Office Market Recovery 'Optimistic Assumption'

DENVER-Area office vacancy rates are likely to rise over the next month, while rents, construction and net absorption will all drop, according to Trammell Crow Co.’s most recent MarketScope report. The projections continue the same trend of the previous six months.

The overall office vacancy rate now has a direct vacancy rate of almost 15%, or 14.2 sf of available space, according to the report. In addition, there’s another 5.9 million sf of sublease space on the market, driving the overall vacancy rate to 21%.

At the end of the second quarter 2001, the direct vacancy rate stood at 10% and the overall rate was 14.1%.

Currently, only the small submarkets of Cherry Creek/Colorado Boulevard and Midtown still have vacancy rates below 10%, while others range from 12.5% to about 39% vacancies.

So far this year, the market has seen negative net absorption of 825,037 sf, with 21,632 sf of it in the second quarter.

In addition, the overall weighted average lease rate dropped to $20.86 per sf from $22.71 at the end of the second quarter 2001.

The report notes it would be an “optimistic assumption” that the market is beginning to recover. The office market is not projected to begin its recovery until early 2003, the report notes.