The property in the 4000 block of South Monaco Street at the Denver Tech Center looks like a typical office building at the sprawling business complex 30 minutes south of downtown — four stories high with walls of windows and hemmed in by parking lots.
But that’s just the outside. Inside, construction crews are in the process of transforming the 120,000 square-foot office building into 143 affordable apartments. Developer Shea Properties has torn everything inside the building down to the studs.
“There used to be walls everywhere, so there would be conference rooms, people's offices, and we demolished all of that,” said Peter Culshaw, executive vice president at Shea Properties. “When you take out all the former partitions and walls, you have a very clear open space to work with, which makes this easier to convert to residential.”
Tenants are expected to start moving in next June, according to Culshaw. The units will include everything from studios to four-bedroom apartments. A one-bedroom will rent for about $1,400 per month, Culshaw said.
The project is the first such conversion to break ground since the pandemic, even though the idea has been gaining attention for years. It could serve as a blueprint for other developers as Denver officials push to convert empty office buildings into apartments to kickstart downtown’s flagging economy and ease the housing shortage. Denver Mayor Mike Johnston wants to convert 4 million square feet of empty offices into middle-class housing.
There’s plenty of space to go around. Even as a growing number of companies mandate employees return to in-person work, office attendance in Denver is stuck 40 percent below where it was before the pandemic, according to data company Placer.ai. Denver was dead last in Placer.ai’s recent office attendance ranking of 11 cities.
Denver officials have been talking about conversion projects since empty office space first started piling up in 2020. But despite all the talk, progress has been slow.
“The upfront investment and energy spent on this has been significant,” said Shea’s Culshaw. “It's hard. You've got to find the right property to do it, and you've got to be willing to invest a lot at the beginning … That’s a barrier.”
Shea’s property is better suited to be turned into apartment buildings than a lot of other offices, he said.
“I think it's much more difficult with older buildings. And I think the higher the building gets, the more difficult this is. It doesn't mean [it] can't be done, but I think it's not an easily transferable idea,” he said.
By that logic, downtown boosters are fighting an uphill battle, with much of the empty office space sitting in dated skyscrapers. But there are optimists. Buildings from the ‘70s and '80s can be good candidates, according to Josie Hyde with architectural firm Gensler, which has worked to identify potential conversions in Denver. She estimates 80 percent of the available office space in Denver could be turned into housing.
“They've always been a challenge, but they’re very doable,” Hyde said during an interview earlier this year with Colorado Matters. “We've done plenty of them across the country, and really, what it takes is finding the right buildings.”
There’s a lot of analysis that goes into deciding which buildings are good candidates. Physical characteristics such as building location, existing stair and elevator locations, and overall floorplate size are all factors, according to a spokesperson for Denver’s planning department.
The biggest sticking point is probably cost. Conversions are an expensive proposition.
Shea bought the property at the DTC in April for $12 million. They got a good deal on the real estate because the building had been sitting vacant since the last tenant left seven years ago.
“We bought it inexpensively. And that allows you to do these things … Obviously, the market is where it is for office space. So, we're fortunate to take advantage of that,” Culshaw said.
The space definitely feels different than a typical apartment complex. For instance, the windows are set up differently in an office building. That can be a problem for some properties because it means natural light can’t penetrate the middle of the building. Some of the bedrooms at the tech center property won’t have a window. But because the windows are so large, Culshaw said, light will still filter in.
“One of the nice things about converting an office building to residential is you get higher ceilings,” Culshaw said. “These windows are 10 feet high, you don't get that in most apartments … so this is going to feel very spacious.”
The most challenging part of the project has been figuring out where to drill the holes to bring down the pipes, Culshaw said. All the units are different, and of course, an office building doesn’t come with the necessary plumbing.
“It's like a jigsaw puzzle of finding where you can bring the plumbing down, which then relates to where you can put the bathroom, which then relates to where you can put the sink, and then add to that all the air conditioning,” he said.
They had to be careful not to drill into structural supports.
“I don't know how many holes we've drilled in the building, but a lot. They're all drilled at this point, which I'm happy about. But if you ask me what kept me up at night, it was probably that,” he said.
Shea Properties has developed seven affordable housing projects. The current project is their first conversion. Despite the headaches, Culshaw said, it’s worth the effort to reuse something that’s already been built. But eventually, the costs will outweigh the benefits for some buildings.
“There is definitely an inflection point at which it's cheaper to start again,” he said.
Now is as good a time as any to buy office real estate cheap in Denver. Even so, conversions aren’t a foregone conclusion.
“You have to invest a lot upfront before you can pull this off … You have to have a seller that will be patient with you while you get rezonings done and get the plans done. And you're investing a lot in plans, not knowing if you're going to get all of that financing. And so it's a high-risk proposition for a lot of developers,” Culshaw said.
