Vaccinations became widely available in the secondquarter, and with restrictions lifting across the city,workers began returning to the office. Leasing activityaccelerated in the last 3 months as tenants tookadvantage of deals available in the market. But there’sstill uncertainty surrounding the pandemic’s long-termimpact on office space with many employers testinghybrid work models and right sizing their office footprint.
Occupiers are starting to take advantage of the tenant-favorable environment, particularly when it comes to theabundance of sublease listings that are typically offeredat a steep discount. The uptick in sublet leases is helpingto offset total available sublease space on the market,which began to decrease in 21Q2 for the first time sincethe onset of the pandemic. There is currently 4.3 millionSF of available sublease space, down from the record-high of 4.7 million SF that was recorded in the firstquarter.
Denver recorded over half a million SF of negative net absorption in the second quarter. Since the beginning of 2020, nearly 6 million SF has been vacated across the Denver metro. Vacancy registered 14.4% at the end of the second quarter, which is now above Great Recession levels. Looking ahead, the office market is projected to remain tenant-favorable, with vacancies continuing to rise through the second half of the year before beginning to compress in 2022 through the end of the forecast.
New construction deliveries have increased the amountof available space in the market over the past year.Thankfully Denver’s office construction pipeline isthinning with only 1.3 million SF currently underway, adecrease of 50% from the previous year.
Denver’s office market is in a period of heightenedvolatility, but there are reasons to be optimistic about itslong-term health. Denver has enjoyed some big winsthis year with the relocation and expansion ofcompanies, and the market continues to diversify withthe emergence of the tech sector’s footprint in the local economy.
View Report: Denver Office Market-Q3