Just a few months after breaking ground, a mixed-use project in Denver's tony Cherry Creek neighborhood has secured a deal with a financial heavyweight eager to take over all its available office space.
UMB Bank finalized a prelease for the office building underway at Cherry Lane, beating out a handful of other big-name tenants competing for the yet-to-be-completed space in a neighborhood that has become the rare bright spot for Denver's otherwise stagnant market.
The bank, which currently has a regional office downtown, will open a retail branch on the project's ground floor and fill all of the office space above in the six-story building at the corner of First Avenue and Clayton Lane.
The UMB deal is particularly notable given that developer BMC Investments hadn't yet begun marketing the space for lease, a sign that demand for office space in Cherry Creek has blown past what's currently available.
"We hadn't even hired a broker and were planning to wait until the project topped out," Matt Joblon, BMC's founding partner and chief executive, told CoStar News. "We were just starting to talk to brokerages, and in the middle of that process had three large, publicly traded tenants reach out and say they wanted the space."
UMB ultimately won out, locking down the space for its future Denver hub that will replace its current outpost at 1670 Broadway. The bank currently leases about 35,000 square feet of office space in the downtown tower, where it has been for more than three decades.
"This development provides us with the unique opportunity to build a customized office from the ground up," UMB CEO Mariner Kemper said in a statement. The new space, which is slated to be ready for occupancy in May 2028, also gives the bank "the ability to create a premier and personalized space for our associates and customers that will support our needs both now and into the future."
Denver is the bank's second-largest market behind its Kansas City, Missouri, headquarters, Kemper said, meaning its investment in physical space is directly correlated to UMB's long-term commitment to growth in the city.
Filling space
The prelease commitment means the Cherry Lane project, still years from completion, is well on its way toward filling up. Once home to large-format retailers such as Sears and Crate & Barrel, the Cherry Creek site is now being overhauled into a neighborhood-within-a-neighborhood designed to feature nearly 380 luxury apartments, the future UMB office building and about 150,000 square feet of high-end retail.
The future retail space is now about half-filled, Joblon said, with negotiations underway to fill the remaining space.
"The thing that was compelling for tenants was the brand exposure that will come from having their name right along First Avenue and the chance to be in a true, mixed-use environment," the CEO said of fielding demand for the project's office space. "There will be a luxury fitness operator, access to the neighborhood's health and wellness brands, all of the shopping is already here ... Cherry Creek has everything tenants want for their employees and clients."
UMB's commitment to the Cherry Lane project extends a string of similar circumstances in which tenants are clamoring for any available space in the Cherry Creek area, pushing preleased rates to 100% long before projects are expected to wrap up construction.
That activity has stood out against a backdrop of depressed demand plaguing the rest of Denver's office market as it slogs through myriad pandemic-induced obstacles.
Yet Cherry Creek — which has long attracted high-profile tenants willing to pay top-tier prices — remains a standout.
Over the past several years, the neighborhood has steadily emerged from the turmoil plaguing the rest of the city, reporting a significantly tighter vacancy rate and stronger leasing momentum. That has given developers such as BMC the confidence to build the space necessary to meet outsize demand.
The neighborhood, located on the outskirts of downtown, has an average office vacancy rate of about 5%, according to CoStar data, a sliver of the city's overall rate of more than 18%.
With immediate access to Cherry Creek's roster of popular retailers and restaurants, tenants are also willing to pay more for space there, typically more than $45 per square foot. By comparison, rents across the rest of the Denver market average about $30 per square foot, according to the data.