Sublease Space the Culprit in Market Shift

DENVER-Cushman & Wakefield broker Daniel C. Beer compares the local office market to the weather in early June when Boeing Co. officials were in town. He notes that on their first day in town, they were greeted by sunny skies and weather in the 70s; the next day, the temperature dropped by 50 degrees and it snowed.

Six months ago, office rents were at an all-time high and vacancies were near an all-time low, he says. Now, it’s a renter’s market for the first time in six or seven years, he says.

The culprit? Four million sf of subleased space on the market, much of it along the Northwest corridor between Denver and Boulder and in the Southeast market.

But it’s not fair to compare the current market to the depressed times of the mid-1980s, Beer says, even though the Northwest submarket’s vacancy rate will rise to more than 20%, which isn’t that far off from the worst days of the ’80s.

But now, instead of empty space, most of it is subleased space and owners are still collecting rent, he says.

Also, the small Northwest market could quickly turn around if only one or two major companies from Northern California, tired of brownouts and blackouts, moves to the corridor, he says.

“It could change quickly,” he says.

Just like the Colorado weather.