It is a challenging time for the downtown Denver office market. 

The office vacancy rate in the city center reached nearly 39% in the first quarter and now sits at around 32% as the city continues to struggle to recover from the impact of the pandemic. So what is the way forward for the Mile High City? 

According to David Brewster, director and shareholder at the Denver-based law firm Otten Johnson Robinson Neff + Ragonetti, the solution is a mix of public and private investment to revitalize not just the office market but the whole of downtown. 

“It is going to take a big investment by our entire community to make this downtown viable again,” Brewster said. “I'm a Denver native, and I want to see this city grow and thrive, and that means the whole city, not just certain pockets.” 

Otten Johnson represents landlords, tenants and developers, working to help them get through the often arduous approvals process to transform a struggling office property into a multifamily building, assisting with leasing and whatever else its clients may need. 

Brewster said Denver is no stranger to reinvention, rebuilding itself from the recession it experienced in the 1980s due in large part to the city’s economy being so reliant on oil and gas and transforming into a more diversified economy and tech hub. However, when the pandemic hit, many of those tech companies switched to work-from-home models, impacting not only the downtown office market but also the restaurants and businesses that relied on a daily influx of employees. 

As a result, he said, there is significantly more office space in the core downtown business area than there is demand, and more sublease space is available as well. In terms of which properties are faring better than others, a lot of it comes down to location, the age of the building and the amenities offered, he said. 

“Once you start getting a little bit further west in downtown Denver, the offices are newer with nicer amenities and are actually doing pretty well,” he said. “The rents in these locations are where you would expect rents to be for a core business district.”

He added that offices closer to Coors Field and other vibrant attractions are doing better than those elsewhere in the city, particularly Uptown, where many older buildings' landlords lack the capital to renovate and make tenant improvements. For these landlords, having the option to convert these properties into much-needed multifamily housing for the area would be a wonderful solution, Brewster said, but that comes with a host of other challenges. 

“These older office buildings, their floor plates are not designed to have separate units, separate bathrooms, separate utilities, all the things multifamily buildings require,” he said. “It would be a massive cost to transform them, and the conversion process is often complex and prohibitively expensive.” 

Brewster said monetary incentives from the local government that make the conversion process easier and regulatory changes that speed up the approvals process will go a long way toward contributing to the success of these projects. 

“The longer a process takes, the more expensive it is for a developer,” Brewster said. “This is especially true today, when a developer generally knows what materials and labor are going to cost in a short period of time, but the longer things are drawn out, the less certain those costs are, and the deal might not pencil eventually. This is why it's so important to speed up the approval process.” 

Brewster said he is hopeful that the money and the effort the city has already put into revitalizing downtown Denver will lead to significant changes in the next few years, but he added that real change is going to require a commitment not just from city and state officials but also from the large companies that call Denver home. 

“They need to invest in this process just as much as the city is trying to,” he said. “That means bringing your employees into the office on a more consistent basis or leasing space in a building that you might otherwise not have considered before.”

A great start would be encouraging the city and state officials to lead the charge by bringing their employees back to the office on a more consistent and permanent basis, Brewster said.

“Simply having foot traffic on the street helps with the safety and perceptions of safety, vibrancy and increased demand for restaurant and other retail businesses,” he said. “This is truly an opportunity for the city and state to act as leaders in bringing vivacity back to downtown, in addition to their monetary efforts.”

For its part, Otten Johnson remains committed to downtown Denver. 

“We've officed in downtown Denver for more than 40 years,” he said. “We believe in it.” 

This article was produced in collaboration between OJRNR and Studio B. Bisnow news staff was not involved in the production of this content.

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