Investment VP Forecasts 1% or Less Office Vacancy for 2001

DENVER-In a bold prediction, a leading Denver broker believes the CBD’s office vacancy could dip below 1% by the end of 2001. The present office vacancy rate is 5.4%, an 18-year low, says Mary Sullivan, investment division vice president for Cushman Realty’s office here. She delivered the promising forecast at the recent annual Rocky Mountain Commercial Real Estate Expo and University of Denver’s Franklin L. Burns Real Estate School’s Fall Forecast.

She is calling for a 2% vacancy by mid-year in Downtown Denver, triggering a dramatic hike in rates and values that already are 15% higher than last year. It will be at least two years before a major office development goes up Downtown, says Sullivan.

“Denver’s CBD is the market to watch over the next few years and will be the most dynamic,” she asserts, saying its emergence as the metro area’s entertainment district is one of the triggering elements for the CBD’s positive outlook.

Meanwhile, the US 36 corridor between Denver and Boulder, she says, “has exploded being the hotbed for high-tech and telecom companies while the Southeast suburban office market isn’t as strong.

Nationwide, office property demand has dropped significantly except for Washington, DC, Boston, Manhattan, Austin and Southern California. “These markets are perceived to have a very low vacancy and limited new construction causing rents to increase sharply,” says Sullivan, who cited one of her recent marketing efforts in San Diego of a class-B, suburban project that had attracted 16 offers. “We had just closed at a 7.5% cap rate. I suspect if I had the same portfolio in Southeast Denver, I would have not fared as well on the number of offers or the cap rate,” Sullivan says.