CASTLE ROCK, Colo. — Just 30 miles south of Denver, Castle Rock is grappling with an unusual problem in today's commercial real estate market: A severe shortage of available office space.
The town's office vacancy rate sits at 4.7%, according to CoStar Realty Information Inc., a stark contrast to Denver's struggling office market, where vacancy rates hit 35% during the first quarter of this year, according to global real estate firm CBRE.
"Well, first of all, it's a great challenge to have," said Frank Gray, CEO of Castle Rock Economic Development Council.
The lack of available inventory has forced Gray and real estate experts to get creative when helping clients find suitable workspace.
"To find a block of space today that's north of 4,000 square feet is pretty much impossible at the moment," said Matt Call, founding principal at NavPoint Real Estate Group.
Gray explained that small co-working spaces are often snatched up immediately from the market. He believes companies are drawn to Castle Rock's vibrant community culture.
"They're like...'Oh, this is a cool, thriving, fun downtown.' They've got jazz on Wednesday nights in the park. They have great community events happening around here. There's an amphitheater I can go to see some cool concerts," Gray said.
Both Gray and Call often find themselves having difficult conversations with prospective tenants about the limited supply of available units.
"We'll have that conversation. And then they go, 'Okay, well, we like it. We understand what's going on. We're excited about coming to Castle Rock. Can we look at space?' And we go, 'Well, if you're looking for anything over you know, 5,000 square feet, it doesn't exist," Gray said.
Both experts suggested that the solution may involve building more space from the ground up, but that comes with its own challenges.
"I don't know what the solution would be. And yes, that's probably it," Gray said when asked about building new space.
But Gray acknowledged the economic hurdles facing new construction projects.
"So you have a high interest rate, you have a really high cost of goods, and then the cost of construction and labor, right? These are all challenges in the market," Gray said.
Despite the challenges, industry experts believe that market pressure will eventually lead to new developments emerging.
"We're going to get to a tipping point in the near-term, and I think you'll see some office product get built down here, just as a function of the demand we're seeing and the lack of available space," Call said.
