Denver Office Market Posts Best Absorption In 4 Years
Denver’s office market is still recovering from the pandemic, but second-quarter reports indicate it is shifting toward stabilization with positive net absorption.
Office tenants took approximately 119,700 SF more than they vacated in Q2, according to Cushman & Wakefield.
Last quarter was Denver’s strongest quarterly net absorption since Q1 2022, which had nearly 282K SF of net absorption, according to Cushman & Wakefield data provided to Bisnow.
Absorption growth last quarter came despite Schlumberger giving up more than 50K SF at the Denver Energy Center. Meanwhile, Industrious moved into 25,200 SF at 2420 17th St., according to Cushman & Wakefield’s Q2 Denver office report.
Other notable move-ins in the second quarter included Merrick & Co. at Lincoln Crossing Tower I and Intrepid Potash at Republic Plaza, according to CBRE.
“While market fundamentals improved, tenant downsizing and delayed occupancies continued to influence leasing activity, tempering the pace of the recovery,” according to Cushman & Wakefield’s Q2 Denver office report.
Denver’s office market is expected to stabilize gradually rather than recovering rapidly, according to JLL.
“Positive absorption, declining sublease inventory, limited new supply and continued demand for higher-quality space suggest the period of rapid deterioration has largely passed,” TJ Jaroszewski, JLL senior director of mountain region research, wrote in the Q2 report. “Recovery is expected to remain highly selective, with future improvement dependent on leasing activity translating into sustained occupancy growth rather than reshuffling demand within the existing inventory base.”
Nationally, the office market is getting healthier. Vacancy rates dropped by 10 basis points in Q2, and 49 of the 92 markets tracked by Cushman & Wakefield recorded a decline, Bisnow previously reported.
In Denver, vacancy changes varied by industry reports but were statistically negligible, hovering between 26.6% and 28.7%.
Cushman & Wakefield said Denver’s vacancy rate increased by 10 basis points quarter-over-quarter. CBRE reported total vacancy was down 20 basis points quarter-over-quarter.
Each commercial real estate services firm said that vacancy rates vary by submarket, with higher rates in downtown Denver and River North, at 38.6% and 42.3% vacant, respectively. Cherry Creek posted 12.8% vacancy, and the Southeast market, which includes the Denver Tech Center, recorded 26.4% vacancy, according to CBRE’s latest report.
