Office vacancy in Downtown Denver has risen this year to nearly one in three offices — yet business advocates and real estate brokers are whistling a happier tune.
The number of empty offices in Downtown inched up to 32.1 percent in the first three months of the year, from 31.5 percent late last year, the Denver Post reported, citing figures from CBRE. It’s the highest in decades.
But real estate brokers and business advocates say there’s “more to the story” about the state of Downtown.
After putting out feelers to exit Downtown, Johns Manville last month restaked its global headquarters in the Mile High City, renewing its lease for 121,000 square feet of offices on five floors at 717 17th Street through 2035.
It was a huge boost to a city that, like others across the U.S., saw office workers leave its central core in droves during a broad shift to remote work.
Sarajane Goodfellow of the Denver office of CBRE, who represents office landlords, said the number of building tours Downtown has increased. A year ago, she said tours were light. Now she and her colleagues are busy.
There’s also a different vibe on the sidewalks below.
“I just think that statistics lag what’s truly happening on the streets,” Goodfellow told the Post. “From a day-to-day perspective and from a boots-on-the-ground perspective, it is feeling a lot better, more lively and active.”
Although the vacancy rate “tipped upward” in the first quarter, there’s more activity in the market and more leasing, Janessa Biller, a broker with JLL in Denver, said.
“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 told the newspaper.
The numbers belie the gut response.
A report by JLL mirrored rising vacancy recorded by CBRE, putting the vacancy of Downtown office buildings at 31.8 percent from January through March, up from 30.9 percent in the fourth quarter.
The vacancy for offices across greater Denver was 24.1 percent in the first quarter, according to JLL.
The number of employees who’ve returned to the office is around 60 percent, compared to before the pandemic, according to a report by the Downtown Denver Partnership, which uses tracking data from Placer.ai.
An analysis by JLL said return-to-office mandates “failed to keep office demand from softening further” in the first quarter. It blamed “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 a closer look at the numbers outlines what Biller and Goodfellow describe as “a tale of two cities,” according to the Post.
Newer buildings and more amenities are attracting tenants. Parts of the city, such as Lower Downtown and around Union Station, are active. Office vacancy in LoDo is in the single digits, Biller said.
At the same time, businesses are trying to find better offices close to Union Station and LoDo, or offices at buildings in Uptown and Midtown where landlords have invested in new amenities.
Goodfellow said she’s optimistic about leasing activity. Tenants who once balked at longer leases and “were sort of kicking the can down the road” are agreeing to longer terms, she told the Post. They “are being really thoughtful about the leases they find.”
— Dana Bartholomew
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