Office Sublease Remains Elevated, while Industrial Leasing Activity Underscores its Resilience

Total office vacancy and asking rents, courtesy of CBRE Research.

CBRE just released its Q2 reports on Metro Denver’s office and industrial property sectors. Office sublease availability remains elevated but a recent decline indicates signs of leveling off. At the same time, a robust industrial leasing activity underscores Denver industrial’s resilience.

Q2 2023 Metro Denver Office Highlights

  • After reporting record-breaking levels for the past three quarters, sublease availability dropped 3.2% quarter-over-quarter to 6.4 million sq. ft.
  • The development pipeline remained at 2.4 million sq. ft.
  • Negative 140,800 sq. ft. of direct net absorption was posted in Q2 2023, a notable improvement from the negative 384,600 sq. ft. recorded in Q1 2023.
  • Leasing activity totaled 1.1 million sq. ft. in Q2 2023, marking a 22.4% increase quarter-over-quarter and closely mirroring the level of activity seen a year earlier.
  • Investment activity improved in Q2 2023, totaling $253.6 million ($304.39 per sq. ft).
  • Total vacancy increased 10 basis points (bps) quarter-over-quarter and 120 bps year-over-year to 21.2%. Direct vacancy saw a similar quarterly increase of 10 bps to 18.0%.
  • The overall average direct asking rent posted a marginal increase of 0.3% quarter-over-quarter but a decrease of 0.2% year-over-year to $32.11 per sq. ft FSG.

Q2 2023 Metro Denver Industrial Highlights

  • Total leasing volume transacted in metro Denver climbed to over 2.9 million sq. ft., a 73.1% quarter-over-quarter increase.
  • Over 1.6 million sq. ft. of positive net absorption was posted, pushing year-to-date total net absorption to over 2.4 million sq. ft.
  • Development activity decreased 18.0% quarter-over-quarter with 8.2 million sq. ft. under construction at the end of Q2 2023.
  • Metro Denver asking rent growth remained nearly flat quarter-over-quarter, increasing slightly by less than 1.0% to $8.78 per sq. ft. NNN.
  • Availability rates in metro Denver saw a marginal increase of 30 bps to 7.9%, while vacancy rates remained flat at 6.7%.
  • As economic uncertainty continues and capital markets remain volatile, sales activity once again fell in Q2 2023, recording an overall volume of $98.0 million.

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