Panel Discussion Recap: The State of the Market and Its Impact on Occupiers
As part of Colorado Real Estate Journal’s Development and Construction Forecast, Chad Kollar sat on a panel to discuss Colorado’s office market. The panel included contractors and developers, meaning that Chad was able to provide unique insight on the market, from the occupier’s perspective.
- Jay Despard - Senior Managing Director, Hines
- Tim Kretzschmar - Vice President, Division Manager, Swinerton
- Chad Kollar - Managing Principal, Cresa
- David Haltom - Vice President, Patrinely Group, LLC
- Jon Gambrill - Principal| Managing Director, Gensler
Here are the key take-aways from the conversation.
The State of Denver’s Office Market
In 2018 Denver ranked third in absorption. For reference, Denver is currently ranked 19th in terms of market size. The only cities in 2018 that had higher rates of absorption were New York and San Francisco.
For the past several years Denver has grown quickly and consistently. We seem to be coming to a point of equilibrium, but office product of scale is increasingly more difficult to find.
Corporations now have Denver on their radar and Denver continues to see high rates of in migration. National cost of living increases influence decision making, and Denver offers affordability and a high quality of life.
What That Means for Office Occupiers
Occupiers will see the same challenges continue throughout 2019, including the pressure to compete for labor. Unemployment has remained near or below three percent. This means that recruiting and retention efforts are top priority. It puts pressure on employers to invest in their space, utilizing the office itself and location as a benefit.
Companies who are nearing the end of a five to seven-year lease are entering a completely different situation then they likely have experienced in past lease negotiations. Prices are much higher, and the process has slowed down.
With rising costs, we’re looking at more creative ways to save money for occupiers. One way of doing so is to utilize shared building amenities such as conference rooms. This can reduce the square footage on the lease and save companies from having to budget for the added expense.
Those migrating, are tending to look towards Denver’s core. This goes back to the urgency to recruit talent. Being located up North, in Boulder or South of Denver reduces the size of your talent pool. Being located in the center of the state, widens the net that you as an employer are able to cast.
The second factor we see occupiers asking for is being located near a transit station. Sub-markets in Denver are being created around Lightrail stations and as traffic continues to worsen, we expect that trend to continue.