"Despite weak market fundamentals, investment activity in the Denver office market remained steady and median prices moved higher in 2002," says Adam P. Christofferson, regional manager of the firm's Denver office. "Investors who realize that the worst is over and believe in the long-term stability of the Denver market will continue to seek office properties throughout the metropolitan area," he says.

Developers, wary of competition, will slow new deliveries. Only 1.2 million sf will come to market this year, a 40% decline from 2002, according to the report.

Another prediction is that the overall vacancy rate will close 2003 at 20.3%, a slight increase over the 2002 figure.

Job growth will return and put an end to the steep ascent in vacancy the market has suffered over the past 24 months. In first quarter 2003, vacancies were up 30 basis points, to 19.9%, from the year-end 2002 figure. The average effective rent ended 2002 at $15.67 per sf and will decline further in 2003, from $15.51 per sf in 2002.

Average asking rents, on the other hand, should remain firm at $19.05 per sf. Despite the dip in rents, steady investment activity will be recorded and median prices will remain stable, at $102 per sf.

Low interest rates buoyed the overall median price in 2002, which rose by 2.6% from 2001.

Investment activity in 2003 will mirror 2002's pace, with the majority of transaction velocity accounted for in the lower tiers of the market, according to the Marcus & Millichap report.

Instant Insights /

Office Market Appears to be Stabilizing

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