Office Market Expected To Weather Recession

DENVER-Although Denver-area office vacancies are at a 10-year high, while the northwest submarket, sporting a vacancy rate as high as 40%, the market will emerge from the current national recession faster and easier then it did following the energy crash of the mid-1980s. That’s the consensus of Nick Pavlakovich, senior director and top office broker at the Denver office of Cushman & Wakefield.

”You have to look at other cycles, to understand where we’ve gone over the last 18 years,” Pavlakovich tells GlobeSt.com. “To understand where you are today, you have to look at the past, present and future. Not only from a statistical standpoint, but from an environment and emotional perspective.”

He notes that in 1986, President Reagan froze Libyan assets; there was an accident at the nuclear reactor at Chernoboyl; the national unemployment rate was 7.2% and Penn State won the college football championship. In Denver, energy was still king, accounting for 42% of Downtown’s tenancy and 20% of the southeast suburban office space. The S&Ls were giving money away, and their poor lending practicesresulted in them being taken over the government’s Resolution Trust Corp.

Denver made international headlines when office space in the 56-story Republic Plaza, the tallest building in Colorado, was auctioned for $0.10 per sf.

If you fast forward 15 years, Denver, and the US, are in different places, he says.

”Now, Denver is no longer counter-cyclical to the national economy,” Pavlakovich tells GlobeSt.com. ”Less than 2% of our tenancy is tied to energy. The former Soviet Union now is our ally in the war in Afghanistan. And Penn State will not win the national football champion.”

Overall, the ”future is bright,” Pavlakovich says. ”We can weather the recession,” he predicts. ”It is no where close to the abyss in the ’80s.”

He says Denver still scores at the top of everyone’s list for quality of life and he has faith that the federal government’s monetary policies will bear fruit. ”This is a cake walk compared to the ’80s,” he says.

Still, he’s not sugar-coating today’s environment. ”There are tough times ahead of us,” Pavlakovich says. ”Change is inevitable. This cycle will come full circle.”