This article originally appeared in the September/October 2024 issue of the Colorado Real Estate Journal’s Office & Industrial Quarterly.

Denver Office Vacancy at ALL TIME HIGH! Work from home is here to stay! The office is dead. Landlords are giving space away! There is more vacant space than occupied space in Denver.

We have all seen these national and local headlines about how empty office buildings are in abundance. Just how desperate are investors and landlords?

According to Savills Research Q2 2024 Office Report, the Denver metropolitan overall vacancy rate is 29% with an overall asking rate $34.56 per square foot.

These statistics are certainly not ideal for anyone in the office market food chain. Landlords, leasing agents, lenders, general contractors, cabling and furniture vendors, moving companies, coffee shops and restauranteurs are all feeling the effects of a softer office market. Long removed are the go-go days of a robust and exciting office market. How soon, if ever, will they return?

We decided to put this concerning situation to the test. To simplify, we decided to utilize several of our current client needs for this experiment and have broken them into the following categories:

When we run generic searches for each of these requirements they yield the following results:

Wow! Seventy (70) options to choose from in downtown Denver? Eighteen (18) 100K+ sf options southeast? Twenty three (23) in Cherry Creek and thirty seven (37) in Boulder? That is a lot of options to choose from. And what tenant in today’s market will pay $67 and $75 per square foot (all time record highs) to a desperate landlord? Where do you start to sift through 70 downtown options? We recall past cycles where we could count options for all of these submarkets on one hand. Perhaps the news headlines are right and tenants that are willing to buck the work from home trend and mandate in person work attendance can truly name their lease rate and achieve low occupancy costs for their business. Are these options all one size fits all and can they offer the same tenant experience and amenities as the next?

Before we overwhelm ourselves with the idea of taking on these large quantities of options let us discuss what our clients are hoping to achieve by committing to a new office lease in hopes of getting their workforce back to the office. Yesterday’s office for most companies was straightforward. Place to park, building lobby, stairs and/or elevator to get to your floor, reception, kitchen, conference room, privates offices for some and workstations for others. Pretty simple. While that was the norm for years it may not cut it for tenants in a post-COVID world.

Generally speaking, today’s tenant is looking for an office experience that attracts them to their place of work where they can be more productive and successful. Fitness centers, coffee kiosks, common areas both indoors and outdoors equipped with WiFi enabling options to work on site but away from their desks. Walk to various restaurants for meals and bars to socialize in after work, secure locations to store your bike for those who ride to work, walkable public transportation options and 24/7 security. These are some of the features today’s tenants are demanding of their employers to return to the office each week.

Now if we re-run the aforementioned searches with this revised set of criteria, we see a vastly different and slimmed down list of results. To be clear we are setting the following filters: Class A or B, direct lease (not sublease), built (not proposed nor under construction), updated/renovated with functioning HVAC, space at grade or above grade (not in the lower level of building), 5 days per week janitorial service, on-site fitness center, common conference room, onsite parking, proximity (5 blocks) to public transportation, walkability (5 blocks) to food options and a 24/7 onsite security force.

Now these results do not bleed the same air of desperation as the news headlines would suggest. This table illustrates that for a 2024 tenant in search of 2024 amenities in a nice building in a nice area, there are options to be had but not an endless number of them…and certainly not at a basement bargain lease rate. If you want all the bells and whistles in the right location, you will pay a premium and will not have as many options to choose from.

Having said this and for the no frills office user that conducts a business where access to amenities and public transportation are not priorities you will certainly be able to find a steal throughout metropolitan Denver. This has always been the case. The sensational headlines we all read can pertain to these situations but they do not consider the fine print and what every tenant is looking for. Office vacancy rates are at an all-time high and some landlords for the lesser demanding tenant will get aggressive with lower rental rates, but the office industry is far from dead.

Whatever your need is regarding office space and the amenities you require we encourage you to start your process early to understand the wide array of options and the associated costs.