Denver has been on a roll over the last couple years with numerous companies like VF Corp., Slack, Gusto, Sunrun, Marketo, Vertafore and Optiv relocating or expanding operations. Like in other cities, we also have seen WeWork’s insatiable appetite to lease many blocks of space downtown. This activity has led to Denver ranking No. 3 in the nation for net office absorption, according to our recent data. While positive news for landlords, I’m concerned we won’t be able to continue to attract the high-caliber companies if we are unable to deliver a real estate solution in the near term.
If we don’t have existing office space that meets new company requirements, they could elect to relocate to another market that has the product readily available. Often, companies aren’t willing to wait two to three years for a developer to build their new office when other cities on their short list can have them operational in existing vacant buildings in less than a year. The timing issue is only further compounded with tech companies as they typically need space “yesterday,” and in their world, it’s often difficult to predict office space needs more than a year into the future.
There are many other factors beyond real estate that companies evaluate during their site-selection process with cost of living and labor supply often rising to the top. Fortunately, Colorado ranked first in labor supply in Forbes’ recent listing of top states for business. However, we are all too familiar with where the cost of living has gone in Colorado over the past few years. Ultimately, companies evaluate many variables in their site-selection process and Denver needs to check as many of the boxes as possible. I fear we are on the verge of not being able to check the box for available large blocks of existing office space.
Denver often is competing with Dallas, Phoenix and Nashville, Tennessee, to attract new companies. I had our research department evaluate the opportunities for large blocks of office space available within the next two years across these markets. Unfortunately, Denver simply doesn’t have the inventory that our primary competing markets can deliver.
I was fortunate to represent VF Corp. on its recent search for a new global headquarters, and after an extensive evaluation of the market, the company focused on downtown Denver. It required 300,000 square feet of space all under one roof and preferred to be operational in the new facility by the end of 2019. The only building that met this requirement was 1551 Wewatta, so we moved quickly to negotiate a lease. If we had not secured this opportunity, it would have been 2021 before VF Corp. would have been in a new global HQ with many years of disruption in temporary space. As detailed in the graph, there are just a few large blocks of office space remaining. Once they are gone, will Denver miss out on the next VF Corp. or Slack Technologies? #ifyoubuildittheywillcome