Tenant Turnover at Writer Square
By Margaret Jackson
The Denver Post
August 9, 2008
Higher rents on new leases are pushing out several shops and a public-relations agency. Rising rents are forcing a number of longtime tenants to leave Writer Square downtown. Most of those tenants are ground-level retail: Victoriana Antique Jewelry, Sunglass City, Lupo and Writer Square Travel, now called Writer Travel.
But at least one longtime tenant of the 10-story office building, JohnstonWells public relations, is leaving after 20 years. JohnstonWells is relocating from the 8,400 square feet it occupies because the landlord hiked the rent from $18 a square foot to $33 a square foot, said Gwin Johnston, the company's chief executive. The company is moving to 9,300 square feet of newly remodeled office space in the Rocky Mountain Seed Building on 15th Street between Larimer and Market.
"I guess they think there is going to be great demand for office space in downtown Denver, but we can't afford to pay that kind of rent," Johnston said.
That's exactly what the owners think, said Scott Amling, regional director of TA Associates Realty, which controls the pension fund that owns the property.
TA has been raising rental rates for both office and retail tenants as their leases expire. The building is under contract to be sold to Gary Dragul of GDA Real Estate Services LLC, according to people familiar with the deal. Neither Amling nor Dragul would confirm Dragul is the buyer.
High demand seen
"There's a lot of interest in buying the project because the rents have doubled in downtown," Amling said. "We've raised the rents because that's what tenants will pay for office and retail space downtown."
The median rental rate for downtown office space is $27.65 a square foot, according to information provided by Frederick Ross Co. In Lower Downtown, the median rental rate is $28.75. The highest downtown median rental rate is in the Skyline Park area at $31.88.
Downtown office broker Darrin Revious of Frederick Ross Co. said the rent increases at Writer Square are reasonable, given its location between the 16th Street Mall and Larimer Square.
"I think it's reasonable because of the location and the parking," Revious said. "There will be some rollover with those tenants facing renewals, but there are tenants willing to come in and backfill that space."
Tom Lee, also with Frederick Ross, said the building has the best parking available per square foot of any building downtown.
"There's an opportunity to really upgrade that building and have it really be a nice boutique building," Lee said. "It's been out of sight, out of mind because it's been very full, but there are some tenants moving out and there are opportunities to grow rents and put some new tenants in there."
The 118,696-square-foot Writer Square office building is 95 percent leased.
Moving after 25 years
When TA Associates increased the rent for Victoriana Antique Jewelry from $54 a square foot to $62 a square foot, owner Dave Prebble relocated to nearby Larimer Square, where total rent is $47 a square foot.
Median retail rental rates downtown, which has a vacancy rate of 3.17 percent, are about $25 a square foot, according to Frederick Ross research.
"We had a leasing agent who just thought we would pay the rate," Prebble said. "I'm selling a discretionary product in a down economy, and I have to be conservative."
Annemarie Durel, manager and owner of Writer Travel, said rents at Writer Square are being increased about 40 percent. She relocated to Wewatta Street in May after being in the same location for 25 years.
"They don't want to deal with anybody — there's no loyalty, no nothing."
Susan Karsh, managing director of Frederick Ross who specializes in retail, said $50 a square foot a month would be a reasonable rate for retail space in Writer Square.
"I think $62 is really, really high," said Karsh, who estimates retail space in LoDo is about $25 to $30 a square foot and the 16th Street Mall is about $35 to $40 a square foot.
She said the owner of Writer Square should concentrate on improving the overall appeal of the development before raising lease rates.
"It's always been a mishmash," she said. "There are a few good spaces ... and nothing great in the middle. Why would they want to lose good tenants while they're working on their overall plan? Raising rents before creating image could be detrimental in the long run."
Increase is recent
There are plenty of retail and office tenants staying. Those who renewed their leases a year or two ago did not see sharp increases in rent.
Companies that lease space in the office building include Babcock & Brown Energy Inc., Crawley Ventures, Emerald Hill Capital Partners, Etkin Johnson Group, Equastone, Laramie Energy, the University of Wyoming and Village Ventures.
Sage Hospitality Resources is relocating from the 22,000 square feet it occupies to the newly named Sage Building on the 16th Street Mall. Sage still has a couple of years left on its lease and plans to sublease its space.
"We ran out of space, and there was no adjacent space we could expand to," said Walter Isenberg, the company's president. "There's not a better office location, but the retail has struggled for the entire time we've been here."
Retail tenants on the ground level include the UPS Store, Statice Salon & Spa, Cafe Colore, Evil Bean, Sushi Han, Knox Galleries, Triage, Rocky Mountain Chocolate Factory and Zaidy's Deli. There are at least four vacant storefronts. The 51,346 square feet of retail space is 93 percent leased.
There also are privately owned condos above some of the retail space.
Dave Tewksbury of Tewksbury & Company Premium Tobacconist said his rent was raised about 18 months ago to about what he expected and he is now paying in the low to mid-$20-per-square-foot range for the 1,000-square-foot store.
"I really don't have any gripes with the owner," he said. "We're were fortunate we got in before their attitude changed."