At a recent 2006 forecast meeting, Patricia Silverstein, principal of Development Research Partners and chief economist for the Metro Denver Economic Development Corp. said direct vacancy rate decreased to 13.4% in the fourth quarter, down from 14.8% a year earlier. The average lease rate, meanwhile, held steady at $14.47 per sf, but it's the highest the overall office lease rate has been since third quarter 2003, according to Silverstein. "Based on slowly improving economic conditions, expect office vacancy rate to drop by 0.5 percentage points in 2006," she said.

Silverstein added minimal office construction occurred last year. About 730,000 sf was completed and another 1.3 million sf remains under construction. "There will be a limited need for new office construction until the vacancy rate retreats back to 10% or less," she concluded.

The industrial vacancy increased to 8% at year-end; it was 7.8in Q4 2004. Silverstein's report shows the average lease rate stayed relatively steady at $4.71 per sf, triple net. Industrial construction activity dropped slightly in 2005 from 2004. About 1.8 million sf of industrial space was completed in 2004, but only 1.3 million sf delivered last year. The market has about 900,000 sf under construction.