Boulder, CO 2nd Quarter 2015 OFFICE Market Trends COMMERCIAL REAL ESTATE INFORMATION
Table of Contents/Methodology of Tracked Set Table of Contents/Methodology of Tracked Set 2 Boulder Office Market Map 3 Q2 2015 Overview 4 Overview by Submarket/ Building Type 5 Vacancy & Lease Rates 6-8 Available Space 9 Notable Transactions 10 Vacancy & Absorption 11 Xceligent Boulder Contact 12 Boulder Office Advisory Board 13 The Boulder tracked set consists of an inventory of buildings considered to be competitive within the brokerage community. All buildings within the competitive tracked set have been reviewed and verified by members of the Advisory Boards for each market area. Inventory Class A Class B Class C Total Available SF Total Vacant SF Direct Vacant SF Sublease SF Net Absorption Weighted Average Direct Lease Rate The total square feet of all existing single and multi tenant office buildings greater than 10,000 SF, excluding medical, government and owner occupied buildings. Most prestigious buildings competing for premier office users with rents above the market average. Buildings have high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence. Buildings competing for a wide range of office users with average market rents. Building finishes are fair to good for the area and systems are adequate, but the property does not compete with Class A product. Buildings competing for office users requiring functional office space at rents below the market average for the area. All of the available leasable space within a building, whether it is occupied or vacant, for direct lease or sublease space. Space can be available but not vacant, for example, if the landlord, or his agent, is marketing space that will be coming available at a future date because a tenant is planning to move. The total of all of the vacant square footage within a building, including both direct and sublease space. The total of the vacant square footage in a building that is being marketed by an agent representing the landlord. Space that is offered for lease by a current tenant, or his agent, within a property. Whether the tenant is paying rent or not, the space is considered vacant only if it is unoccupied. The net change in occupancy from quarter to quarter, expressed in square feet. The weighted average of all direct asking lease rates expressed as a full service/gross rental rate and weighted on total direct available square feet. Non-full service rates (such as NNN) have been grossed up to reflect a full service/gross rate. 2
Boulder Office Market Map 3
Net Absorption (SF) Vacancy Rate (%) Q2 2015 Overview The office market in the Boulder metro area has seen it's fifth quarter of growth, with 74,181 SF of positive absorption in Q2 2015. Rental rates have climbed to an average of $24.51/SF as quality available space remains limited. Increased activity in the market has eliminated many landlord incentives. Tenants and buyers must act quickly to secure desired space, as the market has turned competitive. A limited supply of investment property is pushing prices up and cap rates down. The Boulder metro is seeing an influx of new tenants, many from out of the state and spanning across all user types. These new users will continue to push the demand for quality space in the market. 