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Mixed-Use TOD Building in Lakewood Sells for $20.9M

February 26, 2018



Mixed-Use TOD Building in Lakewood Sells for $20.9M

Investors lined up for the chance to buy a mixed-use building at the Federal Center light-rail station in a deal that, according to public records, closed at $20.9 million. The 105,844-square foot 200 Union at Federal Center Station sold to Houston, Texas-based Griffin Partners. Petrus Partners, which updated the interior and exterior of the Lakewood property over the last three years, was the seller. “There continues to be significant demand by capital to buy mixed-use assets that are on light-rail stations, and those properties do not necessarily need to be located in a primary submarket like the southeast suburban market to attract interest,” said JLL Executive Vice President Patrick Devereaux. Devereaux, along with JLL Executive Vice President Jason Schmidt, fielded several offers for the property. “For mixed-use light-rail assets, this is the premier property on Union Boulevard,” said Devereaux. “It’s the one property that has direct access to the light-rail station.” Because of that, the building has been able to attract technology tenants whose decision makers live on the west side of the Denver metro area and in the foothills, Devereaux said. “Their employee base can live downtown, ride the light rail to Union Boulevard and walk right into the building. They’ve built out collaborative, open ceiling tenant spaces to attract that tenant type to the asset.” Tech companies Mytech Partners, Canoe Ventures and AdAction Interactive are tenants in the office space, where workspace provider Regus is the largest tenant. There also is 25,000 sf of retail space fully leased to Jason’s Deli, 240 Union restaurant, Subway and others. Office occupancy at 200 Union at Federal Center Station was 88 percent at the time of the sale. Besides the opportunity to add value by leasing up the vacant space, the property offers the opportunity to add boutique office and/or mixed-use development should the new owner choose to do so, said Devereaux. There is surplus parking and a pad site, he said. Griffin Partners is a commercial real estate development and property management company whose affiliate, Griffin Partners Investment Management, sponsors multiple real estate investment funds focused on value-add office and industrial properties, according to its website. The company’s Colorado properties include Arapahoe Business Park and 345 Inverness Drive South in Englewood. (Colorado Real Estate Journal)



Denver Office Leasing Strong In 2017

LoDo, the Central Platte Valley and Boulder have the highest demand for office space. Metro Denver’s office market leasing activity remained strong, with deal volume totaling 9.1M SF in 2017, exceeding the 8.6M SF completed during the previous year, according to a Savills Studley report on the region’s office sector. Asking rent was nearly unchanged, increasing by 0.3% from $26.63 to $26.70. Some of the region's submarkets are in more demand than others, according to the report. As companies focus on hiring younger employees, the push has been to locate in the urban core, creating very competitive and challenging conditions in Boulder, Cherry Creek, Lower Downtown and the Central Platte Valley. For example, rent in LoDo and the Central Platte Valley is approaching $39/SF, and new buildings are commanding up to $45/SF. Rent is about 20% lower in Midtown and Uptown because they lack the nightlife and streetscape found in downtown Boulder and LoDo. They also have more big blocks of space available. There are only six existing buildings in LoDo and the Central Platte Valley with a contiguous block of space more than 50K SF. The rest of Denver’s central business district has 11 buildings. “Large space options remain very limited in LoDo/Platte, as well as downtown Boulder,” Savills Studley Vice Chairman Rick Schuham said. “Tenants willing to step out into surrounding submarkets such as Uptown or suburban Boulder can capture significant discounts in rent and greater concessions.” Investors are eager to expand their Denver holdings, particularly in LoDo, which continues to command the highest prices in the region. Pricing also is increasing for newer office buildings in suburban locations that have easy access to either light rail or major transportation routes. Office property sales through November totaled $1.5B — a 21% decline from $1.9B in the same period in 2016. (Bisnow)



Boulder Moves to Double Affordable Housing Fee for Developers, May Tie Country's Highest

