Two years of pandemic have given Coloradans new ways of looking at the urban center, and for brokers in commercial real estate those impressions include a highest-ever office vacancy rate, new worries about safety and a visible homelessness issue.
But in the details, commercial real estate brokers are finding numbers of reasons to feel buoyed about where the city is heading.
“This is the most challenging time that cities have seen in decades, a generational change that happened in two years,” Downtown Denver Partnership President and CEO Kourtny Garrett told brokers gathered Thursday for the Colorado Commercial Real Estate Symposium at downtown’s Seawell Ballroom.
But crowds are returning downtown, including growing numbers of office workers that had shunned the city following the stay-at-home order.
Garrett, who referred to the post-pandemic urban scene as a “tale of two cities,” said that worker participation is most visible Tuesdays-through-Thursdays, but is becoming more evident Fridays, as well.
Garrett and other speakers pointed to the $3 billion in new development in and around downtown that took place from 2018 through the height of the COVID-19 pandemic, and to a host of infrastructure projects in the making to repair big problems. Those include a makeover of the Sixteenth Street Mall and Skyline Park, and a 62-acre River Mile project to transform the Platte River between the Pepsi Center and Empower Field.
The shift from working downtown to working from home served to exaggerate a high office vacancy rate in metro area, according to one report topping out at around 25% in the central business district this year. But speakers said that Colorado’s continuing growth and job availability suggest the market isn’t overbuilt.
“Is this the end of office space as we know it? I don’t think so,” said Hessam Nadji, president and CEO of California-based Marcus & Millichap, who was a keynote at the symposium.
Office space, he noted, has the least optimistic return now of five basic commercial real estate sectors after generally rapid rent increases during the past four years. Office rents were up just 3% over the period, compared to almost 10% for retail, 27% for apartments, and 28% for industrial properties.
For investors in the office sector, the coming years will take a strong stomach, Nadji added, but the demographics look good, including a Gen-Z population that was waylaid on the way to marriage and independent living, likely to return at some point, and workers gradually drifting back from home.
“It’s certainly getting busier over the past year, with more people coming in,” said Craig Ratterman with Newmark Group, who said he now works four days a week downtown in the firm’s office near McGregor Square.
“We like to be in there and collaborate,” he added. “You can’t underestimate what you learn.”
Q-and-A sessions during the largely-broker gathering expressed some concerns for safety downtown as the pandemic recedes. But the Partnership’s Garrett says that luring crowds back to downtown can help change that perception.
“When you have more people in an area, that automatically makes people feel safer,” Garrett told The Denver Gazette. “You give people more reasons to come back and you naturally have more eyes and ears and activity in the street.”
Garrett added that a change in perception of safety also requires program changes, including more presence from law enforcement, holding those with criminal intent accountable, and helping people who are truly in need.
The Colorado Commercial Real Estate Symposium is presented annually by the Denver Metro Commercial Association of Realtors.
