Denver's real estate sparkles and prosperity shines in the light of recent world events. This was the year that the world's spotlight was cast on Denver, most prominently by the Denver Summit of the Eight. Commercial real estate leaders were encouraged and excited that across the globe, leaders were learning about the strong economy in Denver.
"Denver is a city that America can be proud of, a city bursting with the promise of the new century," President Clinton says.
The city also made worldwide headlines for less positive events. Local real estate executives agreed, however, that neither the Timothy McVeigh trial nor the Jon Benet Ramsey case has had a negative effect on Denver's image and may even help keep Denver in the back of the minds of business leaders.
"It certainly goes to work on the awareness level that, 'Gee, Denver is more than a tourist destination for skiers,'" says Brad Neiman, an investment broker at CB Commercial. "Good or bad, Denver takes on a more cosmopolitan identity, very subtly."
When the world leaders were in Denver, the German investors for the glitziest retail project ever contemplated for downtown Denver -- the $101.5 million Denver Pavilions -- were glued to the television. "The Denver Summit of the Eight received a lot of TV coverage overseas," says Bill Denton, president of the California-based Entertainment Development Group, developer of the Pavilions. "Denver, today, is turning into a world-class, dynamic city."
As of early-July, Denton says that he has about another 50,000 sq. ft. of space that is about to go under contract. That means about 85% of the 350,000 sq. ft. project will be leased a year or so before opening.
Denver takes the spotlight Carl Luppens, a broker at Cushman Realty, hopes that the positive press around the Summit was enough to convince a large Eastern company to open a huge industrial project in Denver.
The company decided to open the complex in Atlanta, but Luppens was heartened because Denver came under serious consideration and may have a shot at the next.
That's a marked contrast to the energy-bust of the late-'80s. Today, Denver and Colorado are boasting the strongest economy and commercial real estate market it has ever seen. As with most metropolitan areas, the only concern deals with overbuilding in the power centers.
Apartments, office, hotels and industrial are boasting record lease rates and near-record low vacancies. While the vacancies for offices, for example, today hovering between 10% and 12%, aren't as low as in the early-'80s, experts note that the two prime markets, downtown and the Southeast corridor, have more than doubled in size since then.
"I remember in previous years telling National Real Estate Investor that I am cautiously optimistic. Well, I have never been this positive before," says George Thorn, president of Mile High Properties, which is developing a $65 million project at its Colorado Center. Colorado Center includes the first high-rise office tower built in the metro area in more than a decade.
The new office tower will command rates in the $24 to $27 per sq. ft. range, the equivalent of the best new buildings in the Denver Technological Center along the southeast corridor.
Barry Dorfman, a broker who heads the Staubach Co.'s Denver office, says that companies are finally discovering Denver. "Just about every corporation has a presence here," Dorfman says. "They may not have their headquarters here, but more and more of them have regional offices."
Dorfman says that even with about 30 spec office buildings either built, under construction or on the drawing board, he's not worried about overbuilding. "In the early- and mid-'80s, they were building 10- and 12-story buildings with 300,000 and 400,000 sq. ft.," he says. "When the market suddenly crashed, they were hurt. But today, they're building 100,000 sq. ft. and 150,000 sq. ft. buildings with bigger floorplates. If the market goes south, it's easy to just not build the next 150,000 sq. ft. building."
It's not just the southeast corridor that is booming. These days, the U.S. 36 corridor between Denver and Boulder is becoming Denver's version of the Silicon Valley. Development is being led by Sun Microsystems Inc.'s $240 million campus under construction in the Interlocken Business Park in Broomfield.
"Sun will have an effect on that whole corridor. Even with their grand plans, they may need to lease some additional space before their office campus is up and running," says Denver developer Stephen Clarke, president of Prime West.
Space in the corridor tends to be leased up as fast as it is built -- or even faster, Clarke says.
For example, one floor of a six-story, 150,000 sq. ft., Class-A building Prime West is developing with Prudential was spoken for before construction or marketing began.
"You still can't overlook the southeast corridor, because there is 600,000 or 700,000 sq. ft. of spec space planned, so the southeast is still the strongest area overall," Clarke says. "But in percentage growth, the Boulder corridor probably is second to none."
DIA market heats up Clarke also is developing the 510,000 sq. ft. I-225 Business Center, close to the Denver International Airport, with Chicago-based Prudential Real Estate Investors. The first phase of the industrial project was recently completed, and it had been 30% preleased.
Clarke is competing with other industrial developers, such as Majestic Real Estate, which recently broke ground on a 200,000 sq. ft. industrial building, and Bill Pauls, developer of the Gateway Park development around DIA.
Alexander Ringsby, a broker with Cushman & Wakefield, says all of the industrial developers near DIA are building well-located, well-thought-out projects that are being leased as fast as they can be built. Only developers that try to build far away from major highways probably won't succeed, he says.
Much of the industrial construction -- as well as a flurry of new hotels -- is taking place near DIA. Indeed, when DIA opened a couple of years ago, it had the dubious distinction of being the only major airport in the country with no hotel.
Colorado Springs making strides Now, there are at least nine hotels under construction in the Gateway Park development outside of DIA, which will bring 1,411 rooms to the area. Clarke also will be developing Class-A office buildings along the southeast corridor in the Dry Creek Rampart Business Center, with the Palm Desert, Calif., company that owns the land. But it's not just the Denver market that is hopping. The Colorado Springs market, although much smaller, may be even stronger than Denver's.
Clarke is looking to develop office buildings in the Briargate office park in northern Colorado Springs.
"I like that market at the north end of Colorado Springs," Clarke says. "It has great potential because of all the residential growth. It has really low vacancies."
And Pacifica Holding Co. recently developed the first spec office buildings in Colorado Springs in about 10 years. One 115,000 sq. ft. office building in Briargate cost $14 million, and a 90,000 sq. ft. research and development building cost $9 million.
"These buildings lease very quickly," says Steve Leonard, president of Pacifica. "There's very little competing space; virtually no good space exists that competes with them."
The office building commands lease rates of $14 to$15 per sq. ft., while the high-tech building gets rates of $11.50 per sq. ft.
And mountain real estate is booming. In fact, land is so expensive in the mountains, that Denver-based Corum Real Estate Group has had to get creative to develop affordable housing for seasonal workers.
Corum recently unveiled plans for a 104-unit, 317-bed complex near Beaver Creek. "The hardest segment for them to address is when they staff up," says Jamie Fitzpatrick, a principal of Corum. "Vail has to hire 2,000 people every ski season."
Sixty percent of the units will have four bedrooms and one bath, so employees can afford to live close to work. "This is a lot better solution than having them live way on the outskirts and have to drive a long way to home," Fitzpatrick says. "They'll be close to work and to public transportation."
And that's not the only development in the area. Boulder developer Leo Palmos recently broke ground on the $30 million retail and condominium project called Chapel Square in Avon, outside of Beaver Creek.
Palmos, who developed a Wal-Mart in Avon in 1988, isn't worried about filling the space with tenants. And he probably doesn't need to be, considering the high-priced homes in the area.
For example, Vail Associates had an auction of its Bachelor Gulch community in the hills west of Vail and sold about $40 million in properties. One site snapped up was an acre on a hilltop with a 360-degree view. The price? A whopping $1.8 million. The house, which will cost several millions of dollars more, is still to come.
John Rebchook is the Real Estate Editor of the Rocky Mountainin Denver.