Aurora Office Market Seen as Stabilizing

The market's stabilization has been expected since mid-year, he says. "This begs the question, though, are we at the bottom of the market and is the market recovering, or are we still going to bump along in the trough? While it is difficult to speculate on the mid- to long-term status of the market, we are seeing leasing activity increase over the past few months and with the recent market trend, the near term outlook of the market remains positive," he says.

The 2.4-million-sf class A, multi-tenant buildings ended the year with a 23.8% availability rate and 186,000 sf of negative absorption.

Class B space, a 1.5-million–sf market, had a 17.79% availability rate and 1,629 sf of negative absorption. Interestingly, the average rental rate for class B space is $15.81 per sf, almost identical to the $15.83 per sf charged at class A space.

The class C space, with one million sf, has a 29.04% availability rate, with 66,119 sf of negative absorption. And that space only gets an average of $11.87 per sf in rent.

"Overall, the market's vacancy rates decreased less than one-quarter of 1%, availability rates have declined significantly and the overall average weighted asking lease rates have increased slightly from the previous quarter," according to the report.

Thomas notes that a third of the total vacant class A space can be found in four buildings. "These properties have had the majority of their vacant space on the market for well over a year and continue to lead the market in aggressively pursuing tenants by offering generous tenant improvement allowances, extremely low lease rates and rental concessions," according to the report. "Over the coming quarters, it will be interesting to see how well these complexes perform and as they are able to lease significant blocks of space, the market will grow stronger."

He notes that the local market "has been historically seen as a lower quality office market when compared to other office markets in the Denver area." But Thomas thinks that reputation will change.

"Thousands of single-family residential units are planned and under construction throughout the market, several high-end retail centers have been completed during 2002/2003 with several others being planned along E-470 for delivery in 2005 and 2006, and the completion of the E-470 highway and the Northwest Parkway (both part of Denver's beltway system) has given better and faster access to the area and the excellent access companies have to a highly educated workforce," Thomas says.

Meanwhile, an affordable labor pool will help the local economy, he says. Also, the redevelopment of Stapleton, Fitzsimons and Lowry—-with a completed value of about $10 billion-—"will also work to change and enhance Aurora's corporate image and economy in a positive direction," according to Thomas.