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Commercial Real Estate’s Hot Streak to Continue in Metro Denver, Brokers Say

October 9, 2017

 

 

Commercial Real Estate’s Hot Streak to Continue in Metro Denver, Brokers Say

Metro Denver's commercial real estate market has continued its rise through 2017 and is on track to continue its hot streak through the rest of the year and into the next. That's according to a panel of brokers convened at the Denver Metro Commercial Association of Realtors' annual Colorado Commercial Real Estate Symposium. "We're participants in one of the best commercial real estate markets in the country. Pricing is at an all-time high and there's a lot of momentum," said Tim Richey, vice chairman of capital markets at CBRE Group Inc. Investment pricing in Denver took a "quantum leap" after the recession, Richey said. Before the recession, the high-water mark for office investment deals in downtown Denver was around $450 per square foot. After the recession, properties started bringing in $600 per square foot, and now, $700 per square foot is within range. Leasing activity has also brought price increases across the board in Denver commercial real estate. In the multi-family housing sector, attaining a $2 per-square-foot rental rate was a tipping point, said Chris Cowan, executive managing director at ARA, A Newmark Company. "$2 per foot rent was always elusive, and once it was accomplished, it opened doors. That justified capital and new developers coming to the urban core to execute on higher density and cost per-square-foot," Cowan said. But even with large populations of young people moving to Denver, it's still a "fist fight" for companies to find the employees they need with the 2.4 percent unemployment rate, said Todd Roebken, executive managing director of Savills Studley. But in spite of the hiring challenge, companies in Denver today are looking for higher-quality office space with more amenities, Roebken said, which translates into higher average lease rates and incentivizes owners of older buildings to renovate their space in order to compete with new product. And while national retailers are struggling, residents of apartment complexes and employees from nearby offices are providing a steady stream of customers for restaurants of all kinds, which are seeking retail real estate near those populations in Denver, said Sam Zaitz, partner at Legend Partners. As downtown Denver becomes a hub for office use as well as residences, retailers are shifting their focus to urban areas because there are potential customers in the area 24 hours a days, Zaitz said. Both upscale, chef-driven restaurants and quick-service restaurants, as well as grocery stores, fitness centers and other service-based businesses are looking for retail space in Denver now, he said. And while some retailers are concerned about the rise of e-commerce, the industrial sector in Denver is benefitting from it in the form of pre-leased new construction and increased lease rates along long-time industrial corridors like east Interstate 70 and newer hubs like northern Interstate 25, said Mitch Zatz, managing director and industrial lead at Jones Lang LaSalle. The industrial sector wasn't hit as hard as other parts of the commercial real estate market in the recession, Zatz said, but lease rates are still up 50 percent from 2007, driven in part by Denver's increasing population and by the metro area's growing prominence as a distribution hub. (Denver Business Journal)

 

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Iconic Building Demolished to Make Way for Jones District

An iconic 180,000-square foot office building on Interstate 25 in the southeast Denver metro area is coming down to make way for new development. Built as the headquarters of Jones Intercable and later home to the first accredited online university, the Jones building at 9697 E. Mineral Ave. in Centennial served its purpose and has reached its useful life, Peter Coakley, vice president of real estate development for Opus Development Company LLC, said at a recent event marking the demolition and the next phase for the property. “We were fortunate to be able to acquire this site. To envision it to fulfill Glenn’s vision, and his team members’ vision, about what could be here is just a very exciting opportunity for us,” he said, referring to Jones Intercable founder Glenn Jones. Development of The Jones District began a year ago with groundbreaking for The Glenn, a 306-unit luxury apartment community that will deliver in early February. “The plan is to continue to pursue speculative development and build-to-suit projects, including senior housing, office, hotel and, possibly, additional retail,” said Coakley. He compared the highly visible 42-acre site, next to the Dry Creek Station, to the hole of a doughnut in that it is surrounded by development. Opus and partner Brue Baukol Capital Partners are working with Allegro Senior Housing to develop a 180-unit senior housing facility on the property. They also have a proposal out for a 150,000-sf build-to-suit office building and are evaluating development of Vista Tower I and II, two 180,000-sf office buildings. “The southeast market over the last four or five years has been unbelievably resilient – office in particular,” commented Geoff Baukol, president and partner at Brue Baukol Capital Partners. The prospect of launching the first Vista building on a speculative basis is being “strongly considered,” according to Coakley, who noted Jones selected the site in the 1980s because of its elevation and outstanding western views. The vision for The Jones District is to be a “fairly dense environment,” he said. A highlight will be a huge central park the length of two football fields. The developers and consultants are working on plans to activate the space seven days a week with uses that will draw residents of the apartments and senior housing, office tenants and the community, said Mark Johnson, Opus vice president, real estate development. (Colorado Real Estate Journal)

