Becky Callan Gamble
President, Dean Callan & Co. Inc.
Over 5,000 students graduated from University of Colorado Boulder in May. If any of those grads wants to stay in Boulder, despite a 2.7% unemployment count between July 2018-March 2019, there were over 38,000 jobs available in Boulder County, almost 15,000 in the information technology sector. This means the companies that are located here are hiring, and there are new companies coming to town. That can only mean good news for landlords owning office product.
The reason companies expand or want to open an office in Boulder never really changes, beginning with lifestyle and Boulder being one of the most-highly educated cities per capita. But what is changing is the challenge of hiring top talent, finding a place to live and getting to work in a timely fashion. All these factors make for an interesting cycle in the Boulder’s office market.
So, where shall we start? First, let’s take a quick snap shot at those notable companies already in Boulder that seem to like it.
• Google has found something in Boulder that is working and now controls almost 700,000 square feet of space.
• Amazon filled its downtown Boulder location and is rumored to be looking for expansion options.
• Ball Aerospace recently announced plans to hire up to 600 new employees.
• LogRhythm is hiring and expanding.
• Workforce has more than doubled its space.
And then there are the companies that just arrived or on their way to landing in Boulder:
• Splunk leased 53,000 sf in the Spark Development.
• Cloudability leased 9,000 sf downtown as a secondary location to its Portland headquarters.
• WeWork leased 30,000 sf at 28th and Canyon and has been rumored to be hunting for more Boulder locations.
Now, let’s look at the other variables impacting the office market.
• Coworking. One does not have to look far to find some type of coworking operation in Boulder. There are more than a dozen coworking spaces, including Industrious, Novel, Galvanize, Regus and Office Evolution. And as mentioned above, WeWork is scheduled to open this fall. While coworking has a variety of benefits and is an attractive solution for Boulder’s many start-ups, it has had an impact on landlords who have smaller spaces. Historically it was difficult to find spaces less than 2,500 sf, now with coworking, the market is full of smaller options. Landlords are forced to implement ideas to stay competitive with coworking that market, along with flexible lease terms, flavored water and free breakfast to attract smaller users. As of the time of this article, there are approximately 50 available spaces in Boulder between 1,000 to 2,500 sf.
• New projects for 2019-2020. There will be almost 400,000 sf of potential new office product available by yearend 2020. This reflects more than a 5% increase in the total 7 million sf market. Projects include:
• The Reve – an 100,000-sf Class A office at 30th and Pearl streets, which is part of a larger mixed-used project.
• Boulder Commons Phase 2 – 52,000 sf of Class A office and some retail.
• Spark-Market Building – 30,000 sf of Class A office.
• 5505 Central – 54,000 sf of Class A creative office.
• Boulder 29 – 150,000 sf of repositioned Macy’s department store to Class A office. (It should be noted that this building is in the opportunity zone and, at this point, the city of Boulder does not really want retail to be converted to office.)
• 1650 Canyon – 29,000 sf of Class A office
• Economic indicators. Year-end 2018 vacancy was just above 10%, with the largest vacancy in east Boulder showing a 20% vacancy and central Boulder the strongest with 6%. Interesting to note that the central market’s lease rates are averaging just over $21 triple net, with downtown at $29 triple net, so that gap is narrowing. Projects like Spark are pushing rates higher than many downtown options. East Boulder has witnessed lease rates reach into the low to mid-20s. Gunbarrel still is the most likely submarket to find office lease rates in the teens. There are several leases out for signature in downtown and in East Boulder, so it is likely that the numbers will be dramatically stronger by mid-2019 and possibly even absorbing some of the new projects set to come on line.
All numbers seem to indicate positive trends; however, while Boulder is humming, it also is facing some serious challenges to the business community. Talent shortage, lack of affordable workforce housing and the ever-growing traffic snarls have the potential to impact economic development and vitality of Boulder (and region). The good news is Boulder is filled with incredible, bright people, which includes those behind the Boulder Chamber’s Boulder Together Initiative.
The four-year project launched last year “is a package of proactive strategies for increasing the supply of local and regional housing, improving regional mobility, and deploying workforce development programs that better align workforce talent and industry needs,” said John Tayer, Chamber president and CEO. Boulder Together is an effort to “sustain our economic vitality” for the long term, Tayer said. As part of the initiative, the Chamber’s focus is to identify areas that offer redevelopment opportunities for housing and review processes that are barriers for development, Tayer said.
Numerous companies with a local presence, both big and small, are getting involved to help address these challenges so that Boulder can continue to be an attractive place for companies to locate and thrive. That said, Boulder’s ability to successfully address these issues have a long-term impact on the office market and economy. The other piece of good news is that some things won’t ever change in Boulder, especially lifestyle. That alone coupled with the energy of growing companies will keep the office market healthy for the foreseeable future.
