Lamenting the “Californication” of Colorado is a favored pastime for some natives, but don’t expect commercial real estate agents to do much griping about the Bay Area-ification of the Denver metro area.
After all, big-time tech companies from in and around San Francisco have helped make their lives easier over the last decade, soaking up a combined 900,000 square feet of commercial space in the greater Denver-Boulder area since 2010, according to a new report. That’s a figure that makes the Mile High metro one of the country’s top 10 markets for attracting Northern California tech firms looking for outposts away from home.
The report, released earlier this month by real estate services firm Cushman Wakefield, is titled “The Great Tech Migration” and it details the expansion of 89 established technology and life-science companies headquartered in the Bay Area over the past decade. Of those companies, 58 have set up satellite locations in other cities across America since 2010. Twenty-two of those — more than one in three — have carved out homes away from home in Denver.
The names of the firms are familiar: Apple, Facebook, Google, Lyft. By now, factors that helped attract them to Denver are familiar too: A workforce where 43.9% have bachelor’s degrees or higher and a population that is 23.5% millennial, nearly 3% higher than the nationwide rate.
Beyond those measurables, there is something immeasurable that helps Bay Area companies feel at ease in Denver, said Steve Billigmeier, an executive managing director with Cushman Wakefield’s Denver office and part of the company’s emerging tech advisory group.
“I think just culturally, Denver as a community has similarities to the vibe to Northern California,” Billigmeier said last week. “There is a level of comfort expanding their footprint in Denver because of that fact. It’s a gut-feel-type deal that doesn’t go into the numbers, but it’s definitely a part of the conversations.”
Off the top 10 markets in Cushman Wakefield’s report, Denver is last in terms of square feet absorbed. It’s 900,000 total square feet is comparable to Dallas and Portland, Ore.’s 1 million square feet but well behind Seattle (5.1 million square feet) and Austin,Texas (6.1 million square feet), markets that are often held as comparable to Denver.
The discrepancy has a lot to do with single companies gobbling up heaps of real estate in those places, Billigmeier said, where it’s been more a case of many companies nibbling in Denver. Austin benefits from the University of Texas churning out software engineers at a rate the University of Colorado isn’t matching, he said.
Denver remains a bargain compared to other top-tier markets. Plenty of companies Cushman Wakefield tracked for its report chose to expand in the Bay Area itself. Billigmeier said he is working with a client now looking at lease rates of $100 per square foot in Northern California. Cushman Wakefield’s third-quarter analysis of the Denver office market put the average lease rate in town is $25.68 per foot.
But Denver isn’t as cheap as its once was, and other cities are now showing up on the radar of Bay Area firms looking for space.
“Second-tier markets like Kansas City and Minneapolis, those markets are a lot cheaper than Denver and if (companies) can get the talent they need in those markets, unfortunately, Denver might be missing out on those deals and more in the future,” Billigmeier said. “It’s absolutely a concern and an issue.”