Live And Play Has Been Cherry Creek's Mantra. Now It's Adding Work As High-End Office Heats Up
Posh. Luxe. Upscale. Tony.
These are the terms frequently used to describe Denver’s Cherry Creek neighborhood, one of the best-known pockets of the city, thanks to its luxury shopping, high-end homes and the verdant environment — the product of an eponymous creek that winds through the streets.
“Since 2017, there are four new hotels in Cherry Creek, there’s been a huge hotel renaissance and thousands of new residential units,” said Matt Joblon, CEO of BMC Investments, the developer of several of those hotels and residential projects. “But office kind of lagged. The real catalyst for Cherry Creek and office was really the pandemic.”
Joblon himself is part of the office renaissance coming to Cherry Creek. BMC broke ground this week on 255 Fillmore, a seven-story building with office space atop a restaurant for a total of 100K SF.
The project is speculative, but is already 93% leased, Joblon told Bisnow, an “astounding” feat for an office building in the current market conditions the week of its groundbreaking. And there’s demand for more.
“I could have leased one-and-a-half, two times this building,” he said.
Cherry Creek has long been an office destination for a particular type of firm, namely, white-shoe finance companies like Bow River Capital, Janus Henderson Investors and Morgan Stanley, which all have a presence in the area. But the neighborhood’s appeal is gaining traction among office users, drawn by the opportunity to offer their employees a workspace in the city’s fanciest neighborhood.
The tenant mix is still largely financial services, but it is diversifying as its capacity as an office hub becomes clearer, according to Joblon. He sees a coming influx from smaller tech companies and energy investment firms, but the biggest newcomer to the submarket will be professional services, particularly law firms.
“The talent war and attracting talent is key to any business. Businesses really have to look at their office space and creating places where people can thrive,” Joblon said.
With low crime rates, good walkability and a wellness-focused culture that combines health-food restaurants with exercise studios and high-end athleisure stores, Cherry Creek seems to be the answer.
But with an infill location carved from the middle of Denver and lack of the sky-high zoning found in central business districts, there’s only so much office space that can go up in Cherry Creek. Joblon sees a runway of three to five years before land constraints make it difficult to build offices in Cherry Creek. And his company will do its best to capitalize on what’s left, with another office project in the planning stages on Milwaukee Street.
The limited availability means that companies looking to move to the area have to think very far in advance and be prepared to pay a premium.
Hot competition makes it hard to get into Cherry Creek, especially if you’re seeking a larger floor plate, said Brendan Fisher, corporate managing director at Savills’ Denver office.
“If you want a full floor or bigger block in Cherry Creek, you have to get out ahead of it. You’re going to have to commit before they break ground. It’s a very unique characteristic,” Fisher told Bisnow.
Higher rental rates come with the territory in a market where so little space is available. Class-A office space in Cherry Creek right now goes for about $42 per SF for a full-service lease, roughly $8 higher than in the Central Business District, according to Savills data.
Paying a premium isn’t a new idea in Cherry Creek, where you can spend several thousand dollars on a Hermes bag before heading down the street for some Waygu beef and caviar at Matsuhisa, then going home just upstairs to Steele Creek, where one-bedroom apartments go for $2,900 per month.
And it’s exactly that level of flair and high-end experiences that companies are drawn to as they seek a new office space, Joblon said, explaining that he was able to obtain rates that were a 10% to 15% premium over what office buildings get downtown right now.
“They understand the value proposition,” he said.
Investors see the value as well. Earlier this year, Granite Properties picked up one of Cherry Creek’s best-known office buildings, First Avenue Plaza, for $105M, about 40% more than what Black Creek Group, now part of Ares Management, paid for it in 2014. Part of that price appreciation can be chalked up to the intense growth the market experienced in the latter half of the 2010s, but the allure of the neighborhood should not be overlooked.
Cherry Creek’s performance as a market, particularly the leasing velocity, drew Granite to the deal, Senior Managing Director Stephanie Lawrence told Bisnow at the time.
In spite of all that, however, Cherry Creek isn’t the most expensive office submarket in the city.
Popular areas like River North and Platte Street, situated on the north end of the CBD, while Cherry Creek is just outside downtown’s southern boundary, lease for around $50 per SF.
The rise of the submarkets on the periphery of downtown is indicative of where office users’ demands are headed, Joblon said.
“All the buildings are boutique in nature. They are 75K to 100K SF,” he said of the Cherry Creek developments. “It’s not massive companies all getting to the office at once. It’s really compelling to people.”