Uncertainty Still Looms As Return To Office Nears

Office space and development in Denver will still thrive despite the coronavirus pandemic, two experts said this week.

Brookfield Properties Executive Vice President David Sternberg and Broe Real Estate Group Chief Operating Office Peter Albro were both panelists on Bisnow’s Rocky Mountain Roundup: Denver Office Update webinar. 

Both said that while it is likely that we won’t be returning to normal office spaces, what that return will specifically look like is uncertain.

The impact that telecommuting and the pandemic will have on the future of office space is twofold, Albro said. While there’s a lot of discussion around how efficient groups are working remotely, Albro doesn’t think the need for office space is going anywhere. 

“People are looking forward to the human interaction that comes from being in an office environment,” he said. But with 6-foot distancing in mind, a lot of office space is too tight.

“One could make an argument that there will be upward pressure on the office footprint,” he said. “There will be counterbalancing forces that will be interesting to track.”

Several Bisnow webinars with CRE experts have highlighted a potential migration of office tenants from the central business district into other areas, including Denver’s suburbs. But Sternberg said that Brookfield Properties continues to be confident in downtown. 

“We’re still a big believer in the downtown of Denver, the population growth and where the workforce and up and coming workforce wants to be,” he said. 

Sternberg said downtown's location, infrastructure and diversity still offer a lot to employers, and he thinks it will continue to grow. 

“The growth is certainly going to be modified and change from where things were before for a period of time, but over its duration we’re still bullish on and optimistic about the CBD.” 

Albro sees opportunity in the suburban markets. Broe Real Estate Group has properties in the suburbs and said there tend to be “wider yields.” While he doesn’t predict a cataclysmic move to the suburbs, he does predict more of a willingness to see value in suburban environments. 

Moving forward, the submarkets with the highest opportunities for growth will likely be LoDo and RiNo based on their attributes of transportation and accessibility, Albro said. 

“Those will be pretty consistently favorable; obviously there might be some musical chairs,” he said. “I think those will be strong micro markets.”

Office leasing in Denver isn’t at a total standstill, Sternberg said, because there’s still interest and activity, though it’s slower and there is re-evaluation.  

“Transactions that had started before this — many of them, if not most, got across the finish line with little change,” he said. 

There are very few transactions occurring right now, Sternberg said, but he thinks it will pick back up again later this month, as people start returning to offices and more restrictions continue to lift. 

In the city of Denver, some nonessential businesses will be allowed to reopen this weekend with restrictions, which will include a 50% staffing level for offices. 

When employees return to offices, it’s going to be gradual and slow at first, Sternberg said, with around 50% staffing upon return, and safety protocols in place to keep tenants safe. 

“Streets will not be packed, in my opinion, on Monday,” Sternberg said. 

There’s not a lot of reward for being a first mover and taking drastic steps to get people back in the office, Albro said. He said he thinks that given the consequences and the ambiguity around getting the workforce back into office buildings, many will be conservative about it. 

“It appears as though there’s some pent-up experiential demand right now,” he said. “So I think people are going to err on the side of being excited on having a transition back towards normalcy versus anxiety.”