DENVER-The area office market recovery remains elusive, according to a first-quarter report by Grubb & Ellis. While it appeared the market had hit bottom late last year and was poised to begin slowly recover, Grubb & Ellis reports a new round of negative net absorption has caused the overall vacancy rate to rise to 22.4%.

The report shows 322,800 sf of negative absorption in the first quarter. Of that, 295,084 sf is in the suburbs.

“The bottom line is that for Denver’s office market to improve, companies that lease office space need to create more jobs and hence will eventually need more space to accommodate these new employees,” the report notes. “Unfortunately, new job growth for Denver is forecasted at just 1.2% for 2004. This growth rate will not translate into a need for more office space, but at least there is some job growth projected.”

If the national economy picks up, Denver likely will benefit about six months later, the report notes, as Denver tends to lag the national economy and the national commercial real estate market by about six months.

That may be little comfort for property owners in today’s market, although it is good news for tenants.

“Unfortunately, with every submarket posting double-digit rates, landlords must keep their rental rates down in an effort to attract tenants to their buildings,” the report notes.

In the first quarter, Denver’s overall average rental rate lost another 0.8%, ending at an overall average of $17.50 per sf. For class-A space in the suburbs, the overall average rental rate was $18.50 per sf. For the entire metro area, the overall class-A average lease rate was $20.05 per sf.

For class-B space, the overall suburban average rental rate was $15.94 per sf, while for the entire market it was $16.60 per sf.

Grubb & Ellis advises tenants to take advantage of low rates while they still can. As the market slowly improves, landlords will begin to pull back on aggressive concessions and hold steady on firmer rates.

“The window is still open for tenants, but they should not hesitate, as they may regret their lack of action by the latter part of 2004,” the report notes.

Property owners, meanwhile, need to continue to aggressively go after tenants to remain competitive.

“The need for significant concessions should ease by the second half of 2004, but rental rates will not be able to grow for some time,” the report cautions.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Dig Deeper



Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join now!

  • Free unlimited access to's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including and

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2024 ALM Global, LLC. All Rights Reserved.