Office Recovery Under Way

DENVER-The metro-area economy appears to be on the mend, heading for a sustainable recovery, according to a first quarter office market report by Studley, the tenant rep firm, headed by Rob Link in Denver. The report notes that employment growth, while “meager,” is still an improvement after job losses for several years.

“The weakest industries over the last few years–telecom and software–are expected to post net new jobs for this year, unlike the previous four years,” the report states. In addition, the natural resources and mining industries are projected to add several new jobs this year.

“In total, as many as 21,300 new jobs are expected to be added to the greater metropolitan Denver payrolls in the coming months. This is certainly good news for the office markets across metropolitan Denver. However, it will take time to filter through to increased demand for office space. Therefore, significant declines in available space or increase in demand and rents will be gradual at best over the near term.”

Still, the report details improvements. For example, the city’s overall office availability rate fell to 23.1%, a 1.2 percentage point drop form the fourth quarter and 2.6 percentage points lower than a year ago. Class A availability rate fared better than the market as a whole. The class A availability rate fell to 21.7%, a drop of 1.9 percentage points from the fourth quarter and a 5.4 percentage point drop from a year earlier.

Meanwhile, tenants signed 2.8 million sf of leases. “Leasing activity was robust, registering an increase of 24.9% over the year-ago level, although it declined slightly [2.5%],” from the fourth quarter, according to the report. Class A space, once again, led the pack, as tenants took advantage of still low rates. Tenants leased 1.2 million sf of class A space, a 27.4% year-over-year increase, Studley notes.

Meanwhile, there were 28 blocks of contiguous class A space of at least 50,000 sf available in the first quarter, up slightly from the 25 similar sized blocks in the fourth quarter. However, it’s a marked improvement over the 39 large blocks of space available in the first quarter of 2004.