REAL ESTATE FIRM SEES MARKET AT A TIPPING POINT
Hines Denver director says safety and security problems need resolved
Hines, a real estate firm with a significant footprint in downtown Denver, remains optimistic about the market, but believes the area is at a tipping point that could lead to a “doom spiral” if concerns about safety and other challenges facing developers aren’t addressed.
The global firm’s office in Denver has about $4 billion in assets that it manages and about 100 employees, said Chris Crawford, who heads the team.
“We focus on a full suite of products: acquisitions, development and asset management,” Crawford said.
The company has three current industrial deals totaling about 1.5 million square feet and about 2 million more square feet for additional phases, Crawford said. One development is Quantum 56, a sixbuilding, 868,360-square-foot industrial park in north-central Denver.
Current apartment projects include 1,500 units with about 500 more on the way. One project is Mica Rino, an 11-story building with 397 units.
And the company is involved in master-planned projects with about 6,000 single-family home lots built, under construction or proposed. Hines is a co-developer of and will manage the new T3 Rino mass-timber building in the River North Art District, where Xcel Energy plans to move its headquarters to in 2025.
Over the past decade, Hines developed or acquired roughly 2 million square feet of office space in downtown Denver. The company still owns two of the buildings and manages the assets of another 1.2 million square feet of space.
Crawford acknowledged the pessimism pervading the office-building market. Real estate firms JLL and CBRE both recently released reports that showed the overall downtown office vacancy rate exceeding 30% in the fourth quarter of 2023, the highest point since the early 1990s.
Nationwide, 19.6% of the office space in major U.S. cities wasn’t leased as of the fourth quarter, breaking the previous record of 19.3% set twice: in 1986, following an expansion of inventory, and in 1991, during the savings and loans crisis, according to Moody’s Analytics.
Remote and hybrid work routines spurred by the pandemic have contributed to the emptying out of offices. Another factor, The Wall Street Journal reported, is the surge in new construction that took place in the1980s, resulting in a glut on the market during economic downturns. Now, many of those older spaces sit empty or are underused as tenants sign up for newer buildings with more amenities to lure workers back to the office.
“A lot of office space has been negatively tarnished in saying it’s oversold, it’s maybe not as in demand. We’re seeing the exact opposite for what we refer to as magnet assets,” Crawford said.
Those “magnet” assets are buildings, even older ones, that are well located and have ample interior amenities such as breakout rooms for employees and conference facilities, Crawford said. They also present attractive “ground planes,” or where the building meets the ground and encompass neighboring restaurants, landscaping and open space.
“We’ve got existing assets that are 30 years old and undergoing extensive renovations that are seeing tremendous activity,” Crawford said.
While Hines has future projects lined up for downtown Denver, Crawford said the company is watching events closely there. He said safety and security concerns, including issues around crime and questions around how to respond to homelessness, could impede growth.
“This could put us into a sort of a doom spiral if this isn’t handled correctly,” Crawford said.
Ensuring safety and security are pivotal pieces to reinvigorating downtown, along with thriving retail and office buildings people want to work in, Crawford added. He would also like to see more predictability when it comes to changes in zoning and building codes.
“When the rules change, that’s when you start getting investors saying that it creates additional risk,” Crawford said.