Market Information: Denver

Economy

Office

Office/Flex

Economy: Year-End 2009

Economy Remains Weak, But Beginning to Stabilize

Denver-Boulder Metro area payroll employment – a lagging economic indicator -- decreased by 57,400 jobs over the 12 months ending October 2009. This was a 4.0% rate of contraction, the same rate experienced nationally. The Government and Education/Health sectors continue to hold up well, and are the only parts of the local economy to add jobs over the past 12 months.

The region’s unemployment rate was 6.6% in October 2009, down from 7.8% in July, although up from 5.5% a year ago. The national unemployment rate was 10.2% in October 2009 and 10.0% in November. Denver Metro’s unemployment rate is the second-lowest among large metro areas.

Office Market: Year-End 2009

Office Market Pauses in Q4

The Metro Denver office market closed out the year quietly, as the weak economic environment kept businesses in a defensive posture. In the final quarter of the year, absorption of office space was flat, the vacancy rate inched down, and rents continued to decline .

Highlights:

Net absorption of office space totaled negative 6,000 SF in Metro Denver in the 4th quarter of 2009. For the year, net absorption totaled negative 365,000 SF, compared to positive 644,000 SF in 2008.
Available sublease space in Metro Denver declined by 159,000 SF in the 4th quarter of 2009 and 185,000 SF during the year, after increasing by 371,000 SF in 2008. There is now 1.4 million SF of sublease space on the market, representing 1.0% of standing inventory.
The overall office vacancy rate edged down to 14.6% in Metro Denver at year-end 2009, from 14.8% in the 3rd quarter, but is up from 13.6% a year ago. The direct vacancy rate is 13.6% at year-end 2009, unchanged from the 3rd quarter but up from 12.4% a year ago.
There is 1.8 million SF of office space under construction or renovation at year-end 2009, essentially unchanged from the 3rd quarter but down from 3.1 million SF a year ago. Space under construction or renovation at year-end 2009 is 45% pre-leased, up from 39% a year ago.
Metro Denver office deliveries, including renovations, totaled 1.6 million SF in 2009, compared to 2.4 million SF in 2008. Space delivered in 2009 was 58% leased upon delivery, compared to 46% in 2008.
Metro Denver office rents declined 1.6% during the 4th quarter of 2009. For the year, office rents for all classes of space declined by 5.8%, compared to a 3.0% increase in 2008. Metro Denver Class A rents fell 7.0% during the year.
We recorded investment sales volume of $190 million in Metro Denver in 2009, compared to $1.1 billion in 2008 and $4.0 billion in 2007. The average investment sales price in Metro Denver was $177/SF in 2009, up slightly from 2008.

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Office/Flex Market: Year-End 2009

Office/Flex Market Contracts

Highlights:

The Metro Denver office/flex market experienced net absorption of negative 56,000 SF in the 4th quarter of 2009. Net absorption totaled negative 166,000 SF for the year, compared to positive 336,000 SF in 2008.
There is 148,000 SF of available office/flex sublease space on the market in Metro Denver, representing 0.8% of the standing inventory. Available sublease space increased by 13,000 SF during all of 2009.
Metro Denver’s overall office/flex vacancy rate rose to 16.1% at year-end 2009, from 15.7% in the 3rd quarter and 14.9% a year ago. The direct vacancy rate is 15.3%at year-end, up from 14.9% last quarter and 14.2% one year ago.
There are no office/flex buildings under construction or renovation at 3rd quarter 2009, compared to a total of 400,000 SF under construction at the same time last year .
There are no office/flex buildings under construction or renovation at year-end 2009. Just 68,000 SF of office/flex space was delivered in Metro Denver in 2009, at 50% leased upon delivery. In 2008, 672,000 SF of office/flex space was delivered, at 41% leased upon delivery.
Office/flex rents declined 2.8% in Metro Denver in 2009. The average asking rent is $8.64/SF, industrial gross.
Investment sales volume office/flex product totaled $99 million in Metro Denver in 2009, compared to $140 million in 2008. Sales prices averaged $106/SF in 2009, compared to $81/SF in 2008.

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