Southeast Suburban Rebounding

September 2004

Tom Lee, Senior Managing Director
Phil Ruschmeyer, Senior Managing Director

Rising occupancy and steady absorption indicate that Denver's Southeast Suburban office market is returning to health after three years of steady decline.

Following the progress of the Southeast Suburban market is important for a number of reasons:

• It has the largest number of office buildings (315 buildings)
• It has the greatest amount of space (28 million square feet)
• It has the largest number of tenants (over 12,600)
• It has the largest number of large tenants (125 that are 20,000+ SF)
• It has more Fortune 1000 tenants than any other submarket (9)

As the chart below shows, the performance of the metropolitan market is inexorably linked to that of the Southeast Suburban market.

 We know that as the supply and demand dynamics change in the Southeast Suburban, so will rents and values, the question is when and by how much.  The chart below shows that if we believe history is any predictor of future behavior, rents will begin to move upward as vacancy drops through certain thresholds.

So what does this mean for tenants, landlords and investors?  There really are implications for everyone.  If you are a tenant, it is worth looking at ways to improve your situation while the market is still soft (can I renew early or extend now?).  If you are a landlord, it may be time to readjust your leasing strategy in the context of changing conditions (what is the optimum balance between higher rents or earlier lease-up?)  And if you are an investor, changes in the market will influence value decisions whether you are buying, selling or holding a property.