 

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Metro Denver Will Push Lifestyle, Workforce Over Incentives in Amazon HQ2 Bid

When Colorado submits its bid this month for Amazon HQ2, the proposal will emphasize the region's highly educated workforce, quality of life and global connectivity through its international airport. Financial and tax incentives? Not so much. “We are not the biggest incentive state — and we won’t do anything differently for Amazon than we would for any other company that is looking to locate here,” J.J. Ament, president and CEO of the Metro Denver Economic Development Corp., told me Thursday. Ament's agency is representing the region in preparing a bid for Amazon.com Inc.'s sprawling second headquarters campus. In September, the Seattle-based online retail giant (Nasdaq: AMZN) announced that it plans to invest more than $5 billion to build and operate the new headquarters and that up to 50,000 employees would work there. The open call launched cities into a full sprint to get their proposals together by the Oct. 19 deadline. Ament is convinced that metro Denver, and the nine counties the EDC represents, will make it past the first round of applications by being competitive in quality workforce and quality of life. “We don’t have to lure them with financial incentives,” Ament said. “We are not going to be that [kind of] proposal.” As for possible Denver-area sites for the huge complex, a review committee with local and state eco devo leaders received more than 30 submissions of potential locations. Amazon is calling for a site of roughly 100 acres within 45 miles of an international airport. The committee pored over 400 documents in the past 10 days and has narrowed the list to about eight sites that it will submit to Amazon, Ament said.“People are generally making a big deal about this whole notion that we are picking sites. We are not picking a single site by any means,” Ament said. He’s thinking of the Colorado proposal more like a menu of site options. No doubt, Ament said, there are plenty of metro Denver sites that fit the criteria outlined in Amazon's request for proposals. But the site is just one of about 10 criteria he thinks are equally important. "I believe we can replicate their experience in Seattle, in terms of talent, business environment they want to work in — friendly and predictable — and you can't ignore our lifestyle. There are some cities around the U.S. that compete with us on talent; some compete on good quality of life — but very few in U.S put it all together like we do." This process has been unusual. Typically, economic development deals are made in secret and announced when the contracts have been signed. Amazon’s open call to cities has created massive interest and speculation about which city will win the project. Ament does not mind a look behind the eco devo curtain. “The community gets to see a great example of how we come together as a region – each area has its own unique attributes, but we are speaking as one voice,” he said. Still, the committee is bound by non-disclosure agreements — meaning, Ament said, that he cannot reveal the top sites the committee identified or any more details about the state’s bid.“Our proposal is cutting edge and creative and regrettably confidential,” Ament said. But the local committee did say in September that sites to be offered likely be close to the airport. Last month, Stephanie Copeland, executive director for the Colorado Office of Economic Development and International Trade, told the Colorado Economic Development Commission that proximity to the airport will be a major factor, per guidance she's received from Amazon officials. That knocks out communities outside the metro area that have expressed interest in the project. Ament said the eight sites that will be highlighted in the proposal are from across the region, including Broomfield, Adams County, Denver County, Arapahoe, Boulder and Douglas counties.“We are agnostic — we are putting the region’s best foot forward,” he said. (Denver Business Journal)

 

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