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DENVER-A Downtown Denver Partnership survey doesn’t bring good news for a rapid recovery of the area office market. But first, the good news.

Of the 65 companies surveyed, which represent 21,000 workers, or about 19% of the workforce, 100% say they plan to stay Downtown. Further, 77%t of the interviewed companies expect increased revenues in 2004, 65% plan some level of employment growth in 2004, and 25% plan to expand their facilities within the next two to three years.

On the surface that may bode well for the office market, where the vacancy rate is hovering around 20%. However, economist Patti Silverstein, who authored the report, notes that while all companies that are planning to add space are adding employees, not all companies that are planning to add employees are planning to add office space.

There is not a strong correlation between revenue and employment growth and additional space needs due to current excess capacity. So many companies have space they are not occupying, they can simply grow into it as they hire more people, Silverstein tells GlobeSt.com. In addition, higher productivity is making companies more efficient, so they don’t need to hire as many people, she adds.

Of the companies anticipating increased revenue in 2004, 33% plan to increase both employment and their facilities. Forty-one percent plan to add employees but have no additional space requirements. Further, 26% of the companies with expanding revenues do not plan to add either employees or space.

But for companies looking to hire, the Downtown location is a strong selling point. The Downtown employers surveyed overwhelmingly agreed that it is easy or very easy to recruit and retain professional and support staff. Eighty-eight percent of the respondents think the quality of the metro Denver workforce is good to excellent, whereas 78% of the employers also gave the metro workforce high marks for productivity.

The study also notes that merger, acquisition and divestiture activity remains strong for those companies surveyed in finance/insurance, legal services, real estate, natural resources, and telecom services. Other industries, such as accounting and architecture, are finally seeing some stabilization of M&A activity. Finally, outsourcing is an issue for many firms. While it may benefit some industries via employee cost savings, other industries, most notably real estate, are struggling with the impacts.

Ninety-two percent of the companies surveyed rate the Downtownbusiness environment as good, very good, or excellent. Most agree that the business environment is improving and there is a resoundingly positive opinion of the new administration.

Although business leaders are comfortable with current business conditions and the direction of Downtown development, transportation, parking and safety top the list of major concerns that Denver must continue to address and improve. Similarly, Downtown companies cited transportation, improving the retail mix, expanding housingoptions and parking as important issues for Downtown’s continued prosperity.

Transportation was the single most important growth factor, ranked No. 1 by 26% of respondents. It was followed by retail opportunities, 14%; housing, 11%; parking, 10%; safety, 8%; cleanliness, 8%; vagrancy/homelessness, 8%; continued economic development, 7%; and establish critical mass of business and residents, 7%.

The report also notes that the entire metro area, not just Downtown, lost 69,000 net jobs during 2002 and 2003, the largest job decline on record. Silversmith tells GlobeSt.com the metro area needs to add around 50,000 net new jobs before the office market will regain its health.

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