"The local economy, in contrast to the US economy, is actually gaining steam this year, generating about 28,000 jobs through May," the Trammell Crow report notes. "With the resumption of hiring has come a renewed demand for office space. We expect vacancy to continue to decline in the second half of the year but at a measures pace."

In the second quarter, the market absorbed 296,777 sf for a total of 713,320 sf this year. In the first half of the year, the market has almost doubled its positive absorption from the 365,555 sf last year.

"The Midtown and Aurora submarkets led the way with 204,319 sf and 75,627 sf of net absorption, respectively," the report says. "Midtown benefited from Exempla's leasing of 72,051 sf at the Diamond Hill Office Complex, while Verizon took 27,600 sf at Cherry Creek Place 1 in the Aurora submarket. TheSoutheats/I-25 area again saw negative absorption of 4,312 sf, but this actually represented a slight improvement over the previous quarter."

The direct vacancy rate, meanwhile, fell 30 basis points to 17.3% during the second quarter an the overall vacancy rate, which includes sublease space, dropped 50 basis points to 19.8%. The CBD's vacancy rate was unchanged 12.8% during the quarter, but is down 90 basis from a year earlier.

Rents, meanwhile, increased marginally to an overall average of $17.84 per sf. "Rates continue to climb in prime space in the most desirable submarkets, but in general, tenants are still in control," Trammell Crow notes. "Tenant concessions, while still relatively generous, are declining in magnitude a the office recovery finally takes hold."