DBJ: Is downtown becoming Denver’s new tech hub?
Article by: Kelcey McClung, Reporter, Denver Business Journal, Aug 9, 2018
Denver’s tech scene is growing up and moving up.
Downtown high-rises built in the late ’70s and early ’80s are seeing new energy as tech tenants plant their flags in or near the city’s Central Business District. The movement has been driven by tech companies that may historically have favored LoDo (Lower Downtown) and the Central Platte Valley, in smaller scale buildings with fewer tenants but hip spaces. Now, these companies are gaining employees and looking for better deals in rental cost and space availability while maintaining access to the people drawn to the area.
“Tech companies are focused on downtown Denver for a number of reasons; one of the main drivers is a proliferation of a young and talented workforce that now lives in and around downtown,” said Andrew
Blaustein, managing director and tenant representation specialist at Newmark Knight Frank.
In July, Denver was listed as the No. 10 top tech talent city, based on an analysis by CBRE. The list ranks 50 North American cities on criteria such tech talent supply, growth, concentration, cost, completed tech
degrees and the outlook for office and apartment rent cost growth. That analysis said that Denver’s tech talent pool is almost at 100,000, or 6.2 percent of its total workforce. It’s up 23.8 percent from 2012. And Downtown Denver, specifically, has seen a 74-percent increase in tech employment since 2010, according to the Downtown Denver Partnership’s 2018 State of Downtown Denver report.
Legacy office buildings located in “upper downtown” coincide with where the bulk of downtown’s employment is concentrated, according to Emily Brett, senior economic development manager for
Downtown Denver Partnership. “These buildings are seeing a shift in tenant mix from the traditional big four (oil and gas, financial services, government, law firms) to technology and co-working spaces,” Brett said.
Faction Inc., a cloud platform company, resides at 1660 Lincoln Street. Eric Culp, its co-founder and vice president of operations, said he felt the area chose them.
“Originally, we were driven by the proximity to highly-connected telecommunications companies and facilities,” Culp said. “As Faction has continued to grow, and we needed to accommodate our ‘in the office’ culture, we moved into 1660 Lincoln St. for more space.” If the firm had moved out of the area, it wouldn’t have been able to attract the same talent, Culp says. “Before moving to 1660 Lincoln, we weighed our options — including moving away from downtown — and determined that such a move would likely kill off that same culture,” he said.
Downtown is a “24/7 community” that includes two grocery stores, parks, entertainment and hotels – in addition to office space, Blaustein said. “Employers, as well as a growing workforce, see the value in this environment and companies across the country have taken notice,” Blaustein said.
In March, Denver Business Journal reported that many San Franciso-based tech firms were moving to downtown Denver for the lower costs and appeal of amenities, infrastructure and cultural attractions.
Garrett Johnson, managing principal at Cresa, a corporate real estate advisory firm that exclusively represents tenants, named other tech companies that he thinks would have historically only looked at LoDo
that all relocated to other parts of downtown as they grew.
Those companies include out-of-state firms like Vertafore, from Seattle, and California-based Marketo as well as local companies like SendGrid. Vertafore, a company that provides technology for the insurance industry worldwide, moved its headquarters to Denver Place at 999 18th St. in 2017, saying the city’s emerging status as a technology hub
was the driving factor.
In January, Marketo announced it was expanding its year-old downtown Denver office at 707 17th St. to four floors, giving it room to employ 500.
SendGrid, an online communication platform founded in Boulder, signed a long-term lease at 1801 California two years ago According to the company the new headquarters nearly tripled its Colorado office California two years ago. According to the company, the new headquarters nearly tripled its Colorado office footprint, and consolidated its Denver and Boulder offices “in a single Denver location.” SendGrid also said that the new space would accommodate their anticipated growth, while giving them access to both the Boulder and Denver talent pools.
More local companies have shifted from other areas to high-rises in downtown. Denver-based app maker Ibotta moved into 1801 California from the company’s original LoDo location in 2016, and doubled its office space last year. Evolve Vacation Rental Network consolidated its Auraria and Tabor Center offices into 38,000 square feet in 717 17th Street last year as well.
Supply and demand
“There has been a philosophical shift in how Denver has grown up,” Johnson said.
