Denver Office Vacancy Rates Show Signs of Stabilizing

Denver's downtown office vacancy rate is showing early signs of stabilizing, according to figures from a commercial real estate research firm, after several years of elevated vacancies following pandemic-era shifts toward remote and hybrid work.

While the vacancy rate remains well above pre-pandemic levels, the rate of increase has slowed noticeably over the past several quarters, and a handful of larger lease signings have offset some of the ongoing move-outs from companies downsizing their office footprints. "We're not calling it a recovery yet," said commercial broker Alan Petrossian. "But the freefall has clearly stopped."

Flight to Quality Continues

Much of the recent leasing activity has concentrated in newer, amenity-rich buildings, a pattern commercial brokers describe as a continued "flight to quality" trend, where companies consolidating office space prioritize higher-end buildings even while reducing overall square footage. Older office buildings, particularly those without significant recent renovations, continue to struggle with vacancy well above the market average.

Some property owners of older buildings have begun exploring conversion to residential use, following a handful of successful conversion projects elsewhere in the country, though local developers note that conversion costs and building layout constraints make many older Denver office buildings poor candidates for residential conversion.

Downtown Foot Traffic Slowly Recovering

Downtown business associations report gradual increases in weekday foot traffic, tied partly to companies adjusting hybrid work policies to require more in-office days than they did a couple of years ago. Restaurant and retail businesses in the downtown core say the increased office attendance has helped, though several note that foot traffic still lags well behind pre-pandemic weekday patterns.

Commercial real estate analysts say full stabilization will likely take several more years, with the pace depending heavily on broader return-to-office trends among the region's largest employers.