now at an average of $36.71 per square foot in the first quarter of 2019, according to local experts. This is a 2.3% increase in rent since the last quarter of 2018. Below is a graph from CoStar that has average office rental rates at $33.72, which is up 6.77% compared to last year. Regardless, office space continues to experience rent growth.
