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Capital improvements in downtown buildings provide landlords with leverage to push rates

• 14 buildings were constructed downtown in the last six years with the latest and greatest finishes and amenities. On the contrary, at over 30 years old, buildings in Denver’s aging skyline began to re-invest in capital improvements.  From outdoor plazas, to indoor lobbies, conference facilities, gyms, common areas and more, buildings positioned themselves to be on par with new construction.

• Tenants began flocking to new construction and some inked deals, but others walked away with sticker shock as rental rates hit new highs.  Existing buildings used this opportunity to upgrade their facilities in order to attract those tenants priced out of new construction. 

• Although the cost of older buildings remains lower than new construction, investing in capital improvements allowed those buildings to push rental rates.  1801 California invested by far the most—$53 million—and saw the greatest rent growth at 66.1 percent.  In addition, 1801 went from 33.5 percent to nearly 94.0 percent leased.  Buildings who recently completed renovations or who are underway have yet to see the same rate growth as those completed prior to 2017. Those landlords who have not yet would be wise to re-invest in their buildings.

Source: JLL Research

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