CBRE has newly released two research reports, Denver Downtown Office MarketView Q2 2021 and Denver Southeast Office MarketView Q2 2021. Fundamentals in the downtown Denver office market exhibited slight improvement and office fundamentals in the Southeast submarket flattened as the COVID-19 pandemic endures.
Downtown Summary:
- Negative net absorption of 157,830 sq. ft. was recorded during Q2 2021, highlighting improved quarter-over-quarter absorption volumes from negative 400,000 sq. ft. in Q1 2021.
- Total vacancy continued to increase to 22.7%, driven by three large office deliveries in downtown Denver, while overall availability climbed to 30.4%.
- Average asking lease rates grew by $3.77 quarter-over-quarter to $39.23 per sq. ft. full service gross (FSG) as the prominent new office projects pushed asking rates up.
- Just over 411,000 sq. ft. was leased in Q2 2021, bringing the rolling four quarter total of leased space in downtown Denver to 1.1 million sq. ft. Quarter-over-quarter, downtown Denver recorded a 132,000-sq.-ft. or 47.5% increase as leasing activity and tenant interest appear to be improving.
- The supply of office projects under construction were historically low with 294,000 sq. ft. of speculative (spec) development as three properties delivered 885,000 sq. ft. of new space to the downtown market in Q2 2021.
Southeast Summary:
- While vacancy continued to increase in the Southeast submarket, the rate of increase began to exhibit signs of slowing down in Q2 2021. Total vacancy increased 35 basis points (bps) quarter-over-quarter to 18.3%.
- Sublease availability started to plateau after escalating since the onset of the pandemic last year. Available sublease space increased a marginal 1.6% quarter-over-quarter to 1.7 million sq. ft.
- As companies are defining their workplace strategies and beginning to reoccupy office space, leasing activity continued to pick up. Nearly, 400,000 sq. ft. was transacted in the Southeast submarket in Q2 2021, double the volume during the previous quarter.
- Negative net absorption of 70,945 sq. ft. was recorded, bringing the year-to-date net absorption to negative 409,465 sq. ft.
- The direct asking lease rate increased $0.06 from the last quarter to $27.29. per sq. ft. full service gross (FSG).
- Construction remained stalled with no new projects breaking ground in Q2 2021.
