Q4 2022 Office Space Report: Denver, CO
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Denver, CO is the base for major companies like RE/MAX, Frontier Airlines, DISH Network, and Qdoba.
The unemployment rate decreased from 3.5% to 2.9% quarter-over-quarter.
Its metro population increased by approximately 1.17% throughout 2022.
At the close of Q4 2022, vacancy increased, net absorption rose, product in development plateaued, and rents declined in Denver, CO’s office space market.
General Area Overview & Demographics
Denver, Colorado, is home to a diverse population of 711,463 people. According to census data, 49.5% of Denver’s population is White, and 32.3% is Hispanic or Latino. African Americans comprise 11.1%, Asian Americans account for 4.6%, and Native Americans comprise 0.4%.
Denver, CO Median Household Income & Population
The median household income in Denver, Colorado, is $62,202. This figure is significantly higher than the national average of $55,376, indicating that the city’s residents are financially prosperous. In addition, approximately 28% of households in Denver earn more than $100,000 annually.
Approximately 25% of the population is under 18, while 15.3% are 65 and older. The median age in Denver is 34 years, slightly higher than the national average of 38.1 years.
The University of Denver, Regis University, and the Colorado School of Mines are among the most prestigious universities in the city.
One of the most renowned attractions is the Denver Art Museum, which houses over 70,000 works worldwide. Denver has over 4,000 acres of parks and more than 200 miles of trails.
Denver has a dry, sunny climate most of the year. In winter, temperatures drop to around freezing during the day and dip much lower at night. Summer brings hot, dry days and cool nights.
Summary of Denver Office Space Performance in Q4 2022
Overall average vacancy increased to 21.9% in the fourth quarter of 2022.
RiNo submarket posted the highest vacancy of 29.4%, while Boulder was lowest at 15.9%.
Southeast Suburban and the CBD additionally had vacancy rates over 20%.
Q4 nearly doubled negative absorption alone. There was -1.2 million absorbed in Q4, bringing the annual total to -2.8 million.
Most negative absorption in 2022 occurred in the CBD, posting -1.1 million square feet.
RiNo was the only submarket with positive absorption by the end of 2022 (21,000 square feet).
What are office space rents like in Denver?
Asking rents declined $0.08 quarter-over-quarter to $31.56 per square foot in Q4 2022.
RiNo had the highest average asking rent compared to any submarket in Denver, being the only one to exceed $40 per square foot ($43.95).
Aurora/Northeast rents were approximately $21.25 per square foot, making them the lowest.
Class A rents averaged $35.51 per square foot.
Purchase & Leasing Activity
Office space transactions reached $1.5 billion in volume throughout the first two quarters of 2022.
As interest rates increased, purchase activity stalled significantly, with no deals in November or December 2022.
Total sales volume for the year ended at around $2 billion, while 2021 reached nearly $3 billion.
The average sales price rose to approximately $290 per square foot in the fourth quarter.
Leasing activity experienced a rebound in Q4 with over 1.2 million square feet of signed leases.
Notable Office Space Deals in Denver in Q4 2022
Several deals for Denver’s office space properties took place in Q4.
- NGP Capital purchased 232,000 square feet for $60.8 million.
- Westside Investment Partners purchased 274,600 square feet for $14.8 million.
- Burns and McDonnell leased 124,000 square feet.
- Antero Resources leased 122,000 square feet.
These are select examples among other activity.
New Office Space Development Activity in Denver in Q4 2022
No new construction activity happened in the final quarter of 2022. There were no deliveries or starts.
The active pipeline remained around 2.1 million square feet quarter-over-quarter.
RiNo and CBD submarkets are receiving more than half of what was under construction.
Market Forecast for Denver’s Office Space Market
In the final months of 2022, Denver’s office market faced challenging headwinds, with both leasing activity and rental rates down.
After an initial period of growth in 2022, the decline in activity brings uncertainty to the market.
These metrics indicate that the impact of working from home and layoffs during the pandemic will be long-lasting.
While Denver is positioned to recover, Q4 hasn’t indicated it will soon.
Takeaways for Office Space Real Estate Investors
The office market in the US is bound to pick up at some point, and while Denver had a sluggish end to 2022, its underlying fundamentals make it a quality candidate to perform well in the future.
Whether the time is now to get in will require discernment from the investor.
The flight-to-quality trend is also present in Denver, so prioritizing that product is worth consideration.
Do your research and happy investing.
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