© 2024 Real Estate Consultants of Colorado, LLC
Austin, TX
In January, I started working with a new client who requested about 10,000 square feet of Class A office space in Cherry Creek. They had already found one candidate space whose landlord was not negotiating to their satisfaction, and they wanted to explore other options. Their criteria: a true Cherry Creek North location (going east of Steele Street was too far); off-street parking; and outdoor space. I dove in and found very little, so I started searching off-market and found but one new space in shell condition that could be ready for move in later this year. The price tag: $43 for base rent and $28 for NNN.The terms: a TI allowance that would not cover an office buildout of any standard and a minimum 10-year term, take it or leave it. The exercise was enough to quickly underscore the value of the other space my client had previously found and they took it. This was not the Cherry Creek I knew from a couple years ago.
The flurry of headlines this year underscoring the health of Cherry Creek’s office market hasn’t stopped: Schnitzer West is building Antero Resources Corp., who plans to leave Union Station, a new office at 201 Fillmore.[1] Havenly left RiNo for 3200 Cherry Creek Drive South.[2] Broe Real Estate Group is knocking down a beautiful 15 year old building onClayton to build a much larger office property because there was a waiting list for their new 200 Clayton project.[3] Meanwhile in greater downtown, Robinhood has listed their 120,000 square foot office at 1701 Platte Street for sublease before moving in[4]; Chipotle was still subleasing parts of their former headquarters at 1144 15th Street earlier this year after leaving in 2018[5]; and, from the correspondence this broker receives from the downtown office listing brokerages, incentives to tenants and their brokers alike are increasingly generous in exchange for what appears to be a marginal absorption rate.
Looking at the data, Cherry Creek’s average rental rate is $38.19 compared with Denver’s $28.93.[6] Vacancy in Cherry Creek is 6.9% compared with Denver’s 14.8%. And downtown’s vacancy rate is 24.9% with an average rental rate of $34.30.[7] Note how the vacancy rates for Cherry Creek and downtown correlated until 2020when a massive divergence in Cherry Creek’s favor began.
Since 2020, commercial real estate professionals have been using the term ‘flight to quality’ to describe how companies are choosing nicer offices because they believe a great office will attract employees back. That does not explain the Cherry Creek-downtown dichotomy, however, because there is no shortage of premium offices in premium locations downtown. Access to public transportation does not offer an explanation either because Cherry Creek has little connectivity for those who do not drive themselves. Instead, I argue that it is Cherry Creek’s brand -scarcity, shopping and safety - that has bolstered the submarket’s recent success. Let’s discuss each in turn.
Scarcity. Cherry Creek is a small fraction of the size of downtown and so maintaining its reputation as the neighborhood where the affluent live, work and play is more manageable. To say that a company has just signed a full-floor lease at a new Class A office building in Cherry Creek North carries a certain prestige. And in addition to the arguable benefits to employees, clients concerned about perceived downtown grit may be relieved to hear that their visit to the office will be in CherryCreek. Cherry Creek is the safer choice.
Shopping. Have you tried to make alunch reservation downtown recently? It’s not easy. Many restaurants that used to cater to the business lunch downtown are now open for dinner only. Not so inCherry Creek. There are also myriad coffee shops a quick stroll away and street parking is free north of 3rd Avenue. Add in the convenience of being within a couple blocks of just about any store you would ever need, and CherryCreek is the safer choice.
Safety. There’s no arguing thatCherry Creek simply does not have the homeless problem that downtown does – and that with homelessness oftentimes comes crime and public fear. Once a global model for urban revitalization, Union Station was hit hard in 2020. Only when the RTD Union Chief called Union Station a ‘lawless hellhole’ last year did the government put a plan in place to clean up the area.[8] Is it in better shape today? Definitely. Is it as pristine as Cherry CreekNorth? Certainly not. Employers want a secure and clean place for their employees and visiting clients. Cherry Creek is, in this case due to safety itself, the safer choice.
Just a few years ago, I would have said Cherry Creek is not for everyone, but when tech startups are moving to the neighborhood from RiNo, we have turned a corner. Cherry Creek has done a fine job curating its brand and that is paying off in the Denver office market we see today.
[1] https://businessden.com/2022/11/16/schnitzer-west-strikes-ground-lease-for-planned-antero-hq-in-cherry-creek/
[2] https://businessden.com/2022/11/22/design-firm-havenly-leases-in-cherry-creek-after-rino-exit/
[3] https://businessden.com/2022/11/29/broe-to-expand-cherry-creek-office-project-by-razing-15-year-old-building/
[4] https://www.bizjournals.com/denver/news/2022/11/21/robinhood-platte-street-office-sublease.html
[5] https://darik.news/newhampshire/former-greyhound-site-co-developer-subleases-chipotle-office-space/603122.html
[6]Cherry Creek Office Submarket. Costar Group. Visited December 8, 2022.
[7]Central Business District Office Submarket. Costar Group. Visited December 8,2022.
