Cherry Creek's example: What Denver can learn from its most resilient office submarket — Table of Experts
Denver's office market remains in flux — with metro vacancy now at 26.8%, according to CBRE's first quarter report — but in Cherry Creek, optimism is easier to come by. New buildings are leasing up, old landmarks are coming down and top developers are betting big on continued demand.
But what can this submarket's resilience teach us about the rest of the city?
That was the backdrop for a recent Denver Business Journal Publisher's Dinner, held at Toro Latin Kitchen & Lounge in Cherry Creek and presented by FirstBank. A group of local commercial real estate leaders gathered for an intimate conversation about downtown recovery, the role of government and how Cherry Creek might serve as a model — or at least a contrast — to other parts of the metro area.
In attendance were Ferd Belz, president, LC Fulenwider; Keith Dennis, president and publisher, DBJ; Rhys Duggan, president and CEO, Revesco; Aubrey Ebbs, president Cherry Creek market, FirstBank; Brad Farber, principal, Elevation Development Group; Dan Huml, managing partner, Magnetic Capital; Derek Longwell, market president Downtown Denver, FirstBank; Evan Makovsky, managing partner, Shames Makovsky; Jessica Ostermick, market leader, CBRE; Marc Perusse, founder and CEO, E2M Ventures; and James Roupp, managing director, JLL.
One clear theme emerged: While Cherry Creek pushes ahead, the broader market faces headwinds: some cyclical, others structural.
'In Cherry Creek, we're seeing demand change now more than ever with tenants looking for north of 20,000 square feet in office space,' said Dan Huml, founder and managing partner of Magnetic Capital. 'We're also seeing diversification. It used to be just financial, professional services and real estate. Now we're seeing tech for the first time, oil and gas, educational services. The big question is: How do you get employees into the office? And that's the beauty of Cherry Creek — the neighborhood, the amenities, you can walk to your favorite restaurant. It's going to be full and active all day, and that's the kind of environment you want your employees coming into every day versus downtown that can feel unsafe and empty.'
Downtown Denver, in particular, continues to lag. CBRE's data pegs the submarket's total vacancy at 35.3%, with Class B buildings reaching nearly 40% vacant. But panelists noted there's still activity.
The Colorado Department of Labor and Employment recently leased 131,000 square feet at 707 17th St., and Class A assets downtown posted positive net absorption for just the second time in three quarters.
Still, employees are ultimately calling the shots when it comes to the location a company calls home, JLL Managing Director Jamie Roupp said. He pointed to the 16th Street Mall's multiyear closure as well as downtown's relatively aging buildings as potential turnoffs for employees looking for vibrant, activated office neighborhoods.
'The power has shifted,' Roupp said.
Projects like Cherry Lane in Cherry Creek — the redevelopment of the former Sears site led by BMC Investments, Prism Places and Invesco — are reshaping the neighborhood. That project will bring 379 apartments, 59,000 square feet of office and 133,000 square feet of retail, with developers already claiming interest from luxury tenants found on Fifth Avenue and Rodeo Drive.
CBRE's first-quarter figures back up that enthusiasm. The Cherry Creek submarket has the lowest office vacancy in the city at just 8.3%, and more than 220,000 square feet of office is currently under construction. The average asking rent is $35.49 per square foot, which is below downtown's $41.57 going rate, but trending upward.
Still, attendees acknowledged the Cherry Creek formula isn't easily replicated elsewhere. The submarket's density, walkability and wealth — not to mention its private business improvement district — make it an outlier.
Downtown gets an unfair rap, some said, and it's up to developers to change that narrative.
'We have to work on changing that perception that downtown isn't safe,' said Brad Farber, principal at Elevation Development Group. 'Restaurants are open again, there is vibrancy. It's not going to be easy by any means, but we need to help people see the value in moving downtown.'
Several experts said Denver needs to rethink its approach to housing, especially downtown. The state's construction-defects rules resurfaced, with multiple developers pointing to liability costs and insurance barriers as reasons why condos remain rare. Gov. Jared Polis just signed House Bill 25-1272, which was designed to encourage condo construction.
Shames Makovsky Managing Partner Evan Makovsky described a recent visit to Austin, Texas, where he was struck by how many young families now live downtown.
'At about 6:00 in the evening, suddenly there are people with strollers, families, young couples, bicycles. You can't walk on the streets, they are so packed. They are living in condos. We don't have condos because of the current legal landscape,' Makovsky said, noting that Austin's cost of living isn't 'cheap.'
'Getting more people living downtown here in Denver, like in Austin, will be a major driver,' Makovsky said 'We have to create those opportunities. That, in and of itself, is what will drive growth in both office and retail.'
'That's the difference,' he said. 'They've built a lifestyle product that's affordable enough and attractive enough for people to actually live there.'
Makovsky told a story from the 2008 financial crisis and recalled advice from the late banker, Don Sturm: 'No matter what, there will always be a tomorrow. The question is whether you're prepared for it.'
His message? The business community can't sit on the sidelines — not now.
It was a call not just to engage, but to lead — in Cherry Creek, in downtown and across Denver's evolving urban core.
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