The Denver office market continues to feel the effects of the coronavirus pandemic. While 2021 ushered in widespread vaccinations and a return-to-office initiative for many businesses, headwinds from the delta variant, followed soon after by the omicron variant, have dampened momentum. Many employers have again pushed back a return to office.
Occupiers are starting to take advantage of the tenantfavorable environment, particularly when it comes to the abundance of sublease listings that are typically offered at a steep discount. The uptick in sublet leases helped to offset total available sublease space on the market, which began to decrease in 21Q2 for the first time since the onset of the pandemic. There is currently 4.4 million SF of available sublease space, down from the recordhigh of 4.7 million SF that was recorded in 21Q1.
Since the beginning of 2020, over 6 million SF has been vacated across the Denver metro. Vacancy registers 14.2%, which is now above Great Recession levels. Looking ahead, the office market is projected to remain tenant-favorable, with vacancies projected to remain high through the end of the forecast.
New construction deliveries have increased the amount of available space in the market over the past year. However, Denver’s office construction pipeline is thinning with only 1.0 million SF currently underway, a decrease of more than 50% from the previous year.
Price growth and investment volume picked up in 2021. Investors are targeting well-leased assets in prime locations, but value-add plays and high vacancy properties are also trading, speaking to the confidence that investors have in Denver’s long-term performance