Hope on horizon for Boulder area commercial real estate?

BOULDER — Despite persistent headwinds — from rising interest rates to the post-COVID-19 work-from-home revolution — commercial real estate activity in the Boulder Valley may be poised for increased activity in the middle and back half of 2024.

“There’s nothing to jump up and down about, the numbers are what they are. But I think there is enough good (momentum) and a little bit of an energy shift … that I think, with baby steps, it’ll get a little bit better and better,” Becky Gamble, CEO of the brokerage Dean Callan & Co., told BizWest this week.

“We’ve been having headwinds that are out of our control, like on the geopolitical side of the equation. It’s out of our control, but it does impact companies’ decision making” when it comes to building and leasing new commercial space, she said. “Certainly interest rates are important, so is the cost of capital, which impacts companies’ ability to expand and to hire.”

In Boulder County, the total office vacancy rate, not including life-science-centric flex space, was  22.4% in the first quarter of 2024, according to a new report from Dean Callan & Co. Of that total, 6% represents subleases.

In the wake of the pandemic, companies that have traditionally been office tenants are still grappling with questions such as: “What does it look like when we come back? How much space will we need?” Gamble said.  

The answers to those questions, she said, often depend on the tenants’ industry sector, but “the days of nine-to-five (work days in the office) for certain segments are probably gone.”

Still, lease activity is trending in the right direction in many of the region’s submarkets. 

In downtown Boulder, about 28.8% of office space was vacant in the first quarter of this year. While higher than pre-pandemic, that figure is down from 29.2% in the same period last year, according to Dean Callan & Co. data. Transactions in the downtown submarket doubled year-over-year to 10 in the first quarter of 2024. 

“Inquiries are picking up — so that’s good — even in the office realm,” Gamble said. “That’s generally good news, but whether (inquiries) will translate into actual lease execution, that’s to be determined.”

Countywide, the commercial sales volume rose from $44.7 million in the first quarter of 2023 to $64.9 million in the most recent quarter, according to the Dean Callan report. 

Biotechnology flex spaces have been a red-hot space for developers in the Boulder area, as a host of new and redeveloped projects are expected to hit the market in the coming months and years. Whether those hundreds of thousands of office, research, laboratory and manufacturing square feet will be immediately gobbled up by tenants remains to be seen. 

Some life-sciences companies have “struggle(d) to get funding,” Gamble said. “I think the VC market is still slow,” which affects biotech companies’ abilities to take over new offices, manufacturing plants and R&D facilities. 

“We went from having nothing when the demand was crazy to having product” being developed in a demand environment that has somewhat cooled, she said. “You’ve got some of these projects that have been completed and are now ready for that demand to return.”

There is a silver lining related to commercial real estate vacancy in that it offers the chase for an injection of new blood into a community’s business ecosystem, Gamble said. 

“There’s an opportunity for (companies) that have not had a chance to get into Boulder, whether it was too expensive or there wasn’t the right size” of office space available, she said. “When one door closes, another one opens. …The landscape has changed a bit so that companies that before might not have had the opportunity to be here can now be here.”

Gamble predicted that the Boulder area, in coming years, could see an increased presence from aerospace and defense industry tenants, along with more technology companies in the quantum computing realm.

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