Q2 Office Market Update

Much like the residential market, the commercial lease and sale arena is on fire with no signs of slowing in the upcoming quarters. The stats for the sub catagories of the commercial office market are as follows:

Vacancy

The office vacancy rate in the Denver market area decreased to 10.0% at the end of the second quarter 2015. The vacancy rate was 10.3% at the end of the first quarter 2015, 10.5% at the end of the fourth quarter 2014, and 10.6% at the end of the third quarter 2014.

 

Rental Rates

The average quoted asking rental rate for available office space, all classes, was $23.81 per square foot per year at the end of the second quarter 2015 in the Denver market area. This represented a 1.4% increase in quoted rental rates from the end of the first quarter 2015, when rents were reported at $23.49 per square foot.

Inventory

Total office inventory in the Denver market area amounted to 190,482,183 square feet in 7,408 buildings as of the end of the second quarter 2015.

Sales Activity

Tallying office building sales of 15,000 square feet or larger, Denver office sales figures fell during the first quarter 2015 in terms of dollar volume compared to the fourth quarter of 2014. In the first quarter, 30 office transactions closed with a total volume of $562,287,698. The 30 buildings totaled 3,023,124 square feet and the average price per square foot equated to $186.00 per square foot. That compares to 44 transactions totaling $601,590,443 in the fourth quarter 2014. The total square footage in the fourth quarter was 4,314,955 square feet for an average price per square foot of $139.42. Total office building sales activity in 2015 was up compared to 2014. In the first three months of 2015, the market saw 30 office sales transactions with a total volume of $562,287,698. The price per square foot averaged $186.00. In the same first three months of 2014, the market posted 21 transactions with a total volume of $333,215,887. The price per square foot averaged $163.32.

Cap Rates

Cap rates have been lower in 2015, averaging 7.13% compared to the same period in 2014 when they averaged 7.19%

In summary, the commercial office real estate market is in line with the residential market holding on the steady upward trend. Values are high, vacancy is low and there are no signs of slowing. If you have questions about a specific market area please contact a member of our team for a detailed analysis.