Denver Office Market in 'Correction' Phase

As far as Denver specifically, Transwestern says the economy remains weak, but is beginning to improve. The metro area over the 12 months ending last October lost 17,900 jobs. It put the unemployment rate at 5.4%, down from the national average of 6%. However, since the Transwestern report came out, more current numbers show that Colorado's unemployment rate has risen to 5.8%, while the national unemployment rate has fallen to 5.6%.

Transwestern also says that the cyclical recovery in the office market has begun. It reports that the market absorbed 327,000 sf in 2003, a welcome relief after two years of negative absorption.

Other good news is that subleased space declined by 982,000 sf last year and the overall office vacancy rate fell to 16.7%, down from 17.4% at the end of 2002. However, Denver's office vacancy rate is still the third highest in the country and above the national average of 16%. The only metro areas with higher vacancy rates, according to Transwestern, are San Francisco at 17%, Atlanta at 18% and Dallas/Fort Worth at 21.7%.

Washington, DC has the lowest vacancy rate at 11.2%, followed by Orange County at 12%, Los Angeles at 12.4% and New York City at 12.5%. Houston, Phoenix, Chicago and Boston also have slightly lower office vacancy rates than Denver, according to the report. Transwestern also says that face rental rates are stabilizing in Denver, but effective rental rates are likely to firm in 2005.