DENVER—Denver's office market posted exceptional results in the first quarter of 2015. With first quarter performance showing strong absorption, declining vacancy and average asking rental rates reaching all-time highs, the Denver office market is thriving and competitive, says the local office of Avison Young.

The firm has released its Q1 2015 Denver Office Market Report, which forecasts more of the same in 2015 “depending on how oil price volatility affects leasing activity.” Development has remained vibrant with 2.4 million square feet under construction at the conclusion of the quarter.

“The Denver office market is still strong, but oil and gas sublease space and new construction deliveries may soften the market,” said Alec Wynne, principal and managing director of the company's Denver office.

During the first quarter of 2015, 894,000 square feet of sublet space hit the market as a result of a number of oil and gas firms downsizing. “Fortunately, Denver is in a favorable position to handle negative absorption and rising vacancy due to the city's strong regional economy. This year will be a good test of the office market's ability to handle uncertainty within a prominent industry after many years of solid growth,” adds Wynne.

Several noteworthy lease deals were completed in the first quarter of 2015. Comcast signed a new lease at Panorama Corporate Center for approximately 274,000 sf, taking over the space previously occupied by Charles Schwab. AECOM signed a new lease for 136,954 sf at 6901 Havana Street and will relocate from its current space at Denver Corporate Center.

According to the report, vacancy dipped to a 14-year low of 10% in the first quarter of 2015. The last time Denver's vacancy rate was at or below 10% was 2001 when vacancy was 9.7%. The class A vacancy rate was 9.1% in the first quarter, down a full 100 basis points (bps) from the year-end 2014 mark of 10.1%.

Asking rates continued to climb and concluded the first quarter of 2015 at $23.69 per square foot, up from $23.28 psf in the fourth quarter of 2014. During the past 12 months, class A asking rental rates have increased 6% and class B have risen 4%, demonstrating there is across-the-board demand for office space.