Denver market for commercial real estate hot

Second firm reports retail, office deals to eclipse 2005 record

John Rebchook, Rocky Mountain News

Friday, July 14, 2006

Last year, when investors paid $3.2 billion for commercial real estate in the Denver area, investment broker Patrick Devereaux and other experts thought that record would stand for many years.

"We were wrong," said Devereaux, a senior director at Cushman & Wakefield. "We are absolutely certain to set a record in total dollar volume this year."

Devereaux already has tracked $2.3 billion in sales of office, retail and industrial properties in the first half of the year. Brad Neiman, senior vice president of North Star Commercial Partners, released a similar report last month.

"There are a lot of big transactions expected to happen in the second half of the year in Denver. It is not unlikely that we will hit $4 billion in transactions this year," said Devereaux, who was joined Thursday at a midyear update and forecast by C&W brokers Jim Wonhof and Mitch Zatz, who discussed the improving office and industrial markets.

Deveraux described the appetite by investors for first-class Denver -real estate, especially offices, as "very frothy."

Investors, especially those from California, who recently have been accounting for 70 percent of the bidders, are willing to pay record prices for Denver office and retail buildings because they look cheap compared with buildings on the East and West coasts, he said. Other investors have come from Texas, New York, New Jersey, Australia and even one from Norway, who bought a downtown building and has two more under contract, Deveraux said.

One reason Denver is attractive is because it is just beginning its economic recovery, while other parts of the country are in the later stage of their recoveries, he said.

"Denver has definitely established itself as one of the most preferred markets within the nation," Devereaux said. "That's because the economic conditions here in Denver are outpacing the nation in terms of job growth, population growth, and it has lower unemployment."

Asked if investors are concerned that real estate foreclosures in Colorado are leading the nation and heading toward record territory, Deveraux said: "We hear about that some, but not as much as you would think. It may sound crazy, but a lot of investors are dealing with OPM - other people's money."

But people who are investing their own money are seeing foreclosures as an opportunity, he said.

He said the question he increasingly is getting from "really smart guys who are investing for their own accounts is, 'Hey, are you buying houses?' It sounds like a good time to buy houses, sit on them for a while, let the job growth kick in, and make some money."

rebchookj@RockyMountainNews.com or 303-892-5207