October 2010
Commercial real estate continues to recover as vacancy rates decline in Metro Denver
Commercial real estate continues to recover as vacancy rates in Metro Denver's industrial and retail markets declined in the third quarter, according to data compiled by the Metro Denver Economic Development Corporation (Metro Denver EDC) in its Monthly Economic Summary for October 2010.
Results of a survey released by PricewaterhouseCoopers suggest commercial property investors are returning to the market in many areas, including Metro Denver. Investors are generally focused on high performing, Class A assets, and some respondents said debt financing is again available. Respondents also said Metro Denver remains a buyers' market for office property but is on-track for recovery.
"That recovery, though, could ultimately look like a series of gains and setbacks until business confidence returns to a level that supports consistent hiring and more demand for space," stated Tom Clark, executive vice president of the Metro Denver EDC.
According to CoStar Realty Information, Inc., Metro Denver's third quarter direct office market vacancy rate rose slightly from the second quarter and returned to the same level (13.9 percent) reported one year prior. The third quarter direct average lease rate ($20.11 per square foot) was down slightly from the second quarter average and was 3.5 percent below the average rate one year ago.
CoStar data also show the direct vacancy rate in Metro Denver's industrial market declined for the fifth-consecutive time in the third quarter. The third quarter rate (5.8 percent) was the lowest reported since the fourth quarter of 2007, which marked the official start of the recession.
"However, lease rates remain soft and are likely to show little change until employment growth and leasing activity strengthens," said Clark.
The third quarter direct average lease rate ($4.71 per square foot) was down slightly from the second quarter average and was 2.5 percent below last year's average rate.
Several public-sector construction projects are helping to offset the sluggish pace of commercial development. Further, several apartment and transit-oriented development projects now in the planning or building phase also illustrate Metro Denver's enduring reputation as a great place to live and work.
Construction activity in the Metro Denver region includes:
- A 77-acre property formerly home to an Asarco metals smelter will undergo an environmental cleanup and will ultimately offer 1.1 million square feet of new industrial space north of downtown Denver. Denver-based developer Brownfield Partners LLC will oversee the project - to be called the Globeville Commerce Center - and will receive contributions from Adams County and the City and County of Denver.
- The Ralph L. Carr Colorado Judicial Center at Broadway and East 14th Avenue in Denver is underway. The center will be built on the site of the former Colorado State Judicial Building and will include a 204,800-square-foot courthouse joined to a 600,000-square-foot judicial office building. Builders expect to complete the $258 million project in the spring of 2013.
- The University of Colorado broke ground on its Health and Wellness Center at the Anschutz Medical Campus. The new 94,000-square-foot building will house research facilities focused on holistic health and facilities dedicated to fitness, nutrition, and community wellness. Builders expect to complete the project in early 2012.
- The Regional Transportation District (RTD) and TOD Group LLC are discussing plans for a 21-acre development along the FasTracks Gold Line in Adams County. Plans include residential, retail, and office space.
- Wood Partners LLC announced plans to develop Alta Aspen Grove, near the Aspen Grove Shopping Center and the Mineral Avenue light rail stop in Littleton. Developers say the 280-unit project should be completed next spring.
- The Apartments at Yale Station is also underway. The 50-unit development was designed as affordable senior housing and will include retail space. The South Lincoln Apartments in Denver is another affordable apartment community that will include 100 units with plans to achieve LEED Platinum certification.
Twelve indicators on Metro Denver's economy moved in a positive monthly direction in this report, compared to 11 indicators in the previous report. Fifteen indicators moved in a positive annual direction, compared to 16 indicators in the previous report.
The Monthly Economic Summary provides a snapshot of metro area economic activity, as well as its relationship to national and regional economic trends.