One DTC Sale Demonstrates Changing Times For Offices
A $55M building sale in the Denver Tech Center could be a harbinger of office trends to come, as the buyers plan millions in upgrades to attract and retain new tenants, while the sellers shift their focus to industrial.
The building, One DTC, sold at a loss, while the market continues to recover from the pandemic.
Greenwood Village-based Hill Cos. purchased the 16-story office property at 5251 DTC Parkway from Principal Real Estate Investors, which purchased the property in 2007 for $57.8M, according to the Denver Business Journal.
Hill Cos. wants to spend $5.5M upgrading the building, doubling the size of the tenant gym, improving the lobby and adding a golf simulator and outdoor putting greens.
These kinds of hospitality improvements are expected to become more common as building owners seek to offer the kinds of amenities that will compete with the comforts of home and the convenience of skipping a commute.
Beginning with the building’s exterior, Hill Cos. wants to create a country club feel, with a putting green, seating areas and audio-visual hookups. Inside, the golf simulator is meant to allow building tenants to play a round of golf at their lunch hour or bring the links to their clients, rather than the other way around.
It’s difficult to predict exactly what the workplace will look like in the next three to five years as society adjusts to a post-Covid lifestyle, but changes are almost certainly coming for office spaces. Some of the country’s larger employers, including those who own their real estate, have already started implementing new features, some of which are meant to enhance the employee experience, while others aim to smooth the transition to hybrid work, in which some workers are in the office and others are remote.
Google, for example, is busy trying out new office designs on 10% of its space worldwide, equating to millions of square feet of office beta testing.
While some companies look for ways to revamp the idea of the office, others appear to be pivoting.
After holding One DTC through the Great Recession, Principal Real Estate Investors reportedly sought to decrease its exposure in the Denver Tech Center, which contains the largest office inventory in the metro area, and were “re-balancing” their portfolio. That goal ended with the company selling One DTC for $2.15M less than it paid for the 240K SF building, in spite of more than a decade of rising property values across the metro area.
Earlier this year, Principal Real Estate Investors paid $85.3M for an industrial development along I-76 in Brighton, signaling its interest in the rapidly expanding market for warehouse and distribution space as e-commerce continues its ascent.
They’re not alone. As the Covid-related shakeup of the commercial real estate industry continues, many companies are plowing cash into industrial assets in search of yields and the relative safety of an asset class with strong tailwinds for the foreseeable future. In 2021, investors pumped more than $160B into industrial properties, an increase of 55% over the previous year.
