Market Information: Denver

Economy

Office

Office/Flex

Economy: First Quarter 2008

Economy Expanding

The Denver metro economy continued to expand in the 1st quarter of 2008. The Denver-Boulder Metro area payroll employment increased by 2.1% – 28,300 jobs – over the 12 months ending January 2008. This compares to a 0.7% increase nationally during this time. Long-term job growth in the region is 21,400 jobs per year. The Professional/Business Services and Education/Health sectors continued to see the strongest growth, adding a combined 11,300 jobs. Other sectors saw modest expansion, with the exception of Financial Services and Manufacturing, which shed a combined 3,700 jobs over the last 12 months

The region’s unemployment rate ticked up to 4.7% in January 2008 from 4.6% a year ago, though it remains well below a recent peak of 7.0% in the summer of 2003. The national unemployment rate was 4.9% in January.

The Colorado Business Conditions Index, which indicates where the regional economy is headed in the short term, continued to decline in February. The decrease has been due to the continuing weakness of the residential construction sector. The index measured 59.1 in February 2008, compared to 70.1 at year-end 2007, despite a spike of 86.9 in January. A reading over 50 signifies that the regional economy is expanding.

Office Market: First Quarter 2008

Solid Growth

The Metro Denver office market continued to see positive absorption in the 1st quarter of 2008, led by healthy demand in the CBD. Overall vacancy fell slightly and rents rose. Investment sale volume of office assets fell from last year’s record total.

Highlights:

Net absorption of office space totaled 537,000 SF in Metro Denver in the 1st quarter of 2008.
Available sublease space in Metro Denver declined by 134,000 SF in the 1st quarter of 2008 after declining by 172,000 SF in all of 2007, and now represents just 0.9% of standing inventory.
The overall office vacancy rate was 12.3% in Metro Denver in the 1st quarter of 2008, down from 12.9% a year ago. The direct vacancy rate is 11.4% in the 1st quarter of 2008, down from 11.8% a year ago.
There is 3.9 million SF of office space under construction or renovation at 1st quarter 2008, compared to 3.3 million SF at year-end 2007 and 2.0 million a year ago. 26% pre-leased, up from 20% a year ago.
Metro Denver office deliveries totaled 330,000 SF in the 1st quarter of 2008, compared to 202,000 SF at 4th quarter 2007. 73% leased upon delivery, compared to 68% in all of 2007.
Metro Denver office rents continued to rise in the 1st quarter of 2008. Metro Metro rents for Class A product rose 1.6% during the quarter.
Investment sales volume totaled $354 million in Metro Denver in the 1st quarter of 2008, compared with $917 million one year ago. Investment sales averaged $143/SF for the 1st quarter, compared with the average of $215/SF for all of 2007.

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Office/Flex Market: First Quarter 2008

Moderate Expansion

The Metro Denver office/flex market saw modest expansion during the 1st quarter of 2008.

Highlights:

Net absorption of office/flex space totaled 179,000 SF, up from the 113,000 SF absorbed at 4th quarter 2007 but down from 305,000 SF one year ago.
There is 120,000 SF of available office/flex sublease space on the market in Metro Denver, representing 0.7% of the standing inventory.
Metro Denver’s overall office/flex vacancy rate was 13.6% at 1st quarter 2008, down from 13.8% at year-end 2007 and 14.5% a year ago. The direct vacancy rate is 12.9%, down from 13.2% at year-end 2007 and 13.7% a year ago.
There is 211,000 SF of speculative office/flex space under construction at 1st quarter 2008, compared to no space under construction at the same time last year.
Two flex buildings totaling 124,000 SF delivered in the 1st quarter of 2008, compared to six buildings totaling 155,000 SF in all of 2007.
Office/flex rents rose 0.6% in Metro Denver in the 1st quarter of 2008, compared to 8.9% in all of 2007. The average asking rent is $8.99/SF, industrial gross.
Investment sales volume totaled $61 million in Metro Denver in the 1st quarter of 2008. Sales prices averaged $71/SF in 1st quarter 2008, down from $99/SF in all of 2007.

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