JAMES REAL ESTATE SERVICES, INC.
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Creek. The Class C sector has experienced the largest recovery of the three sectors. In 1990 the
vacancy rate for Class C space was 35%, at mid year 2000, the vacancy rate is reported at 8.69%.
The office mini-boom in the southeast suburbs and elsewhere is reminiscent of the 1980s, with a
few exceptions. For one, tenants are not looking for marquee space. They want an image that conveys
fiscal responsibility. Today's office buildings are also being built with redundant power, fiber optics,
cable trays, uninterrupted power supplies, and greater air conditioning volume to diffuse the heat
produced by electrical appliances. Businesses are also pursuing cost savings by packing their office
space more densely with employees, which requires more flexible floor layouts and more parking
spaces in most cases, five per thousand.
By upgrading the functional elements that tenants need, while avoiding ostentatious building
materials, developers have been able to keep costs competitive with existing buildings along the
Interstate 25 corridor. Today, new office "flex" and single-story office buildings are popping up to meet
the demand of tenants leaving the office towers in search of cheaper rents. The demand for the lower-
cost buildings, which don't have such amenities as elevators and lobby areas, is expected to grow.
Overall, metro Denver's office market remains healthy with new buildings getting leased and
rents in most areas increasing. However, the frenetic pace of new construction and investor interest
appears to be slowing. Worth noting is that in the 1980s, the office market was growing by
approximately 9.9 percent a year at a time when job growth was averaging approximately 1.9 percent,
while in the 1990s, the office market has been growing at approximately 1.4 percent annually with job
growth averaging approximately 3.2 percent.
Industrial
Strong absorption, dropping vacancy rates, and a considerable amount of new construction have
been the recent trends within the Denver metro area for industrial properties. According to the
Frederick Ross Company vacancy dropped 1% since year end 1999, with more than 3 million square
feet of space absorbed. Multitenant space experienced the largest amount of absorption with a reported
vacancy rate change from 10.23% to 7.58%. Single tenant R&D space was the only class to perform
poorly with vacancy rates increasing from 5.74% to 10.12%. Rental rates continue to be flat with some
market segments experiencing slight rental rate increases.
