The Denver office space market underwent a significant reshuffle in 2023, reflecting the complex dance between evolving work patterns, economic headwinds, and the city’s ongoing dynamism. Here’s a snapshot:
Key Trends:
- Rising Vacancy Rates: Overall metro vacancy hit 23.0% in Q4 2023, a notable jump from 18.5% a year prior (Cushman & Wakefield). Downtown Denver saw an even starker rise, crossing 30% for the first time since 2000 (The Colorado Sun).
- Downsizing & Subleasing: Companies, grappling with cost pressures and adapting to hybrid work models, are shedding square footage. This drove a surge in subleases, though the market recently dipped below 6 million sq. ft. (Avison Young US).
- Rents Hold Steady: Despite rising vacancy, rents haven’t plummeted. Class A space even reached record highs in Q3 2023, driven by limited supply and premium features (JLL Research). However, expect increased negotiation for concessions like free rent (CBRE).
- Shifting Dynamics: Smaller leasing deals (under 10,000 sq. ft.) are on the rise, indicating continued demand for flexible spaces, while subleases show slower growth (Newmark). This points to a cautious market adapting to new ways of working.
Opportunities & Challenges:
- Landlords Adapting: Landlords are offering creative packages, including co-working spaces and amenities-rich environments, to attract tenants (Denver MarketBeats).
- Flight to Quality: Premium, amenity-rich spaces in prime locations are faring better, while older, traditional offices face vacancy challenges (Avison Young US).
- Suburban Shift: Suburban markets within the Denver metro area are seeing increased interest, driven by lower rents and easier access to parking (Denver Real Estate Market Reports).
- Uncertainty Ahead: The economic outlook and long-term impact of hybrid work remain uncertain, casting shadows on future market predictions.
Overall, the Denver office space market is in a period of transition. While challenges exist, there are also signs of adaptation and resilience. As companies define their post-pandemic workplace strategies and the economy stabilizes, the market is likely to evolve further, presenting both challenges and opportunities for landlords and tenants alike.
Citations:
- Cushman & Wakefield (2024, January 11). Denver MarketBeats. https://www.cushmanwakefield.com/en/united-states/insights/us-marketbeats
- JLL Research (2023, October 11). Denver Office Insight | Q3 2023. https://www.us.jll.com/en/trends-and-insights/research/office-market-statistics-trends/denver
- Newmark (2024, January 9). Denver Real Estate Market Reports. https://www.nmrk.com/insights/market-report/denver-market-reports
- Avison Young US (2023, December 12). Denver Office Market Reports. https://www.avisonyoung.us/web/denver/office-market-report
- The Colorado Sun (2023, December 7). About 30% of Denver’s downtown office space is vacant. https://coloradosun.com/2023/12/07/denver-metro-office-vacancy-empty/
- CBRE (2023, October 26). Denver Downtown Office Market Sees Vacancy Spike in Q3, But Rate Stabilization Likely Soon. https://www.cbre.com/insights/figures/denver-office-figures-q4-2022
I hope this report provides a helpful overview of the Denver office space market.
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