DENVER-The good news is that the Southeast suburban office market saw its vacancy rate drop to 20.4% in the second quarter from 23.2% in the second quarter of 2004, according to a recent office market update by the CB Richard Ellis South Denver office team of Sergio Castaneda, John Marold, Cameron Brown, Mitch Bradley and Brett Nathan. On the downside, the market went from positive absorption of 122,166 sf a year ago to negative absorption of 243,379 sf in the second quarter. That is the largest amount of negative absorption of the six markets studied for the report.

The average asking rate along the Southeast corridor remains fairly flat, despite the large amount of negative absorption. The average lease rate is $16.15 per sf, compared with $16.07 per sf a year earlier.

However, the Downtown Denver market showed the greatest improvement by every measure. Its absorption went from negative 597,607 sf in the second quarter 2004 to positive absorption of 463,085 sf in the second quarter. Downtown also showed the most improvement by other measures. Its vacancy rate fell to 16.2% from 22.1% a year earlier and its average asking lease rate rose to $19.01 from $16.70 per sf.

"Overall, activity is strong in all markets and the general sense is that class A building will continue to decrease concessions and will raise lease rates as occupancy rise," the report states. "As this occurs, well located class B buildings will start to see more activity."

The report notes that Aurora's availability rate increased to 28.5%, a nine-point increase from 19.5% a year earlier, largely because 279,000 sf at 11900 E. Cornell Ave. came on the market in the second quarter. And the Colorado Boulevard market saw its availability rate rise to 26.7% from 21.7%, and the amount of negative absorption rose to 143,606 sf from 49,139 sf.

In July, the CBRE South Denver team completed 21 transactions for a total of 144,474 sf. They ranged from the 49,473-sf Belle Bonfils lease at the Quad at Lowry to 1,067 sf for the Altus Group at the Country Club Park building. In the first seven months of the year, the team has completed 112 transactions for a total of 937,007 sf.