The Denver office market remains very healthy. This performance is a result of our solid broader economic fundamentals that continue to be fueled by job growth. Since the end of 2017, vacancy rates have continued to decline, and positive rent growth rates are still being realized.
The table below reports some of the key market indicators from 28 submarkets across the greater Denver office market, during Q3 2019.
Market Rents
With the exception of the Southwest Denver area, every office submarket that we track saw positive year-over-year rent growth in Q3 2019.
The Central Business District (CBD) office market rent growth has been quite extraordinary over the past few years (along with its retail sector), and still remains at a national leading level.
This is mainly due to Denver’s bourgeoning tech sector and our elevation as a top-tier market, just below the “Coastal markets,” in which national companies are clamoring for a presence.
Vacancy
The Denver office market vacancy rate fell to 10.00%, making it the lowest rate since early 2001, and marking two decades in vacancy decline. Vacancy has dropped almost uninterrupted for 10 years, with a slight increase in 2016 and 2017, primarily due to oil and gas industry hiccups.
As has been noted in the past, the submarkets with the highest vacancy rate are the ones that have had significant supply increases as a result of construction activity, which is almost entirely Class-A product. In submarkets where there has been little new additional office product the vacancy rates are significantly below 10%.
Forecast
It appears that the Denver office market will stay on this same trajectory for the next year or so. Vacancy rates are predicted to decline, approaching 9%, until mid-to-late 2020; after that, they will begin to increase at a fairly steady rate. Market rents also will increase in the 2% to 4% range during this same period, and then begin to level off.
Brian Lantzy is the Vice President of Operations at Wheelhouse Commercial in Denver, Colorado. For more information about how Wheelhouse Commercial can help manage your properties, please call 303.518.7406 or email info@wheelhousecommercial.com.