200,000 Historical Vacancy & Net Absorption 10.0% 150,000 8.0% 100,000 6.0% 4.0% 50,000 2.0% 0 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 0.0% Q2 2015 Market Overview by Building Class # of Bldgs Inventory (SF) Total Available (SF) Total Vacant (SF) Total Vacancy Rate (%) Direct Vacant (SF) Direct Vacancy Rate (%) Available Sublease (SF) Qtrly Net Absorption (SF) YTD Net Absorption (SF) A 52 4,388,450 617,920 476,042 10.8% 385,925 8.8% 161,799 33,132 72,461 B 231 8,504,157 1,217,460 542,144 6.4% 526,314 6.2% 98,690 43,540 75,293 C 61 1,214,823 104,598 35,138 2.9% 31,902 2.6% 25,789-2,491-3,793 Grand Total 344 14,107,430 1,939,978 1,053,324 7.5% 944,141 6.7% 286,278 74,181 143,961 4
Overview by Submarket/ Building Type # of Bldgs Inventory (SF) Total Available (SF) Total Vacant (SF) Total Vacancy Rate (%) Direct Vacant (SF) Direct Vacancy Rate (%) Available Sublease (SF) Qtrly Net Absorption (SF) YTD Net Absorption (SF) Boulder 283 9,449,591 914,047 471,594 5.0% 368,475 3.9% 177,763 36,180 86,080 Central 59 1,754,684 186,017 136,439 7.8% 44,242 2.5% 96,065 5,808-2,232 A 6 319,055 92,561 92,561 29.0% 3,630 1.1% 88,931 2,060 2,060 B 39 1,017,332 72,862 39,258 3.9% 35,992 3.5% 7,134 4,380-4,769 C 14 418,297 20,594 4,620 1.1% 4,620 1.1% 0-632 477 Downtown 56 2,156,264 166,083 67,689 3.1% 60,003 2.8% 20,990-1,977 13,455 A 16 1,064,077 74,007 18,775 1.8% 17,589 1.7% 8,828 2,377 22,540 B 34 1,000,489 89,495 46,333 4.6% 39,833 4.0% 12,162-4,563-10,169 C 6 91,698 2,581 2,581 2.8% 2,581 2.8% 0 209 1,084 East 75 2,842,634 287,070 154,666 5.4% 151,430 5.3% 59,430 13,058 57,585 A 4 46,372 0 0 0.0% 0 0.0% 0 0 2,336 B 58 2,549,239 232,606 147,613 5.8% 147,613 5.8% 34,919 15,538 56,903 C 13 247,023 54,464 7,053 2.9% 3,817 1.5% 24,511-2,480-1,654 Gunbarrel 16 560,977 44,593 8,467 1.5% 8,467 1.5% 0 2,386 6,716 B 15 546,093 44,593 8,467 1.6% 8,467 1.6% 0 2,386 6,716 C 1 14,884 0 0 0.0% 0 0.0% 0 0 0 Longmont 48 1,277,059 191,734 78,022 6.1% 78,022 6.1% 1,278 15,833 9,962 A 6 130,152 17,207 13,316 10.2% 13,316 10.2% 0 2,657 2,657 B 33 977,542 171,705 64,074 6.6% 64,074 6.6% 0 13,478 7,607 C 9 169,365 2,822 632 0.4% 632 0.4% 1,278-302 -302 North 6 78,100 538 538 0.7% 538 0.7% 0-19 -538 B 3 35,000 0 0 0.0% 0 0.0% 0 0 0 C 3 43,100 538 538 1.2% 538 1.2% 0-19 -538 South 23 779,873 38,012 25,773 3.3% 25,773 3.3% 0 1,091 1,132 A 3 377,362 1,862 0 0.0% 0 0.0% 0 0 0 B 9 234,693 25,014 18,522 7.9% 18,522 7.9% 0 358 3,514 C 11 167,818 11,136 7,251 4.3% 7,251 4.3% 0 733-2,382 Denver Northwest 61 4,657,839 1,025,931 581,730 12.5% 575,666 12.4% 108,515 38,001 57,881 Arvada 1 165,538 0 0 0.0% 0 0.0% 0 0 0 B 1 165,538 0 0 0.0% 0 0.0% 0 0 0 Broomfield 5 292,220 8,002 8,002 2.7% 8,002 2.7% 0 0 0 B 4 268,094 2,119 2,119 0.8% 2,119 0.8% 0 0 0 C 1 24,126 5,883 5,883 24.4% 5,883 24.4% 0 0 0 Church Ranch 1 111,160 0 0 0.0% 0 0.0% 0 0 0 A 1 111,160 0 0 0.0% 0 0.0% 0 0 0 Interlocken 23 2,678,915 592,278 390,966 14.6% 390,966 14.6% 88,928 29,469 52,062 A 14 2,236,282 416,640 339,514 15.2% 339,514 15.2% 64,040 26,038 42,868 B 9 442,633 175,638 51,452 11.6% 51,452 11.6% 24,888 3,431 9,194 Louisville/ Superior 31 1,410,006 425,651 182,762 13.0% 176,698 12.5% 19,587 8,532 5,819 A 2 103,990 15,643 11,876 11.4% 11,876 11.4% 0 0 0 B 26 1,267,504 403,428 164,306 13.0% 158,242 12.5% 19,587 8,532 6,297 C 3 38,512 6,580 6,580 17.1% 6,580 17.1% 0 0-478 Grand Total 344 14,107,430 1,939,978 1,053,324 7.5% 944,141 6.7% 286,278 74,181 143,961 5
