The high office vacancy rate in downtown Denver inched slightly higher in the first three months of 2024, rising to about 32% — the highest point in a couple of decades and more evidence of a drawn-out recovery from a pandemic that upended work routines and sectors of the economy.
But real estate experts and business advocates insist there’s more to the story about the state of downtown than the uptick from a total vacancy level of roughly 31% at the end of 2023.
“I just think that statistics lag what’s truly happening on the streets,” said Sarajane Goodfellow, a first vice president in the Denver office of real estate firm CBRE.
“From a day-to-day perspective and from a boots-on-the-ground perspective, it is feeling a lot better, more lively and active,” she added.
Goodfellow, who represents landlords, said the number of tours she and her team are conducting of downtown office buildings has increased. “A year ago, our tours were pretty light and now our whole team is really busy with tours.”
Although the vacancy rate “tipped upward” in the first quarter of this year, there’s more activity in the market and more leasing, said Janessa Biller, a broker with the real estate firm JLL in Denver.
“I do think at some point people will figure out their office footprint and it will stabilize. When exactly that will be remains to be seen, but I would definitely say activity is up and it feels better,” Biller said.
Johns Manville’s decision to keep its world headquarters in downtown Denver was a big shot in the arm in efforts to rejuvenate the cityscape. The manufacturer of building products announced May 8 that it renewed its lease on 121,000 square feet of space on five floors at 717 17th St. through at least 2035.
“Downtown Denver is centrally located for our employees who live throughout the metro area,” Bob Wamboldt, CEO and president of Johns Manville, said in a statement. “The Mile High City also is a great place to recruit top talent to keep our company on a successful path forward.”
Biller, one of the JLL brokers who represented Johns Manville, called the company’s decision to stay in downtown Denver “a moral victory.”
Although the downtown vibe might be more positive, the overall numbers are not.
A report by JLL put the total vacancy rate of office buildings at 31.8% in the first quarter, up from 30.9% in the fourth quarter of 2023. The total vacancy for office space across metro Denver was 24.1% in the first quarter, according to JLL.
And CBRE reported an overall vacancy rate of 32.1% in downtown Denver in the first quarter, compared to 31.5% in the fourth quarter of 2023.
However, digging into the numbers reveals what Biller and Goodfellow described as “a tale of two cities.” Newer buildings and more amenities are drawing business. Certain parts of the city, such as Lower Downtown and around Union Station, are active.
The percentage of vacant office space in LoDo is in the single digits, Biller said.
“A lot of tenants are trying to, in their minds, upgrade their location and that means being as close to Union Station or LoDo as possible,” Goodfellow said. “But buildings that have spent the money to upgrade amenities proactively in Uptown and Midtown are also getting their fair share of activity.”
What would help ease the angst over vacant spaces is the return of more workers to the office and workers spending more days in the office. A report by the Downtown Denver Partnership that uses tracking data from Placer.ai shows the percentage of employees who’ve returned to the office is hovering at about 60% of pre-pandemic levels.
An analysis by JLL said return-to-office mandates “failed to keep office demand from softening further” in the first quarter of this year. The firm also pointed to “a reduced office footprint by the technology sector coupled with headwinds from 2023 that saw white-collar payrolls shrink in each of its final four months.”
But Goodfellow said she’s optimistic about the leasing activity she sees. Tenants previously hesitated to commit to longer leases and “were sort of kicking the can down the road.”
Now, tenants are agreeing to longer terms and “are being really thoughtful about the leases they find,” Goodfellow said.
Kourtny Garrett, president and CEO of the Downtown Denver Partnership, said downtown’s office vacancy and office occupancy rates are similar to those of other big cities. Like Biller and Goodfellow, Garrett sees signs of positive changes that have improved people’s perceptions about the safety of downtown and has seen progress on helping people find options to living on the streets.
“We have seen a significant positive shift really in the last six months, but it’s been progressively improving over the course of the last two years,” said Garrett, who praised Denver Mayor Mike Johnston’s House 1,000 effort, which is now known as All In Mile High.
The downtown partnership works with nonprofits and social-service organizations to take a holistic approach to homelessness, Garrett said. The business group is also working with a variety of people, including city planners, on ways to repurpose some of the downtown office buildings, including converting them to residences.
Successfully adapting buildings to new uses often requires public-private partnerships, Garrett said. She applauded Johnston’s recent announcement of a plan to expand a special taxing authority downtown that could raise $500 million in public financing in the next decade. She called the plan a “historic moment for Denver.”
“Those dollars will be leveraged to generate hundreds of millions of more dollars in private investment and economic impact,” Garrett said. “It not only advances our efforts to revitalize downtown, it also will benefit the entire city as we see those investments then begetting increased property tax revenue from our property values and from our sales tax contributions.”
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