The Denver office market continued its steady recovery, and 2012 is on track to be the third consecutive year with positive net absorption of over one million square feet, as reported in Newmark Grubb Knight Frank’s newly released Q3 Denver office research report. Vacancy fell year-over to 17.6% from 19.0% but increased slightly from 17.5% in the previous quarter due to the delivery of Hines’ EOS at Interlocken in the Northwest submarket. The 186,231-square-foot building had no pre-leasing initiative. Last year’s trend of a bifurcated recovery - strong in the Class A sector and flat in the Class B and C sectors - has been tempered year-to-date in 2012 due mainly to the final rounds of vacancy occurring at 1801 California in the Central Business District (CBD) during the first two quarters of the year and to increased activity in Class B product.
Key statistics for the Denver office market during the third quarter of 2012 are as follows:
• Vacancy is 17.6%, down year-over-year from 19.0%
• Quarterly absorption was 110,014 square feet, bringing year-to-date absorption to 742,291 square feet
• 11th consecutive quarter of positive absorption
• Stable rental rates with some upward movement in select submarkets
• Four corporate headquarters under construction
• Sale transactions for first 9 months of 2012 total $1.3 billion
“All year, we’ve been talking about a slow recovery in Denver’s commercial real estate market, but as 2012 comes to a close, everything points to a well-established recovery that will really gather momentum in 2013,” said Kevin McCabe, executive vice president and chief operating officer. “In the office sector, we put the large vacancy at 1801 California behind us in the first half of the year and are still on track to surpass 2011. The Southeast Suburban submarket and the LoDo micromarket, in particular, are very healthy, and the Class A sector is approaching equilibrium. This, in turn, is spurring Class A rental rate appreciation and recovery in Class B product.”
Strengthening recovery in Denver’s job and housing markets will spur continued improvement in market fundamentals, setting the stage for 2013 to be a break-out year for the Denver office market.
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About Newmark Grubb Knight Frank
A part of BGC Partners, Inc. (NASDAQ:BGCP), Newmark Grubb Knight Frank is one of the largest commercial real estate service firms in the U.S. It brings together the strategic consultative approach to creating value for clients and leading position in the New York market that are hallmarks of Newmark; the complementary strengths of Grubb & Ellis in leasing and management, investment sales, valuation and capital markets services; and BGC’s financial strength, proprietary technology, expertise in global capital markets and deep relationships with many of the world’s leading financial institutions.
Newmark Grubb Knight Frank, together with its affiliates and London-based partner Knight Frank employ more than 11,000 professionals, operating from more than 300 offices in established and emerging property markets on five continents. This major force in real estate is meeting the local and global needs of tenants, owners, investors and developers worldwide.