Tech companies originally wanted small, satellite offices outside of the Central Business District in areas like the Central Platte Valley and LoDo, according to Johnson. Younger tech talent wanted to live, work and play in the same area, driving a lot of office demand in the Market St. and Wynkoop St. areas, said Rick Door, also a managing principal at Cresa’s Denver office. But that isn’t the case anymore, because as those companies grew and matured, they couldn’t stay there, Johnson said.
The Platte Valley and LoDo areas’ lack of supply and cost of rent helped drive the tenant migration into other downtown areas, said Door. According to Newmark Knight Frank’s office statistics for Q2 2018, median rental rates for Class A office space in the LoDo and Central Platte Valley average $44.81 per square foot. In the company’s self-defined Skyline micromarket (between Larimer and Curtis Streets) the rate is $41.39 per square foot, and even less in Uptown (southeast of Curtis Street) at $33.85 per square foot.
Buildings such as 1801 California, the Wells Fargo Center, Denver Place and 1660 Lincoln are considered to be in Uptown while 1144 Fifteenth, Tabor Center, and Seventeenth Street Plaza buildings are considered to
be in Skyline. The differences in Class A office space vacancies are 921,965 square feet in LoDo/Central Platte Valley, versus 1,039,530 in the Skyline micromarket and 1,621,237 in Uptown, according to Newmark Knight Frank.
Why not the suburbs?
While downtown supplies a good amount of the talent businesses are looking for, businesses can take advantage of the entire metro by being centrally located, Blaustein said.
There are two main reasons businesses are expanding centrally and avoiding moves to places like the Denver Tech Center: transit and talent, Blaustein said. Blaustein added that an employer would be “hard-pressed” to hire somebody who lives north of I-70 when its office is south of downtown.
“Transit is the No. 1 driver,” he said. “Not every tech employer is looking for a 20-year-old employee; some are looking for experienced engineers.” Those engineers, who might live in suburbs, could take a train or bus and get to downtown “much easier,” Blaustein said. “Having a multimodal hub like Union Station can bring people from all points of the metro area to downtown from any corner,” he said. “In the Tech Center, you’re more limited.”
While the Tech Center and the adjacent area is a comparable submarket in terms of quality and quantity of office space, some consider it harder to reach. So why mention the 20-year-old employee?
A lot of that younger talent is closer to downtown, and it tends to be where that population wants to live. “They want to be able to have easy access to work,” Blaustein said, whether that’s walking, biking, or using
An example of a company making moves to please its employees is FullContact. In mid-July, the contact management tech company announced it would relocate its headquarters to the WeWork Tabor Center location, occupying nearly an entire floor. Currently at 90 workers, the company anticipates doubling its workforce in the next four years. WeWork also recently expanded its Denver presence by leasing five floors in the Wells Fargo Center at 1700 Lincoln St.
FullContact was already near Union Station and its expansion drew the company farther south into downtown. “Our team lives all over the metro area, and the regional and local transportation options make it easy for
everyone to get to the office,” said Tim Prunk, the firm’s president and COO. FullContact employees, he said, love the proximity to “great restaurants, entertainment and Denver sports,” among other things. “We wanted to keep our company headquarters in vibrant downtown Denver to continue to attract and retain great talent,” said Prunk. He added that they’d been “fortunate” to witness and contribute to the burgeoning tech scene in Denver.
According to the Downtown Denver Partnership’s 2018 State of Downtown Denver report, a downtown office location provides access to Metro Denver’s labor force of over 1.8 million, 44 percent of whom have a
bachelor’s degree or higher.
In a list of the top 30 leases in “upper downtown,” supplied by the Downtown Denver Partnership, traditional companies like oil and gas and financial services continue to dominate the top half with footprints ranging
from 363,586 to 100,000 square feet. But notably, tech companies and one co-working space fill eight spots on the list with footprints ranging from SendGrid’s 107,581 square feet to higher education company 2U Inc.’s 74,274 square feet. Those eight spots all are new leases for the area, with the companies moving in over the past five years, according to Brett.
“The tech community has a ton of momentum… and we don’t see any signs of slowing,” Blaustein said.
In 2018 alone, major names in the tech scene like Facebook and Slack have announced offices in Denver, and both located in downtown. Because of this, companies moving to Denver, or opening an office in Denver, is going to continue, said Jamie Gard, executive managing director at Newmark Knight Frank and landlord and tenant representation
office specialist. He predicts a lot more will come in the future.
“Those companies don’t just come in and check the box,” Blaustein said. “They’ll make greater investments.”
Read the original article from Denver Business Journal here.