Denver’s office market, fueled by rapid population growth and low unemployment, is the home of Origin Investments’ next investment, cementing its strategy to avoid top-tier markets and target regional hubs with strong economic growth.
Denver jumped 10 spots to place 6th on Forbes’ “Fastest-Growing Cities” list in 2014, while a PwC/Urban Land Institute 2016 outlook study cited it as one of the nation’s most promising cities for real estate investment.
Its diverse economy, outdoor sports opportunities and educated workforce have attracted millennials. Denver had the nation’s biggest post-recession net gain in residents ages 25-34. Jobs are definitely a lure: The city estimates 3,200 new businesses have opened in the last four years.
“Young people want to move Denver because it’s such an engaging city,” says Origin Investments senior associate Jared Friedman. “If you drive an hour, you can find some of the country’s best skiing, whitewater rafting, hiking or mountain biking. It has 300 sunny days a year, which is the most in the country.”
But Denver’s pull is about more than outdoor pursuits.
Subscribe
Subscribe to receive the latest articles about fund updates, industry news and market trends.
“It’s extremely affordable to live here,” Friedman says. “A lot of the companies have followed the millennials and set up shop in Denver because one of the hardest things to do is attract good talent.”
The millennial influx has fueled rapid redevelopment of Lower Downtown and River North. Young idealists are drawn to the region’s support of sustainable practices, maintains Jeff Romine, chief economist for the city and county of Denver.
“When you fly into Denver International Airport, one of the first things you see is a solar array,” he says. “People bike to work at a higher rate…walk or take mass transit.”
Denver millennials are also highly mobile, enjoying downtown diversions while planting roots near the Denver Tech Center.
RELATED: Why Denver Tech Center Property is Poised for Profit
“Its north side is more affordable than the central city, and we see a fair amount of housing purchases by millennials there,” Romine says.
In fact, 25.6 percent of workers in Denver’s south region are ages 29-and-under, a higher concentration than the 21.8 percent in pricier central neighborhoods, says research from the south suburban workforce center Arapahoe/Douglas Works.
“It’s counter to the public and media perception of millennials preferring downtowns,” says Jake Rishavy, director of innovation for the Denver South Economic Development Partnership.
For the Denver Tech Center’s popular southeast suburban corridor, Newmark Grubb Knight Frank research finds the most attractive commercial real estate is close to a transit stop, has parking readily available and provides building amenities, such as a fitness center, food service and conference space. Properties that score highest on these points have vacancy rates 2.3 percentage points lower than the overall submarket and asking rents that are 3.7 percent higher.
“While it may seem counterintuitive, both parking and transit access are important,” notes the September 2015 report. “Many of the executives and decision-makers who work in the (area) live to the south and drive to work. … Meanwhile, the same companies want to attract and retain the millennial talent that favors transit access.”
Romine says millennials need shopping, dining and other amenities to offer productive breaks from their extended hours.
“They think much more about an 18-hour workday that starts around 5 or 6 a.m.,” he says. “What we’re hearing when we talk to the firms about a location is what’s around it, what makes it alive.”
Friedman leads Origin Invesments’ investment in Denver Corporate Center I, an office building in the Denver Tech corridor on the city’s southeast edge. A renovation done in partnership with co-owner Titan-Hamilton Partners will make the building more relevant to business innovation and millennial work habits. Amenities will include a Wi-Fi café, fitness center, conference rooms and secure bicycle storage.
Denver commercial real estate properties that serve the millennial lifestyle will be sound investments. By helping tenants make the most of their surroundings, updated properties will outperform their peers whether the economy is struggling or strong. For more information on the deal, please contact Ben Harris at bharris@origincapitalpartners.com or 312-548-6897.
