2q09 metro denver office tenant view...

© Copyright 2009 | UGL Equis Corporation

Tenant View

• Rothgerber Johnson & Lyons

1200 17th Street 56,179 SF

• Colorado Judicial Department

101 W Colfax Ave 47,441 SF

• Nellcor Puritan Bennett

Corporate Place 47,380 SF

CHANGE FOR THE QUARTER

OFFICE 2ND QUARTER 2009

Executive Summary

UGL EQUIS CORPORATION

8350 East Crescent Parkway

Suite 300

Greenwood, CO 80111

720.554.0789

www.ugl-equis.com

For further information please contact:

[email protected]

OVERALL VACANCY 14.5%

SUBLEASE VACANCY 1.1%

AVERAGE GROSS ASKING RATE $21.02

NET ABSORPTION 204,822

UNDER CONSTRUCTION 1.7 mm

DELIVERIES 447,100

ARROWS INDICATE CHANGE FROM PRIOR PERIOD

TOP 3 LEASING ACTIVITY

Metropolitan Denver

Overall Vacancy vs. Average Asking Rate

Unemployment Rates

Non-Seasonally Adjusted

• Downward pressure on asking and net effective rates

• Vacancy rising due to layoffs, consolidation & other economic factors

The first half of 2009 experienced a continuation of softening real estate fundamentals across

most submarkets impacted by negative job growth and low consumer confidence. Lack of

available debt or credit for the funding of both consumer and business capital requirements

have all combined to keep many companies on the sidelines when making decisions relative to

capital investment and new facility commitments.

This convergence of events has a silver lining; facility cost savings potential. For companies that

can identify core operating facilities, there are outstanding real estate related cost savings

available in the form of vastly reduced rental rates and enhanced economic concessions from property owners. UGL Equis clients are experiencing in-place facility rent savings of 30 percent

to 50 percent in today’s aggressive marketplace. Tenants with a lease expiring in the next 2 to

5 years have significant leverage because the leases are critical to building valuation. Also

tenants that have lease termination options (often overlooked until a thorough lease review is

completed) are also finding tremendous opportunities to renegotiate lease terms and rents at

today’s favorable terms and conditions.

These favorable tenant conditions will exist at least through 2010 as the office market recovery

is directly dependent on job growth, debt and credit market liquidity and basic overall business

expansion. These key criteria have some way to go before they create the kind of momentum required to provide positive net absorption (physical change in occupied space from one period

to the next).

This trend will more so plague debt-sensitive landlords in a weakened position to ride out the

storm due to overpriced and over-leveraged assets. Large landlords in struggling market areas will execute “negative” deals to help cover building’s real estate taxes and operating expenses.

METROPOLITAN DENVER


OFFICE | SECOND QUARTER 2009

Suburban Class A & B


Metropolitan Denver

Net Absorption (All Classes)

Downtown Class A & B


Denver Market Overview

The Denver Office market ended the second quarter 2009 with a vacancy

rate of 14.5%. The vacancy rate was basically unchanged over the previous

quarter nudging slightly upward, with net absorption totaling positive

204,822 square feet in the second quarter. Vacant sublease space

decreased in the quarter, ending the quarter at 1,987,562 square feet.

Rental rates ended the second quarter at $21.02, a decrease over the

previous quarter. A total of seven buildings delivered to the market in the

quarter totaling 353,072 square feet, with 1,727,371 square feet still under

construction at the end of the quarter.

The office vacancy rate in the Denver market area changed to 14.5% at the

end of the second quarter 2009. The vacancy rate was 14.5% at the end of

the first quarter 2009, 13.6% at the end of the fourth quarter 2008, and

13.0% at the end of the third quarter 2008. The overall vacancy rate in

Denver’s central business district at the end of the second quarter 2009

decreased to 15.3%. The vacancy rate was 15.5% at the end of the first

quarter 2009, 14.1% at the end of the fourth quarter 2008, and 12.9% at

the end of the third quarter 2008. The vacancy rate in the suburban markets

increased to 14.4% in the second quarter 2009. The vacancy rate was

14.3% at the end of the first quarter 2009, 13.5% at the end of the fourth

quarter 2008, and 13.0% at the end of the third quarter 2008.

The average quoted asking rental rate for available office space, all classes,

was $21.02 per square foot per year at the end of the second quarter 2009

in the Denver market area. This represented a 0.4% decrease in quoted

rental rates from the end of the first quarter 2009, when rents were reported

at $21.11 per square foot. The average quoted asking rental rate in

Denver’s CBD was $26.56 at the end of the second quarter 2009, and

$19.78 in the suburban markets. In the first quarter 2009, quoted rates were

$27.80 in the CBD and $19.58 in the suburbs.

During the second quarter 2009, seven buildings totaling 353,072 square

feet were completed in the Denver market area. This compares to 11

buildings totaling 528,993 square feet that were completed in the first

quarter 2009, 15 buildings totaling 1,214,092 square feet completed in the

fourth quarter 2008, and 533,409 square feet in 23 buildings completed in

the third quarter 2008.

There were 1,727,371 square feet of office space under construction at the

end of the second quarter 2009. Some of the notable 2009 deliveries

include: 1515 Wynkoop, a 318,088-square-foot facility that delivered in

first quarter 2009 and is now 41% occupied, and Village Center Station I, a

200,174-square-foot building that delivered in second quarter 2009 and is

now 59% occupied. The largest projects underway at the end of second

quarter 2009 were 1800 Larimer, a 496,359-square-foot building with 75%

of its space pre-leased, and 1900 Sixteenth Street - Tower 1, a 433,210-

square-foot facility that is 3% pre-leased.

The largest lease signings occurring in 2009 included: the 67,200-square-

foot lease signed by Zoll Data Systems at 11802 Ridge Pkwy in the

Broomfield market; the 56,179-square-foot deal signed by Rothgerber

Johnson & Lyons at Tabor Center in the Central Business District market; and

the 47,441-square-foot lease signed by Colorado Judicial Department at

Denver Newspaper Agency in the Central Business District market.



Metropolitan Denver Office Statistics


Mark W Grillo is a tenant representative whose experience ranges from addressing the real estate needs of small businesses with

single locations to large corporations whose real estate needs require global portfolio management. Marks experience includes site

selection, financial analysis, negotiations, and build a suits. Mark is a key member of the UGL Equis business development team

which keeps him ingrained in the community so he is often aware of new space availabilities before the listings are even active. This

gives his clients an edge in finding the right space. Mark works with the extended UGL Equis network both nationally and

internationally to ensure that his clients are receiving the highest level of service. As a transaction advisor, Mark specializes in

strategic solutions that align his clients real estate with their business strategies, creating a comprehensive service that will result in a

solution that meets the highest possible level of scrutiny.

Mark W Grillo 303-729-2354

[email protected]

About UGL Equis

UGL Equis Corporation, through its affiliated companies, is a global corporate real estate firm that focuses exclusively on the busi-ness space user. With more than 40,000 affiliated employees in nearly 100 locations around the world, Chicago-based UGL Equis provides comprehensive real estate solutions through portfolio strategy and management, transaction advisory, corporate finance, project services, workplace integration, data management, facility management and audit & recovery services for national and global companies with office, industrial and retail opportunities throughout the United States, Mexico, Asia Pacific, Europe and the Middle East. UGL Equis along with its sister company, UGL Unicco, are subsidiaries of United Group Limited, (ASX: UGL).


The aforementioned information was obtained from sources deemed reliable. UGL Equis makes no representation or warranty concerning the accuracy or

2q09 metro denver office tenant view...

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