Vacancy & Lease Rates Total Vacancy Rate % Asking Wtd Direct Lease Rate (NNN) 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 Boulder 5.8% 5.2% 4.8% 4.4% 5.0% $18.37 $19.13 $21.19 $22.55 $23.25 Central 4.4% 3.7% 2.5% 2.9% 7.8% $16.11 $18.02 $24.57 $20.83 $17.33 A 4.0% 1.8% 1.8% 1.8% 29.0% $18.67 $34.34 $37.07 $37.85 $38.60 B 5.3% 5.2% 3.0% 3.8% 3.9% $15.77 $16.60 $22.17 $18.14 $19.06 C 1.9% 1.3% 1.9% 1.1% 1.1% $20.37 $28.91 $28.09 $28.09 $5.54 Downtown 2.9% 3.4% 3.2% 2.3% 3.1% $37.46 $39.75 $39.13 $43.97 $44.52 A 2.9% 4.3% 3.9% 2.1% 1.8% $40.85 $45.80 $42.49 $43.34 $44.59 B 2.6% 2.3% 2.5% 2.4% 4.6% $35.13 $31.42 $38.04 $45.23 $45.25 C 5.7% 5.4% 4.0% 3.0% 2.8% $22.52 $22.52 $23.10 $21.01 $21.01 East 8.8% 8.4% 7.5% 6.4% 5.4% $18.62 $17.58 $19.63 $21.34 $20.41 A 1.7% 4.5% 5.0% 0.0% 0.0% $30.28 $30.28 $28.98 $0.00 $0.00 B 9.5% 9.1% 8.0% 6.9% 5.8% $18.64 $18.84 $19.69 $21.35 $22.77 C 2.6% 1.4% 2.2% 1.9% 2.9% $13.45 $1.39 $14.25 $20.67 $4.89 Gunbarrel 3.0% 2.8% 2.8% 1.9% 1.5% $12.69 $3.79 $4.49 $3.41 $2.92 A 0.0% 0.0% 0.0% 0.0% 0.0% $0.00 $0.00 $0.00 $0.00 $0.00 B 3.1% 2.9% 2.9% 2.0% 1.6% $12.69 $3.79 $4.49 $3.41 $2.92 C 0.0% 0.0% 0.0% 0.0% 0.0% $0.00 $0.00 $0.00 $0.00 $0.00 Longmont 8.7% 4.6% 6.4% 7.1% 6.1% $8.02 $16.40 $17.23 $16.50 $17.68 A 14.8% 9.0% 11.1% 12.3% 10.2% $18.20 $18.61 $18.93 $18.57 $18.60 B 9.2% 4.8% 6.9% 7.6% 6.6% $6.75 $15.77 $16.66 $15.84 $17.61 C 0.8% 0.0% 0.2% 0.2% 0.4% $18.41 $0.00 $0.00 $0.00 $15.71 North 0.0% 0.0% 0.0% 0.7% 0.7% $25.00 $25.00 $25.00 $21.33 $24.00 A 0.0% 0.0% 0.0% 0.0% 0.0% $0.00 $0.00 $0.00 $0.00 $0.00 B 0.0% 0.0% 0.0% 0.0% 0.0% $25.00 $25.00 $25.00 $21.33 $0.00 C 0.0% 0.0% 0.0% 1.2% 1.2% $0.00 $0.00 $0.00 $0.00 $24.00 South 5.0% 4.9% 4.3% 4.3% 3.3% $22.26 $24.17 $24.48 $24.36 $25.47 A 0.0% 0.0% 0.0% 0.0% 0.0% $0.00 $0.00 $0.00 $0.00 $26.83 B 10.8% 10.4% 9.4% 8.0% 7.9% $22.65 $25.78 $25.70 $26.53 $27.49 C 8.0% 8.5% 6.7% 8.5% 4.3% $20.92 $20.89 $20.86 $20.30 $20.71 6
Vacancy & Lease Rates Total Vacancy Rate % Asking Wtd Direct Lease Rate (NNN) 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 Denver Northwest 15.8% 13.1% 13.0% 13.9% 12.5% $28.05 $27.86 $24.97 $23.90 $25.51 Arvada 0.0% 0.0% 0.0% 0.0% 0.0% $0.00 $0.00 $0.00 $0.00 $0.00 A 0.0% 0.0% 0.0% 0.0% 0.0% $0.00 $0.00 $0.00 $0.00 $0.00 B 0.0% 0.0% 0.0% 0.0% 0.0% $0.00 $0.00 $0.00 $0.00 $0.00 C 0.0% 0.0% 0.0% 0.0% 0.0% $0.00 $0.00 $0.00 $0.00 $0.00 Broomfield 5.9% 5.0% 2.7% 2.7% 2.7% $0.00 $0.00 $0.00 $0.00 $0.00 A 0.0% 0.0% 0.0% 0.0% 0.0% $0.00 $0.00 $0.00 $0.00 $0.00 B 3.5% 2.5% 0.8% 0.8% 0.8% $0.00 $0.00 $0.00 $0.00 $0.00 C 24.4% 24.4% 24.4% 24.4% 24.4% $0.00 $0.00 $0.00 $0.00 $0.00 Church Ranch 6.4% 0.0% 0.0% 0.0% 0.0% $29.90 $0.00 $0.00 $32.11 $0.00 A 6.4% 0.0% 0.0% 0.0% 0.0% $29.90 $0.00 $0.00 $32.11 $0.00 B 0.0% 0.0% 0.0% 0.0% 0.0% $0.00 $0.00 $0.00 $0.00 $0.00 C 0.0% 0.0% 0.0% 0.0% 0.0% $0.00 $0.00 $0.00 $0.00 $0.00 Interlocken 21.7% 18.0% 18.0% 17.1% 14.6% $29.09 $28.77 $28.85 $27.92 $27.52 A 23.2% 18.8% 18.8% 18.0% 15.2% $30.69 $30.14 $30.24 $29.54 $29.19 B 14.3% 14.4% 14.4% 12.4% 11.6% $23.13 $23.13 $23.13 $22.87 $23.14 C 0.0% 0.0% 0.0% 0.0% 0.0% $0.00 $0.00 $0.00 $0.00 $0.00 Louisville/Superior 8.3% 7.4% 7.9% 12.9% 13.0% $21.53 $21.31 $15.01 $17.08 $22.20 A 0.0% 0.0% 0.0% 18.9% 11.4% $0.00 $0.00 $0.00 $25.66 $22.97 B 8.0% 6.9% 7.7% 12.5% 13.0% $22.54 $22.39 $15.15 $16.90 $22.37 C 19.7% 24.5% 15.8% 17.1% 17.1% $7.00 $10.58 $8.07 $12.45 $12.45 Grand Total 9.0% 7.7% 7.5% 7.5% 7.5% $23.35 $24.14 $23.79 $23.45 $24.51 7
