A Mixed Performance for Denver’s Office Market
The pipeline slightly improved, while investment activity continued to dwindle.
![The office building at 717 17th St. in Denver.](https://www.commercialsearch.com/news/wp-content/uploads/sites/46/2024/05/JM_Brookfield-Properties.jpg?w=300)
Denver’s office market concluded the first half of 2024 with some signs of improvement along a few fundamentals. Amid the nationwide slowdown in new office development, plateauing utilization, along with high interest rates, Denver showed some resilience.
The metro’s construction pipeline has improved since last year. Although completions diminished by more than 26 percent, new construction starts signal demand is still present. Vacancy continued to rise, however, while the average price per square foot dropped below most of its peer markets. Overall investment volume for the first half of the year decreased to less than half compared to the first six months of 2023.
Construction pipeline slightly improves
Denver had 1.7 million square feet of office space under construction in June. This represented 1.1 percent of total stock, on par with the national rate. The metro outpaced peer markets such as Phoenix (0.3 percent of stock underway), Portland, Ore., (0.6 percent) and Atlanta (0.9 percent), but lagged Seattle (1.7 percent) and San Diego (4.0 percent).
Chicago-based Riverside Investment & Developments is working on the largest office project underway in the metro, at 1901 Arapahoe St., in Denver’s CBD. The upcoming 30-story building is set to encompass more than 700,000 square feet of office space and include two underground and four above-ground parking levels, along with 9,500 square feet of retail.
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Denver’s office market added 552,482 square feet across five properties to its inventory in the first half of this year, which represented a 0.3 percent expansion of existing stock. Completions slowed down, as this total space was 26.4 percent less than what was delivered in the first half of 2023.
![Boulder 29 in Boulder, Colo.](https://www.commercialsearch.com/news/wp-content/uploads/sites/46/2024/08/Boulder-29.jpg)
John Perlmutter & Co., together with Rockefeller Group, completed Paradigm River North in Denver’s River North Art District, at 3400 Walnut St. At 188,000 square feet of rentable space, it was the largest office property to come online in the first half of the year.
The second largest was Boulder 29 in Boulder, Colo., which came online at the start of the year. Corum Real Estate Group’s three-story, 163,000-square-foot creative office asset was developed with the help of a $73.4 million construction loan provided by Banc of California.
There are signs that development activity is picking up again, as developers broke ground on 966,679 square feet of office space in the first six months. This was a notable improvement from the pause in construction starts of last year.
Denver office average prices drop significantly
Denver investors traded $215 million in office assets in the first half of the year, down 60.6 percent year-over-year. Activity slowed down nationwide, as loans continue to be few and far in between. Properties in the metro traded for an average of $125 per square foot, clocking in below the national average of $172.
Prices in the metro also dropped below most of its peer markets, including Atlanta ($140), Phoenix $167), Seattle ($182), Portland ($182) and San Diego ($274).
A recent CommercialEdge report found that more than $260 billion in office loans have matured recently or will mature by the end of 2026, affecting 30 percent of all office loans and more than 12,000 properties. Denver’s office market was among a few that had a large amount of its loan volume maturing in this time frame, at 41.8 percent.
![The 410 office building in downtown Denver](https://www.commercialsearch.com/news/wp-content/uploads/sites/46/2024/05/Cress_Capital_The_410.jpg)
Cress Capital, together with E2M Ventures, acquired The 410, a 24-story office tower in downtown Denver, one of the largest buildings that traded during the first half of the year. The buyer initially acquired the existing loan on the 440,000-square-foot asset, and later it negotiated a deed-in-lieu of foreclosure with the previous owner.
Another significant deal took shape in Denver’s 24 – I-25 Corridor submarket. Remedy Medical Properties acquired the 73,403-square-foot, two-story asset at 14190 Orchard Parkway for $30.6 million, from Development Solutions Group. The asset traded at roughly $416 per square foot, one of the highest prices in the market.
Vacancy rises above average U.S. levels
Denver’s office sector struggled to maintain a healthy level of occupancy, as vacancy clocked in at 22.1 percent, up 170 basis points over a 12-month period ending in June. This was higher than the national rate (18.1 percent), as well as peer markets Portland (17.1 percent), Phoenix (18.3 percent) and Atlanta (18.4 percent). Seattle had a higher vacancy, at 23.2 percent.
![One of the office buildings within the Belmar mixed-use development in Lakewood, Colo.](https://www.commercialsearch.com/news/wp-content/uploads/sites/46/2024/01/Office-Belmar.jpg)
Brookfield Properties signed a significant deal with tenant Johns Manville in May. The manufacturer renewed its agreement for 121,000 square feet at 717 17th St. in downtown Denver, which serves as its global headquarters. The company has been a tenant there since 1988 and is planning to invest in improvements across the five stories it occupies.
In terms of new leases, suburban office properties have had some success. At the start of the year, Google Fiber signed a 13,000-square-foot agreement at Belmar in Lakewood, Colo., with owner Bridge33 Capital. The provider will relocate to the mixed-use district later this year.
Denver’s office market expands flexible solutions
In June, Denver had 3.8 million square feet of flexible office space, which represented 2.2 percent of its entire inventory. This was higher than the 1.8 percent national share, as well as most peer markets, such as Seattle (1.8 percent), San Diego (2.0 percent) and Atlanta (2.1 percent).
![1660 Lincoln St](https://www.commercialsearch.com/news/wp-content/uploads/sites/46/2023/12/1660-Lincoln-St-e1703058445109.jpg)
Regus remained the leading coworking provider in Denver, with more than 600,000 square feet across 33 locations. WeWork also had a sizeable offering, with more than 340,000 square feet across six properties.
In January, New York-based provider Coalition Spaces entered the Denver coworking market with a 16,000-square-foot location at 1660 Lincoln St. The flexible office company signed an agreement with owner Westport Capital Partners to occupy the 20th floor of the 274,582-square-foot building.
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