[8] https://www.bizjournals.com/denver/news/2021/12/06/rtd-denver-mayor-ramp-up-security-at-union-station.html
In January, I started working with a new client who requested about 10,000 square feet of Class A office space in Cherry Creek. They had already found one candidate space whose landlord was not negotiating to their satisfaction, and they wanted to explore other options. Their criteria: a true Cherry Creek North location (going east of Steele Street was too far); off-street parking; and outdoor space. I dove in and found very little, so I started searching off-market and found but one new space in shell condition that could be ready for move in later this year. The price tag: $43 for base rent and $28 for NNN.The terms: a TI allowance that would not cover an office buildout of any standard and a minimum 10-year term, take it or leave it. The exercise was enough to quickly underscore the value of the other space my client had previously found and they took it. This was not the Cherry Creek I knew from a couple years ago.
The flurry of headlines this year underscoring the health of Cherry Creek’s office market hasn’t stopped: Schnitzer West is building Antero Resources Corp., who plans to leave Union Station, a new office at 201 Fillmore.[1] Havenly left RiNo for 3200 Cherry Creek Drive South.[2] Broe Real Estate Group is knocking down a beautiful 15 year old building onClayton to build a much larger office property because there was a waiting list for their new 200 Clayton project.[3] Meanwhile in greater downtown, Robinhood has listed their 120,000 square foot office at 1701 Platte Street for sublease before moving in[4]; Chipotle was still subleasing parts of their former headquarters at 1144 15th Street earlier this year after leaving in 2018[5]; and, from the correspondence this broker receives from the downtown office listing brokerages, incentives to tenants and their brokers alike are increasingly generous in exchange for what appears to be a marginal absorption rate.
Looking at the data, Cherry Creek’s average rental rate is $38.19 compared with Denver’s $28.93.[6] Vacancy in Cherry Creek is 6.9% compared with Denver’s 14.8%. And downtown’s vacancy rate is 24.9% with an average rental rate of $34.30.[7] Note how the vacancy rates for Cherry Creek and downtown correlated until 2020when a massive divergence in Cherry Creek’s favor began.
Since 2020, commercial real estate professionals have been using the term ‘flight to quality’ to describe how companies are choosing nicer offices because they believe a great office will attract employees back. That does not explain the Cherry Creek-downtown dichotomy, however, because there is no shortage of premium offices in premium locations downtown. Access to public transportation does not offer an explanation either because Cherry Creek has little connectivity for those who do not drive themselves. Instead, I argue that it is Cherry Creek’s brand -scarcity, shopping and safety - that has bolstered the submarket’s recent success. Let’s discuss each in turn.
Scarcity. Cherry Creek is a small fraction of the size of downtown and so maintaining its reputation as the neighborhood where the affluent live, work and play is more manageable. To say that a company has just signed a full-floor lease at a new Class A office building in Cherry Creek North carries a certain prestige. And in addition to the arguable benefits to employees, clients concerned about perceived downtown grit may be relieved to hear that their visit to the office will be in CherryCreek. Cherry Creek is the safer choice.
Shopping. Have you tried to make alunch reservation downtown recently? It’s not easy. Many restaurants that used to cater to the business lunch downtown are now open for dinner only. Not so inCherry Creek. There are also myriad coffee shops a quick stroll away and street parking is free north of 3rd Avenue. Add in the convenience of being within a couple blocks of just about any store you would ever need, and CherryCreek is the safer choice.
Safety. There’s no arguing thatCherry Creek simply does not have the homeless problem that downtown does – and that with homelessness oftentimes comes crime and public fear. Once a global model for urban revitalization, Union Station was hit hard in 2020. Only when the RTD Union Chief called Union Station a ‘lawless hellhole’ last year did the government put a plan in place to clean up the area.[8] Is it in better shape today? Definitely. Is it as pristine as Cherry CreekNorth? Certainly not. Employers want a secure and clean place for their employees and visiting clients. Cherry Creek is, in this case due to safety itself, the safer choice.
Just a few years ago, I would have said Cherry Creek is not for everyone, but when tech startups are moving to the neighborhood from RiNo, we have turned a corner. Cherry Creek has done a fine job curating its brand and that is paying off in the Denver office market we see today.
[1] https://businessden.com/2022/11/16/schnitzer-west-strikes-ground-lease-for-planned-antero-hq-in-cherry-creek/
[2] https://businessden.com/2022/11/22/design-firm-havenly-leases-in-cherry-creek-after-rino-exit/
[3] https://businessden.com/2022/11/29/broe-to-expand-cherry-creek-office-project-by-razing-15-year-old-building/
[4] https://www.bizjournals.com/denver/news/2022/11/21/robinhood-platte-street-office-sublease.html
[5] https://darik.news/newhampshire/former-greyhound-site-co-developer-subleases-chipotle-office-space/603122.html
[6]Cherry Creek Office Submarket. Costar Group. Visited December 8, 2022.
[7]Central Business District Office Submarket. Costar Group. Visited December 8,2022.
[8] https://www.bizjournals.com/denver/news/2021/12/06/rtd-denver-mayor-ramp-up-security-at-union-station.html
© 2019 Real Estate Consultants of Colorado, LLC