Avison Young releases Fourth Quarter 2022 Market Reports for Denver office and industrial sectors
January 25, 2023
• Denver continues to attract top talent, reflecting a 4.0% increase in jobs since December 2019 • Industrial values continue to climb and trade at record prices
Denver, CO – Avison Young has released its Fourth Quarter 2022 Office and Industrial Market Reports for Denver.
Overall, office values in 2022 held steady despite an end-of-year slowdown. In the first half of the year, Denver’s office sales were favorable, accounting for $1.5 billion in total transaction volume. Beginning in the third quarter, the market started to react to the increased interest rate environment along with equity hurdles, which further widened the buy/sell spread. In Q4, capital markets activity halted, with no significant transactions occurring in November and December.
The office development pipeline remains robust, with 2.9 million square feet (msf) anticipated to deliver by 2024. Approximately half of all office development is concentrated in the CBD and the River North submarket.
“During Q4 2022, overall market activity was almost frozen in time, yet there’s a sense of cautious optimism on the horizon coming from the tenant side. As it relates to office occupancy, for every user pulling back, there seems to be two more tenants that are optimistic about their office space needs,“ said Howard Schmidt, a Vice President specializing in office tenant representation with Avison Young.
Average asking rents for direct office space show nominal improvement to $31.74 per square foot (psf)/full-service, having risen by 8.9% since pre-pandemic. Landlords are now offering a discretionary allowance in addition to a tenant improvement allowance and more flexible lease terms to attract new occupiers.
Denver’s industrial property sector remains active but is starting to show signs of slowing. Leasing activity decreased by 16% year-over-year but posted positive net absorption of 6.7 msf. Direct asking rents remained steady, slightly increasing to $9.72 psf/NNN. Top industries leasing new space are logistics/parcel delivery companies and food/beverage manufacturers. Industrial buildings under construction are leasing up at an average of 20% prior to delivery – many of which are offering taller clear heights, surpassing the 40’ mark. Overall availability will continue to grow as 9.3 msf is expected to deliver this year.
“We finished out 2022 in stark contrast to the previous three quarters,” said Dawn McCombs, an Avison Young Principal and Denver industrial team lead. “Q4 saw a significant decrease in activity and absorption, so it will be interesting to see how 2023 recalibrates the supply and demand, with nearly 10 msf anticipated to deliver and as companies assess this new market environment.”
Avison Young’s Denver office will continue to monitor how this affects landlords and tenants alike.
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For more information: • Download Fourth Quarter 2022 Office Market Report and Industrial Market Report • Marcy Moneypenny, Principal & Managing Director: +1.303.800.1040 • Anne McWhirter, Insight Analyst: +1.303.390.0965