(To read more on the net lease market, click here.)
DENVER-Marcus & Millichap, in a report released today, says the Denver office market is poised to book "significant gains" during the year. The commercial real estate is so bullish, the report states, because of the strengthening local economy that is producing rapid absorption of office space.
The report also says in its National Office Index that Denver jumped up three places to No. 21 in the rankings, up from No. 24 last year. The index is a snapshot analysis that ranks 42 office markets based on a 12-month, forward-looking local market supply-and-demand indicators.
"2006 will mark Denver's third straight year of healthy economic growth," says Adam Christofferson, a vice president and regional manager of Marcus & Millichap's Denver office. "Leasing activity is picking up, especially in the Downtown area where vacancy is forecast to fall 300 basis points to 18.9% by the end of 2006."
Marcus & Millichap is predicting employment growth will accelerate this year, with Denver-area employers adding 36,000 new jobs this year, a 3%, gain. This is up from the 1.2 % growth posted in 2005.
Office-using industries will create 12,600 new positions, a 3.7% increase. The new office supply, meanwhile, will remain modest. A total of 220,000 sf in new projects are expected to open this year, on par with the amount of space delivered last year.
With limited new supply and increasing job growth, absorption will hit about 2.2 million sf this year. That will push the overall metro vacancy rate by 270 basis points to 16.95 by the end of the year, execs at Marcus & Millichap project. That will lead to building owners reducing concession and introducing modest rent hikes, the report notes. The average asking rent is expected to climb to $18.26 per sf. Effective rents will increase 2.2%, pushing the average lease rate to $14.44 per sf, according to the report.
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