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Denver’s office sector continues to thrive in Q4 2015

office sector

Denver’s office sector continues to thrive in Q4 2015, dropping the vacancy rate to 9.5% for the quarter. Total absorption for the fourth quarter came in at 1,329,482 square feet which was a significant increase compared to third quarter 2015 at 852,698 square feet while second quarter 2015 saw positive 1,014,454 square feet, and positive 347,226 square feet for the first quarter 2015. This was the highest net absorption for a quarter since the Great Recession and a 69% increase compared to fourth quarter 2014 at 783,730 square feet.

A total of 10 buildings were delivered to the market in the fourth quarter, totaling 739,970 square feet, with another 3,431,549 square feet still under construction at the end of the quarter. Overall total net absorption for 2015 was 3,543,860 square feet for Denver’s office sector.

Class-A office sector recorded the highest net absorption for all three classes for the quarter, with 1,061,616 square feet, compared to positive 399,433 square feet in the third quarter 2015, positive 177,308 square feet in the second quarter 2015, while first quarter recorded positive 332,733 square feet.

Class-B office sector recorded a net positive absorption of 195,800 square feet for fourth quarter 2015, which was a 46% decrease compared to third quarter 2015 of positive 369,097 square feet, while second quarter 2015 saw positive 822,407 square feet, and first quarter 2015 with positive 24,452 square.

Net absorption in fourth quarter for Denver’s Business District was 449,549 square feet which was significantly higher compared to fourth quarter 2014 at 156,543 square feet. Total net absorption for Denver’s Business District for 2015 was 513,652, slightly lower than the total net absorption of 652,220 square feet in 2014. Net positive absorption in third quarter 2015 was 12,531, while second quarter 2015 saw positive 42,706 square feet, and first quarter 2015 with positive 8,866.

Net absorption for the suburban markets was 897,933 square feet in fourth quarter 2015, up 40% compared to positive 627,187 square feet in fourth quarter 2014. Both the third and second quarter 2015 showed high net absorption numbers at 840,167 square feet, 971,748 square feet respectively. First quarter 2015 net absorption was 338,360 square feet.

Average lease rates for all classes was $24.44 per square foot per year in fourth quarter 2015, which was a 1.4% increase compared to third quarter 2015 at $24.10 per square foot. Average quoted lease rate for Class-A office sector was $29.64 at the end of fourth quarter, while Class-B rates stood $21.43. Both Class-A and Class-B saw slight increases in the average lease rates, however, Class-C drop slightly in the third quarter 2015. Average quoted lease rates for Denver Business District was $32.29 at the end of fourth quarter 2015, up 1.0% from third quarter 2015 at $31.97. Suburban market’s average quoted lease stood at $22.50 in fourth quarter 2015.

Vacancy rate for the fourth quarter 2015 fell to 9.5%, compared to 9.9% in third quarter 2015, while second quarter remained flat at 9.9%, and 10.3% at the end of the first quarter 2015.

Vacancy for Class-A office sector stood at 10.6% at the end of the fourth quarter, 11.3% in third quarter 2015, and remained flat at 10.8% in second and first quarter 2015.

Vacancy rate for Class-B office sector stood at 10.0% at the end of the fourth quarter 2015, down two-tenths of a point from 10.2% in third quarter 2015, 10.5% in second quarter 2015, and 11.1% at the end of the first quarter 2015.

Vacancy rate for Denver’s Business District decreased to 10.3% which was a 12% drop compared to 11.7% at the end of third quarter 2015, 11.1% in second quarter 2015, and 11.2% at the end of first quarter 2015.

Vacancy rate for the suburban markets decreased to 9.3% in the fourth quarter 2015, down two-tenths of a point from 9.5% in third quarter 2015, 9.7% in second quarter, and 10.1$ at the end of the first quarter 2015.