Getting your player ready...
At least five first-class office buildings in Denver’s Central Business District are on the market, and together could fetch in the neighborhood of $1 billion. And they could all sell in the second half of this year, top brokers at Newmark Knight Frank Frederick Ross said at a wide-ranging “Mile High Market Trends Forum” on Thursday morning.
The office buildings are:
1801 California, the former headquarters for Qwest, which is getting a new, giant blue sign from CenturyLink, to reflect the company that bought Qwest.
1700 Lincoln, the Wells Fargo Center, also known as the cash-register building.
717 17th St., also called the John Manville Plaza,
707 17th St., formerly known as MCI Building and Arco Tower.
1899 Wynkoop, the EPA building.
These buildings are “drafting” on the recent sales of 1800 Larimer, which in February sold for $430 million – a record $213 per square foot and the June sale of 1515 Wynkoop of !18 million, or $385 million, said Dave Tilton, a top investment broker at Newmark Knight Frank Frederick Ross. Tilton was part of the team that handled the sale of 1800 Larimer, which is headquarters for Newmark Knight Frank Frederick Ross, and was developed by a sister development company, Westfield Co.
There is a lot of capital available for Class A buildings – the newest, most energy efficient and best-located – with much of it focusing on the “gateway” cities such as New York, Boston, Washington, D.C., San Francisco and Los Angeles, Tilton said. He said that “secondary markets,” such as Denver, are “benefitting greatly,” from investors who are moving beyond the gateway cities in search of opportunities. Last year, he said 82 office buildings across the country sold for more than $100 million and 11 of them were in secondary markets, including the Granite building in Denver.
1801 could be a corporate HQ
Tom Lee, a top office broker at Newmakr Knight Frank Frederick Ross, said whoever buys 1801 California will not only pay a high rise, but will spend millions of dollars more to reposition it as one of the top buildings in Denver. It’s almost certain that the buyer will retrofit it as a LEED-certified building, he added. “It’s one of the boxes that you need to check off,” Lee said. Qwest currently has vacated 340,000 square feet at 1801 California, and it is possible it could be leaving even a bigger hole downtown before the dust has settled. That is by far the largest block of office space downtown, he said.
However, Lee said having such a large amount of Class A space – some of it contiguous – provides an opportunity for a good-sized company to move its corporate headquarters into the space. In effect, a company gets the equivalent of new space at a great location for less than it would cost to build their own building, Tilton noted.
“I’m bullish on downtown,” Lee said. “But there will be winners and losers.”
While investment demand is strong for Class A buildings, investors have little to no appetite for Class B and C buildings, he said. A couple of those building in downtown, such as the former Xcel headquarters and the Colorado National Bank building are being converted into hotels, because their useful lives as office buildings have come to an end, he said.
