Office Vacancy Soars in US 36 Corridor

DENVER-Six months ago, the US 36 high-tech corridor between Boulder and Denver boasted of the lowest vacancy rate in the metro area, with only 1% of the office space available. What a difference a half-year and a technology and telecommunications crash makes.

Today, the vacancy rate is about 28%–the highest vacancy rate of any submarket in the area–thanks to about 1.5 million sf of subleased on the market, or about to come on to the market, says Chris Phenicie, a broker and co-owner of Commercial Colorado.

Just a few years ago, there wasn’t even 1.5 million sf in the entire market, much less subleased space, he says.

Level 3, the struggling telecommunications giant caught in a stock slump, will be subleasing about 300,000 sf it has under construction, says Phenicie and other brokers. Level 3, which recently announced plans for layoffs and is headquartered in an 850,000-sf campus along the corridor, says it is continually monitoring its real estate holdings in Colorado and around the world, but won’t address specific properties.

Phenicie and Bill Lucas, a vice president with Jones Lang LaSalle, also are listing a building for Sun Microsystems, which has a 1.1 million-sf campus along US 36. Officials from Sun say the company is looking to move its employees into buildings it owns from space it leases in Colorado and elsewhere.

Phenicie says Sun planned to occupy the building he is leasing with an engineering division that it is moving to Austin, TX with plans to take advantage of the high-tech layoffs there.

Phenicie says the only ray of brightness is that leasing activity recently began picking up. Tenants are seeking about 350,000 sf along the space, and many of them are not high-tech firms, which will bring diversity to the market, he says.

Still, he expects the year to end with about one million sf of space available. He predicts it will take a year to absorb it and by the end of 2002 the market will be strong again.