Similar to other downtowns across the U.S., Colorado’s largest city has a lot of office space sitting empty these days. Nearly one-quarter of Denver’s office space is vacant as remote work becomes the norm, rather than a pandemic-era necessity, according to real estate services firm CBRE.
Not all office workers stay home every day, but many stay home at least a few days a week. That’s leading businesses to cut back on the amount of space they rent. While some are jettisoning offices altogether, many are simply taking less space.
Most companies still want a centralized location for employees to get together, but business leaders have been struggling for the past couple of years to figure out how much room they actually need, according to CBRE’s Ryan Link, a Denver-based senior vice president who advises clients looking for office space.
The uncertainty means it’s taking longer for businesses to make decisions as executives rethink how an office needs to function going forward, Link said.
“Everyone is trying to create an experience that excites and entices employees to not only come back but want to come back to the office, [to] collaborate, increase productivity… increase their culture and morale,” Link said.
One consistent theme is that companies are choosing new buildings over outdated properties, Link said. Businesses have been especially drawn to spaces that are move-in ready so they don’t have to take on the expensive construction costs that typically come with a new lease, he said.
And there are plenty of options to choose from, with companies trying to sublease nearly 6 million square feet of space in Denver, CBRE data show. That’s what happens when a business is no longer using a space, but is still paying rent until the lease expires. In those instances, a company is looking for somebody else to move in and take that expense off their hands.
“I don’t think we’ve seen the end of additional sublease space coming to market,” Link said.
The remote work revolution isn’t the only thing clouding the outlook for Denver’s office buildings. Higher interest rates are making it harder for landlords to pay off their mortgages, especially now that many buildings are worth less money because they are losing tenants. Hanging over all this uncertainty is the specter of an economic slowdown. It hasn’t happened yet, but financial experts have been predicting a recession for more than a year.
CPR compiled a list of some of the notable deals in Denver’s office market that exemplify what’s been going on for the past 12 months.
- Republic Plaza Colorado’s tallest building looked like it was headed for foreclosure after the landlord failed to pay off a loan. But instead, the building’s owners were able to work out a deal with lenders that gave them more time to turn things around at the property. The 56-story tower was built in 1984, and it’s got a lot of empty space. The value of the buildings has fallen by hundreds of millions of dollars over the past decade.
- The Cash Register Building This icon of Denver’s skyline is inching toward foreclosure. Unlike Republic Plaza, no deal has been reached with lenders. The largest tenant, Wells Fargo, is reportedly cutting way back on its space at the property. A receiver has taken over managing the building.
- The Denver Energy Center Troubles at this two-building complex on the 16th Street Mall have been going on for a while. The landlord lost the building to foreclosure in 2022, according to real estate data provider Trepp. The property is more than 60 percent empty, according to Trepp. The lender tried and failed to find a buyer for the property in 2023, Trepp said, citing real estate trade publication Commercial Real Estate Direct.
- Xcel Energy The utility company’s 213,700 square-foot lease at a new building going up in Denver’s River North neighborhood was the biggest new lease signed in 2023, according to CBRE data. Xcel is relocating from its current space to a building on Larimer Street in Denver’s Central Business District.
- DirecTV The satellite service vacated 255,100 square feet at the Denver Tech Center. That was the biggest block of empty space to hit the market in 2023, according to CBRE.
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