Job growth and a fear of rising interest rates are prompting real estate investors to step up their pursuit of Denver office buildings.
“It’s a good time for us to take positions now, because we see both the (interest) rate and demand for space rising,” said Peter Lorente, senior vice president of real estate development and investment firm Legacy Partners.
Two weeks ago, the firm paid $16.5 million for Two Denver Highlands at 10065 E. Harvard Ave. Legacy is likely to pay another $28 million for two other office buildings it has under contract: Lowe Enterprises’ Lawrence Court at 1475 Lawrence St., and Equity Office’s Solarium at 7400 E. Orchard Road in Greenwood Village.
Denver’s office vacancy rate stands at 16.2 percent, down from 16.6 percent in the fourth quarter of 2004, according to real estate analysis firm CoStar Group.
The rate’s dip is largely due to companies’ expanding payrolls. Metro Denver had 27,300 more jobs in the first quarter than in the same period last year, said Patty Silverstein, an economist for Development Research Partners in Littleton. In the past 12 months, Denver firms have expanded into roughly 1 million square feet of space they weren’t using, said Ethan Reed, research director of Denver commercial brokerage CB Richard Ellis.
“That growth is giving investors more confidence about their leasing prospects,” he said.
As space demands have grown, construction has waned. Almost 177,000 square feet of office space was completed in the first quarter, down from 237,912 square feet in the fourth quarter of 2004.
In addition to monitoring local supply and demand of space, investors are fretting about rising interest rates.
“People are definitely acting before the rates go up any higher,” said Frederick Ross senior managing director Dave Tilton, who helped Legacy negotiate its recent purchase.
Staff writer Christine Tatum can be reached at 303-820-1015 or ctatum@denverpost.com.
