If the mystery buyer of the former StorageTek site in Louisville brings the thousands of jobs many people are anticipating, it could spark an explosion of construction and new businesses in a market that only recently started recovering from the dot-com meltdown.
The ripple effect would be tremendous on the 7-million-square-foot submarket along U.S. 36 between Denver and Boulder. The office market there saw vacancy rates swell from 2 percent to 42 percent after the dot-com bomb in 2001.
“If there’s a big announcement, people are going to be scrambling to get into the market to build space,” said Frank Kelley, senior vice president of CB Richard Ellis who specializes in the northwest-metro market. “We have some sites up there that are poised to go.”
Rampant speculation has surrounded the identity of the buyer of the 432-acre StorageTek campus.
Santa Clara, Calif.-based Sun, which bought StorageTek for $4.1 billion in 2005, put the property on the market last year and has been moving employees from the Louisville campus to its main Colorado campus in Broomfield.
The property recently sold for $55.6 million to ST Acquisitions LLC, whose identity remains a mystery. Whoever the buyer turns out to be, experts say it will likely provide a boost to the area real estate market.
The corridor’s commercial market already has been on an upswing. Last year, tenants absorbed nearly 600,000 square feet of space, taking the vacancy rate from more than 20 percent to 14 percent. The vacancy rate for the Denver metro region is 12.6 percent. Asking lease rates for the market are around $20 a square foot, on par with the rest of metro Denver.
“It’s a tight market, with increasing lease rates,” said Kelley, noting that lease rates have increased 30 percent since 2006. “Building owners are going to have a chance to make good on their investments.”
The buyer could have an effect on the market similar to when Level 3 and Sun Microsystems moved there in 1996, said Doug Bakke, senior vice president at CB Richard Ellis who works the market with Kelley. From 1996 to 2001, when businesses serving those companies flocked to the corridor, the market grew from about 2.5 million square feet to the 7 million square feet it is today.
But without knowing who the buyer is and how many jobs it may bring, it’s impossible to predict what the impact will be, Bakke said.
“There’s a lot of momentum even without that tenant,” he said. “That tenant is just going to put fuel on the fire.”
With more than 100 prospective tenants looking for a total 2.7 million square feet of space, Kelley said he expects space to be occupied at a similar rate this year and vacancy rates to drop. Kelley said that when vacancy is less than 10 percent, he anticipates construction to start on a number of projects.
Inquiries surge in 2007
Don Dunshee, president and chief executive of the Broomfield Economic Development Council, said his office had more inquiries about the area in 2007 than during any other year dating back to 1996.
“It’s mostly tech companies,” Dunshee said. “Those are the jobs we lost in the tech-bubble blowup in the early 2000 era.
“Our labor pool is still one of our golden stars in our bag of tricks.”
Two office buildings already are under construction. Koelbel & Co. is building 282 Century, a 62,364-square-foot office building in Centennial Valley, and Wiens Group and Barsocchi & Co. are developing Arista Place, an 88,000-square-foot office building next to the Broomfield Events Center that’s expected to be finished in October. Two more office buildings are planned for the development.
Four other projects in the works would add another 1 million square feet to the market.
“Everything is progressing briskly,” Arista developer Tim Wiens said. “What we’re experiencing on the commercial side is continuing to be pretty firm.
“But the housing market clearly is a soft spot for everybody. The type of housing at Arista is urban, multifamily, high-density residential. That, along with all the urban amenities, overcomes some of the market conditions.”
Apartment market tight
The entire Arista project occupies a triangle of land along U.S. 36 between West 108th and 120th avenues. The Broomfield Event Center is an anchor for the development, which is expected to include 1,200 residential units and 600,000 to 800,000 square feet of retail space when it is completed.
An influx of employees would likely mean rent increases in an already tight apartment market, said Steve Rahe, first vice president of CB Richard Ellis’ multi-housing group. The area’s 3.3 percent apartment vacancy rate is among the lowest in the metropolitan area.
“If you throw in several hundred people looking for an apartment, the vacancy rate would drop significantly, which would cause rents to increase,” he said.
Margaret Jackson: 303-954-1473 or mjackson@denverpost.com
