Guest Blog by Eric Nesbitt

Denver’s Commercial Real Estate Market –
Better than You Might Think
by Eric Nesbitt, President and CEO, The Nesbitt Group

Despite the uncertainty and unpredictability of the national economy, Denver’s commercial real estate market continues to remain steady, particularly in the office and industrial sectors. Although many local large companies are holding off on major real estate decisions, Denver’s commercial real estate market continues to perform well compared to other markets in the country, where vacancies are higher and rents are decreasing.

Denver office and industrial properties continued to positive absorption of vacant space in the third quarter, while retail space such as shopping centers and malls had negative absorption. Retail space is more consumer-oriented than other commercial property types and, therefore, more affected by the economy and consumer problems such as housing foreclosures. However, Colorado’s improving housing market should benefit the retail sector. The state’s foreclosure rate has shown significant improvement this year, and many analysts believe the Denver-area housing market is ahead of the national cycle for recovery.

Overall, vacancy rates increased for office, industrial and retail properties, but despite this softening, average rental rates increased for all three property types. Metro Denver office space saw its total vacancy rate, including sublease space, increase to 15% in the third quarter. However, average asking office rental rates inched up to $20.99 per sq. ft. per year in the third quarter from roughly $20.60 from the same period last year. On the industrial side, total third-quarter vacancy increased to 7.4%, which is still relatively healthy. Average asking rates also increased to $6.41per square foot from $6.00 per sq. ft. for the same quarter last year. Finally, the total retail vacancy rate continued to increase in the third quarter to 7.5%, but the average asking lease rate still rose to $18.04 per square foot per year from nearly $16.00 for the same period last year.

What does this all mean for you and your business? Despite a slumping economy, companies seeking to lease office or industrial may be surprised that landlords are unwilling to do “screaming deals” to get tenants in their buildings. At least for the time being, rental rates remain stable or continue to rise, and commercial landlords have not been overly impacted by the economic slowdown. Of course, this may change in the next few months or as we head in to the New Year.

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