The Boulder City Council moved Tuesday night to at least double the current fee commercial developers pay into the city's affordable housing fund. No official vote was taken at the meeting, though by a 5-3 margin — one member, Cindy Carlisle, was absent — the council agreed to direct city staff to prepare an ordinance that would raise what's known as the affordable housing linkage fee to $25 per square foot at a minimum, and $35 at a maximum. If the council does eventually set the fee at $35, that will tie Palo Alto, Calif., as the highest linkage fee of any American city. This is the fee assessed as a onetime payment commercial developers must give Boulder in order to offset the impact of their new construction on the resulting demand for affordable housing. It's one of a number of "impact fees" developers — both residential and commercial — must pay for the stresses they add to everything from libraries to parks to firefighting. Already, Boulder has a relatively high affordable housing linkage fee. It's $12 right now — the highest of any city in the country between the two coasts and about eight times higher than Denver's fee. But it remains insufficient, a majority of the council said Tuesday night, because it's still low enough to be making commercial development more lucrative than residential development — a problem for a city with such a jobs-housing imbalance "We don't want to be incentivizing, through our fees, the choice to build commercial over housing," Councilman Sam Weaver said early in the discussion, "and so I'm going put a number out there: $30, which I believe to be the middle of the range for what most of the residential development projects are paying." Councilwoman Lisa Morzel said she wanted to see a fee somewhere between $25 and $32. "My hope is that it would help incent housing over commercial," she said. "When we create new jobs, we create new impacts and more stresses on our housing stock, which is very limited." Ultimately, the council directed city staff to prepare an ordinance that will have the fee set at $25, $30 or $35. The final number will be decided after the ordinance comes up for its scheduled first reading on April 17. Mayor Suzanne Jones and Councilwomen Mary Young and Mirabai Nagle joined Morzel and Weaver in supporting the substantial increase. Mayor Pro Tem Aaron Brockett, Councilwoman Jill Adler Grano and Councilman Bob Yates pushed for the fee to stay at $12 — a level approved just 14 months ago by the last City Council, and so new that city staff said they had no data to evaluate with any certainty what effect the $12 fee has had. City staff did share, though, that their analysis shows that developing commercial properties is "totally different" from developing residential properties. "They are apples and oranges," Assistant City Manager Chris Meschuk said. Still, the majority felt a higher fee would move the two kinds of developments closer to "parity." Meanwhile, those in the minority warned of the consequences of a higher fee, including that higher fees could turn into higher rents for tenants already feeling the squeeze in pricey Boulder. Grano, who is a real estate agent, said on the issue of incentivizing housing over commercial development, "We really should be doing that through zoning. It's not everywhere that we want housing over commercial." Yates said big business — he seemed to be speaking of Google, though he never uttered the name — won't be harmed by a higher linkage fee. "They print money and their cost of capital is small, and so they'll continue to build ... but what we're going to kill is small tenants, small business, nonprofits and organizations we want to encourage," he said. Brockett added, of the notion that commercial development should be actively disincentivized: "The additional funding for affordable housing is very attractive. ... I just want to offer the caution that our vibrant economy is not guaranteed. It's not something that will continue forever, necessarily." Though the council was fairly split on the fee level, there was general consensus that vulnerable players, such as small businesses and nonprofits, should be shielded from a higher fee. City staff advised that there could be a number of ways to achieve that goal, and the council will discuss further when the ordinance is introduced. (Daily Camera)



Denver-Area Jobs Study Finds Major Tech Industries are Outpacing National Growth

Software and IT employment grew 32 percent in the Denver metro area over the past five years, making it fastest growing among nine major industry clusters the Metro Denver Economic Development Corp. highlights in its latest annual study, which was issued Thursday. Software and IT outpaced the industry’s growth nationwide and its growth made the Denver area the eighth-highest concentration of software and IT workers among major U.S. cities. Patty Silverstein, Metro Denver EDC’s chief economist, and Lisa Strunk, senior economist of Development Research Partners, produced the annual report. The study found 5,550 metro-area software and IT companies employed 58,190 people in 2017, which is a 32.2 percent jump from the 44,084 employed in the nine-county region five years ago. The software and IT industry grew at 26.1 percent nationally. Last year, 2.5 percent of the metro area’s workforce was in software and IT, compared to 1.9 nationwide, the cluster study found. Five-year employment growth was nearly uniformly strong and surpassed the national growth rates, the study found. In 2017, employment in the metro area’s aviation industry expanded the most, achieving a 5.7 percent single-year growth — six times higher than the national industry average. Aviation rose 23 percent between 2012 and 2017 to 20,140 jobs at 680 companies, the cluster study found. (Denver Business Journal)