Progress on Office/Mixed Use Developments a Great Sign for Downtown Economy

In the DenverInfill Blog, I noticed progress has been made recently on two new downtown mixed use developments with substantial office components : Two Tabor Center and 999 17th Street. Having just filed its building permit, the long awaited second tower at the Tabor Center is much further along in the development cycle than 999 17th Street which is in the preliminary design stage.

However, progress on both these two projects is a positive sign for the downtown Denver economy. Although I do not have any direct or inside knowledge of the situation, I believe both projects' office components are at least partially speculative, meaning they do not have 100% pre-lease commitments for the space. The types of businesses likely to occupy this type of "Class A or higher" CBD office space include companies in the FIRE sectors (financial services, insurance, real estate), professional services firms and corporate or regional headquarters operations. The willingness and ability of Callahan Capital Partners and Shea Properties to move these projects forward in the face of macroeconomic and capital market headwinds, is compelling evidence that Denver's CBD is well poised to grow its base of high paying jobs and attract new businesses.

This continued progress at the likely start of a U.S. economic recession is particularly notable compared to the office space downturn that hammered Denver in the great 1980s construction boom and bust. It is evidence that the current regional economy is more diversified and resilient than it was in the eighties and that the office sector has not been overbuilt during the current construction boom.

The fact that both Two Tabor and 999 17th Street are mixed use projects is notable. With office, hotel, retail, parking and residential condo components, 999 17th street will be a highly diversified real estate development. Economic weakness in any one use category can be offset by strengths in the others. In fact, this development, with its widely mixed uses is emblematic of the broader changes in land use in downtown Denver over the past 25 years and helps explain why the core is so much stronger today than it was in the 1980s.