Qwest Tower Space for Lease

By Paula Moore
Denver Business Journal

DENVER- Space at the 1801 California skyscraper — one of the signature buildings in downtown Denver’s skyline with its bright blue “Qwest” signs — is on the market for lease for the first time in nearly 20 years.

At 1.38 million square feet in 53 stories, the trophy high-rise is one of the largest office buildings in Denver.

The building’s owner — a Public Service Enterprises Group Inc. (NYSE: PEG) subsidiary — just hired the Frederick Ross Co. to market space that will become vacant starting this summer, according to Ross.

PSEG of Newark, N.J., is one of the country’s largest electric companies, with $29 billion in assets and 10,500 employees. The Fortune 500 company celebrated its 100th anniversary in 2003.

“We’ll have a minimum of 400,000 to 500,000 square feet of space to lease,” said Jamie Gard, senior managing director at Denver-based Ross and one of the leasing brokers marketing 1801 California.

Ross could have twice that amount of space to market if Qwest Communications International Inc. (NYSE: Q) decides to move its headquarters out of the building when its lease expires at the end of June 2012.

Qwest leases the entire building through a master lease, or controlling lease, but occupies only about 850,000 square feet and subleases much of the rest of the space. But even though that lease ends in 2012, Ross can start putting new tenants into vacant space starting in October.

“If Qwest vacates the building entirely, we’ll have one of the biggest blocks of space for lease west of the Mississippi River,” said Nathan Johnson, another Ross senior managing director and office broker who’s marketing 1801 California.

Ross signed an agreement to market the building — also called Qwest Tower — on March 16, and hopes to have a preliminary marketing plan in the next few months.

The brokers also expect the building’s landlord to implement a plan to upgrade the property, including possibly seeking LEED certification and making improvements to the exterior. LEED stands for Leadership in Energy and Environmental Design, and is the U.S. Green Building Council’s designation for sustainable, energy-efficient buildings.

No asking rental rate has yet been determined, Gard said.

In the fourth quarter, average asking rent for downtown Denver office buildings was nearly $26 per square foot per year, according to a report by CB Richard Ellis Group Inc.’s Denver branch.

Qwest has leased the 1801 California building since 1992. But the Denver-based telecom company recently decided it won’t renew its master lease there in order to cut costs.

The company said in February that it plans to move non-headquarters operations, with 1,200 employees, out of the building starting this summer to downtown Denver buildings it owns at 930 15th and 931 14th streets, and to its location off Mineral Road in Littleton.

Qwest hasn’t decided if it will move its headquarters, with 1,400 people, out of 1801 California, and may sign a new lease for that space.

The company’s executive offices are located on the building’s top three floors, and other operations are situated throughout the property.

“The headquarters will remain in the Denver metro area,” Qwest spokeswoman Diane Reberger said. “And that includes the possibility of staying at the 1801 building.”

Qwest subleases about 400,000 square feet in the building to companies such as the Kutak Rock LLP and Patton Boggs LLP law firms, the R.W. Beck Inc. engineering firm and a local office of the U.S. Securities and Exchange Commission.

“One of our first priorities is to talk to those people and try to retain them,” Gard said of the sublease tenants.

The 1801 California building was developed as a Mountain Bell building by Miller-Klutznick-Davis-Gray Co. of Denver and completed in 1983. The Miller part of the development company is Myron “Micky” Miller of Miller Global Properties LLC of Denver, and Davis refers to Marvin Davis, the late California oilman, movie mogul and billionaire.

The Qwest building was part of a 1980s office-building boom in downtown Denver that produced “super high-rises” such as Republic Plaza, the Rocky Mountain West’s tallest building at 56 stories, and Wells Fargo Center, the so-called Cash Register Building, as well as 1801 California.

Public Service Enterprises bought 1801 California in 1992 for almost $240 million, according to commercial real estate brokers in Denver.