Distress Draws Investors Back To Denver Office Market, Spending $416M In Q1

Denver’s office market notched $416M in 14 sales in the first quarter as buyers and sellers finally started coming together to get deals done in a drastically changed market.

Office transaction volume jumped more than 1,366% from $28M in Q1 2024, according to Avison Young. 

Investors are spending again, taking advantage of prices brought low by market conditions and weighed further by financial distress motivating landlords to jump ship. At the same time, some semblance of certainty around ongoing office usage among U.S. companies has brought some confidence back to the property type.

“You can only sit on the fence so long,” said Misha Smith, an Avison Young market analyst. “Leadership teams are saying, ‘We know now for sure that we have to have an office.”

Repriced assets are finally coming to market after years of overleverage worked its way through the system, according to Erik Edeen, AY principal and senior director of U.S. investment sales.

Denver bottomed earlier than most markets, setting it up for signs of life this year.

“It looks like Denver’s already on the way up,” Edeen said. “We hear from investors that they want to move ahead.”

Buyers are even accepting negative leverage in some cases, Edeen said, and betting on long-term appreciation in a market with low development risk. 

There are plenty of deals out there as downtown office buildings are selling at a steep discount. 

Los Angeles-based developer Asher Luzzatto just purchased two buildings for $3.2M. That’s down from an estimated $200M valuation in 2019 — a 98% discount. Luzzatto says he plans to convert the buildings, totaling nearly 1M SF at 621 and 633 17th St., into more than 700 apartment units.

In January, Urban Renaissance Group handed over 2399 Blake St. and its parking lot at 1561 Park Ave. to the property’s lender. URG bought the 3.3-acre site near Coors Field for $33M in 2018.

Rising Realty Partners walked away from Civic Center Plaza, a 599K SF office tower at 1560 Broadway, in late November. In December, a lender foreclosed on Novel Coworking’s Trinity Place at 1801 Broadway. In July, RRA Capital took control of Novel’s 124K SF 1630 Welton St. building to prevent foreclosure.

It all paints a picture of distress and opportunity for investors looking for deals.

“We might not be No. 1 in population growth or vacancy rates, but Denver presents a pretty good canvas for investment.” Edeen said.