Asking Lease Rate (FSG) Vacancy & Lease Rates [continued] Asking Lease Rate Range by Class NNN $60.00 $50.00 $47.24 $49.20 $40.00 $30.00 $30.63 $23.76 $24.00 $20.00 $19.80 $10.00 $14.50 $11.08 $12.45 $0.00 A B C 8
Available Space Largest Blocks of Available Space 16 14 12 10 8 6 4 2 0 Denver Northwest Boulder 50-100K 25-50K 10-25K Historical Blocks of Space Quarter 50-100K 25-50K 10-25K 2014 Q2 3 16 25 2014 Q3 3 16 28 2014 Q4 3 15 24 2015 Q1 5 12 24 2015 Q2 5 17 24 9
Notable Transactions Key Lease Transactions Property Name SF Leased Company Name Market Bldg Class Eldorado Ridge I 18,814 Regis University Interlocken A 350 Terry St 12,034 Public Safety Ventures Longmont B Flatiron Park West 8,549 VF Outdoor, Inc. Boulder East B The Rose Building 8,519 Voqal Longmont B Key Sale Transactions Property Name SF Sold Company Name Market Bldg Class 3333 Walnut St 65,545 CSHV 3333 Walnut LLC Central A 5450 Western Ave 25,488 Boulder Community Health East B 75 Manhattan Dr 23,178 Manhattan Fortress LLC East C 726-732 Front St 22,000 Front Street Partners LLC Louisville B 10
Vacancy Rate (%) Net Absorption (SF) Vacancy Rate (%) Net Absorption (SF) Vacancy & Absorption Vacancy Rate by Class Net Absorption by Class 12.0% 10.8% 50,000 43,540 10.0% 40,000 33,132 8.0% 6.0% 6.4% 30,000 20,000 4.0% 2.9% 10,000 2.0% 0 0.0% A B C -10,000-2,491 A B C Vacancy Rate by Quarter Net Absorption by Quarter 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 9.0% 2014 Q2 7.7% 7.5% 7.5% 7.5% 2014 Q3 2014 Q4 2015 Q1 2015 Q2 200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 20,910 2014 Q2 187,058 2014 Q3 27,779 2014 Q4 55,693 2015 Q1 74,181 2015 Q2 11
Net Absorption (SF) Vacancy Rate (%) Vacancy & Absorption Vacancy Rate by Class 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 14.3% 10.2% 6.4% 5.1% 2.0% A B C 19.9% Boulder Northwest Net Absorption by Class 35,000 30,000 31,577 25,000 20,000 26,038 15,000 10,000 11,963 5,000-7,094-2,491 - (5,000) A B C Boulder Northwest 12
Xceligent Boulder Contact This information has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy. For additional information about this report or to discuss membership in Xceligent please contact: Aaron Knight Director of Client Services (303) 503-1657 aknight@xceligent.com David Verwer, CCIM Regional Vice President of Sales (480) 889-4555 dverwer@xceligent.com Eric Groth Regional Vice President of Analytics - Colorado (916) 494 1386 egroth@xceligent.com COMMERCIAL REAL ESTATE INFORMATION 13
Boulder Advisory Board Special thanks to the members of The Xceligent Boulder Advisory Board Chris Boston Gibbons White Keith Kanemoto Re/Max Traditions Commercial Division Aaron Evans New Option Partners Todd Walsh, CCIM The Colorado Group, Inc. Hunter Barto Dean Callahan & Co., Inc. 14