CB Finds Positive Indicators in Denver Office Market

Still, 2003 outperformed 2002 by 35%, with 10.8 million sf of transaction activity producing 400,000 sf of net absorption in 2003. Such substantial activity yielding such moderate absorption exemplified the conditions classically associated with the intra-market "tenant shuffle" thatcomprised a majority of the transaction activity in 2003, according to CB.

Correspondingly, expansion by existing tenants provided the primary fuel that drove net absorption. Sublease space decreased by 1.3 million sf feet in 2003 helping to reduce the overall availability rate to 23.3% from 24.9% at year-end 2002. Continuing to capitalize on the aggressive lease terms throughout the market, tenants maintained the "flight to quality" trend by expanding or upgrading for the same out of pocket expenses, or less, according to the report.

"As a preemptive counter measure, market-savvy landlords have been renewingexisting tenant leases, sometimes two to three years prior to expiration, to maintain full rent rolls," according to the report. Year-end reports indicate the local economy is on the cusp of recovery. As the economy and business environment heat up, Denver's office market is expected to follow.

"We expect the stabilization and gains seen in 2003 to continue and accelerate in 2004," says Richard M. Calhoun, senior managing director of CB Richard Ellis. "The 30,000 new jobs, particularly in the Professional and Business Services sectors, forecasted for 2004 by the University of Colorado Leeds School of Business report, suggest that the positive net absorption of 2003 will continue and carry through the coming year.",