Office Market Shows Signs of Life

The market absorbed about 263,000 sf, helping to offset almost 68,000-sf of negative absorption at mid-year, according to a third-quarter report by the Denver-based Frederick Ross Co.

Also the vacancy rate dropped slightly to 22.94% from 23.27% at mid-year. In addition, only 348,000 sf of new space was completed during the quarter.

"Year-to-date, about 534,000-sf of office space has been completed market-wide, leaving only 488,000-sf still in the pipeline," according to the Ross company, the largest Denver-based, full-service commercial real estate firm.

Meanwhile, rental rates remained stable with no major decline nor increase in concessions given by landlords.

The amount of subleased space on the market dropped by 150,00-sf, another bit of god news. "While far from equilibrium, steady leasing activity, combined with the decline of new supply, appears to have stabilized Denver's office market on its way to recovery," the Ross reports notes.

The reports goes on to say that the CBD received a much-needed boost with the completion and partial occupancy of Legacy Plaza in the third quarter. The 285,00-sf, Class Double A buildings in the Central Platte Valley is the new headquarters for the Gates Rubber Co. Gates absorbed half of the available space out of 143,000-sf in the third quarter, with the remaining space slated for occupancy in first quarter 2004.

The Gates deal, with moderate leasing activity, helped the CBD absorb about 183,000 sf. And the vacancy rate notched down to 17.95% from 18.96% at mid-year, the report explains.

The largest submarket, the Southeast Suburban, also showed positive gains as well. It absorbed about 110,000 sf in the third quarter, pushing down the vacancy rate a fraction to 18.22% from 18.61. Year-to-date the Southeast Suburban market has had positive absorption of 89,481 sf.

The northwest sector, meanwhile, plagued by the highest vacancy rate in the metro area, showed its fourth consecutive quarter of positive absorption and decreased absorption. It showed a modest 35,000 sf of positive absorption in the third quarter, and saw the vacancy rate drop a bit to 29.16% from 29.5%.

In the first nine months of the year, according to the Ross report, the Northwest submarket has absorbed more than 500,000 sf of vacant office space.