Denver's office market continues to struggle, with newly released quarterly reports showing entrenched challenges across a variety of metrics, especially downtown.

Vacancy rose downtown to a post-pandemic high of 27.2%, according to CBRE’s Q4 analysis.

That’s a 40 basis points increase quarter-over-quarter, a 3.3% increase year-over-year and the eighth consecutive quarter  the figure has grown. CBRE analysts said tenant downsizing contributed significantly to the trend in Q4, with TransAmerica’s decision to vacate two floors, totaling about 56K SF at 1801 California St., being one example.

But there was one bright spot: Net absorption downtown hit almost 14K SF in Q4, according to CBRE, the first quarter of positive net absorption in that market’s office segment since Q3 2020. CBRE attributed this, in part, to “delayed occupancies that finally materialized,” including Renewable Energy Systems and Exclusive Resorts moving into MacGregor Square and Ares Management and World Wide Technology moving into the Tabor Center.

Overall, downtown Denver office leasing activity totaled only 1.4M SF for the year, a decline of 38.4% from 2021’s total. CBRE attributes this, in part, to the chilling effect of interest rate hikes, which are “impeding long-term real estate decision making among tenants,” according to the firm’s analysts. Leasing activity had roughly resembled 2021’s levels before the Federal Reserve started to raise rates in June, the report said.

At the same time, CBRE reported, downtown sublease availability increased by 44.1% year-over-year, to a new high of 2.2M SF.

In its Q4 office report, JLL reported available sublease space increased by 550K SF in Q4 alone, equal to 4.8% of total inventory in Denver — the highest level on record.

Not all of the available sublease space is found downtown, however. While Robinhood’s listing its space at One Platte made headlines — the financial services company never moved in — 61% of Denver-area office offered for sublease last quarter was actually in the suburbs. Ninety percent of the quarter’s net move-outs were in the suburbs, according to JLL, a trend that was especially prevalent in the northwest and southeast submarkets.

This stagnant market has slowed office construction to a crawl. JLL pointed out that only three Denver office buildings were completed in 2022, for a total of 555K SF — the lowest volume of completed projects since 2011.