Denver Zoning Rules May Be Quietly Fueling RiNo’s Retail Vacancy

Retail vacancies plague some of Denver's most popular districts and neighborhoods, a paradox that leaves many city proponents scratching their heads as retail in general regains strength after years of turmoil.

In two areas with the highest retail vacancy rates, some commercial real estate players point to obscure city zoning laws as the cause. The River North Art District in particular has been impacted by rules known as design overlay districts, which in effect require ground-floor retail to be included in any large new development.

“Any new project that gets submitted — multifamily, hotel, whatever — has to have ground-floor activation,” said Kyle Framson, senior vice president at Denver brokerage Zall Group. “But there’s too much retail in places where it just doesn’t make sense.”

Framson said developers are building ground-floor space they know they can’t lease just to move forward with the rest of their project.

“It’s the tail wagging the dog,” Framson said. “At this point, we just want to get it activated and hope it helps with the upstairs leasing.”

As of the first quarter of 2025, RiNo’s retail availability rate hit 9%, according to a Newmark report — nearly double the citywide average of 5% and up a point from the end of 2024. 

Vacant retail space can lead to vacancy across a development and harm a building’s reputation, according to experts who spoke to architecture firm Weber Thompson. 

“We see tenants walk into a building, see empty ground-floor retail, and it scares them off,” Wyatt Lovera, founder and managing owner of The Dwelling Collection, a Denver-based lease-up and marketing firm, told Bisnow in an interview.

Denver’s zoning code includes 10 overlay districts. The overlay that governs RiNo, labeled DO-7, was created to “promote activation of the street and sidewalk with nonresidential active uses at the street level” and “maximize transparent windows to activate the street,” according to the code.

In practice, CRE professionals say that mostly translates to one thing: retail.

Landlords are increasingly offering percentage rent deals, waiving base rent altogether or letting in temporary tenants. But these concessions — versions of which are also being offered to potential apartment dwellers in the same buildings— can distort the market, Framson said.

“I have retail in some very funky places like the base of a parking garage with nothing above it,” Framson said. “Then you have all the retail along the Platte River, along Delgany (Street). Nobody talks about if you want to have this retail along the north side of town.”

A spokesperson for Denver told Bisnow zoning rules that promote or require street-level activation are “generally” having their desired effect. 

“Active frontages tend to support pedestrian activity and business visibility,” Alexandra Foster, communications program manager at Denver’s Community Planning and Development office said in an email. “However, outcomes always vary based on the location, and other factors can influence leasing and vibrancy in a neighborhood.”

Foster said that design overlay rules are common across the country and not a feature unique to Denver.

Similar rules also apply to “parts of Downtown, Cherry Creek North, RiNo, parts of Tennyson, other streetcar nodes in northwest Denver, portions of East Colfax and portions of Santa Fe Drive,” she said.

But a Bisnow analysis of the section of Denver’s zoning code that governs official overlay districts reveals no reference to most of the areas the city listed. The only two areas with clear, enforceable language around activating the street level are RiNo and Uptown.

A further analysis of Denver’s broader zoning code shows it generally supports street activation through design, not mandates. Transparency, build-to lines and ground-level entrances are emphasized. 

Ground-floor housing, leasing offices or even shared amenities can meet “active use” requirements under most zoning rules.

Much of that flexibility vanishes in RiNo and Uptown.

Foster pointed out that “a mix of uses” such as eateries, office space and community gathering places could meet those qualifications — a difference without much of a distinction to some CRE players trying to lease their ground-floor space in RiNo.

In other areas like Tennyson, vibrant street life has emerged under standard mixed-use zoning, not rigid overlays. But in RiNo, the overlay zoning leaves little room for adaptation.

The result, brokers say, is lots of retail space overprescribed by code in a neighborhood that isn’t absorbing it.

Uptown, governed by a more flexible standard, fared even worse than RiNo in the first quarter, with an 11.8% availability rate, according to Newmark. The neighborhood, also known as North Capitol Hill, saw net negative absorption of 8.5K SF during the same time frame.

From a residential perspective in RiNo especially, Lovera said the effect of these vacant storefronts is clear.

“The lack of ground-floor retail and neighborhood amenities north of 30th due to that portion of RiNo’s development still underway makes it feel like a desert,” Lovera said.

South of 30th, closer to downtown, street-level activity is stronger, foot traffic is steadier and apartment leasing is healthier, multiple sources said. North of it, the landscape is broken up, with larger blocks, unfinished streets, crumbled sidewalks and unoccupied ground-floor spaces.

“In a market where every building has the same amenities, neighborhood character matters,” Lovera said. “And empty retail sends the wrong signal.”

The result, he said, is a transient renter pool that’s less likely to renew, while more desirable tenants, such as those looking for longer-term stability, are drawn to areas like the burgeoning Golden Triangle district.

More than a dozen developers and attorneys contacted for this story either didn’t respond to requests for comment or declined to speak on the record. But the brokers and marketers closest to the problem say the rules may be adding risk — not reducing it.

“Overlay zoning could become a bigger issue as leases come due, tenants churn and owners face maturing debt,” Lovera said.

For now, the city isn’t planning any changes to the design overlay rules, but CPD’s Foster said that property owners or developers can request a variance from the city’s board of adjustment for zoning “if they present justifying circumstances.”