Denver Office Market Shows Signs of Life as Tenants Hire More

The Denver office market shows glimmers of hope that indicate a change to stability, but brokers say it will take time to turn the market around.

Last quarter, Denver reported its strongest net absorption and leasing activity since the first quarter of 2022, according to Cushman & Wakefield and CBRE. Total leasing activity reached 1.7M SF, up 30% year-over-year, and office tenants took about 120K SF more than they were vacant.

Denver brokers are also noticing that tenants are signing bigger deals, often with longer terms, than they have since the pandemic. The impact of these more recent offers has not yet been reflected in market reports.

“There are some 100K SF tenants not only demo market but trading paper,” said Ryan Link, executive vice president of CBRE’s office occupier leasing group. “To my knowledge, no one is looking short-term. They’re all looking at 10-plus-year terms, some are looking at 15-year terms. The big deal is the needle mover.”

“I think if there were some bigger deals, it would be a different world here in a year or two,” Link said.

Some of these deals have already been announced, although not all companies have moved to new premises.

Last quarter, the Colorado Housing and Finance Authority signed a 30K SF lease at 1900 Lawrence St., the National Beef Association signed a 43K SF lease at 8900 Liberty Circle, and UMB Bank signed a 55K SF prerelease for offices on Cherry Lane, a redevelopment project in Cherry Creek North’, according to the Q2 report.

SM Energy signed off on a 50K SF expansion at 1700 Lincoln St., now occupying five floors and about 124K SF of the building. Most recently, Spring Fertility signed a 15-year, 13K SF lease at 1900 Lawrence St., and Alterra Mountain Co. signed a two-story, nearly 65K SF lease at 101 W. Colfax Ave. for 12 years.

During the pandemic and in the years that followed, 10-year full-floor leases in the Mile High City were rare. However, companies sign short-term leases and often reduce their footprint, but the tides ebb and flow.

“If I look at Denver as a whole, the office image is not too bad,” said Adam Abeln, director of investments and managing director of Real Capital Solutions, in a Bisnow event on September 24. “There are about 6.5M of active tenants, square feet-wise, in the market looking for space. That’s up about 39% from January.”

Denver-based real estate firm TRE said the deal averaged 8,300 SF. Tenants taking 5,000 SF or more prefer leases that don’t expire for at least five years, TRE partner and Managing Broker Andy Cullen said.

“Most of the deals we’re doing now are actually long-term deals rather than 2025,” Cullen said. “So I think the 2026 numbers will continue to increase because people are now making those commitments as they start to see their business plans become stronger.”

Long-term offers will have a trickle-down effect and increase the macro needs of Denver’s office market, Link said.

“The activity level is up,” Cullen said. “It’s great to see the Q2 stats that we’ve shown, because over the last year we’ve been feeling it from a boots-on-the-ground perspective.

Despite the momentum, Denver’s vacancy hovers between 26.6% and 28.7%, and large office tenants, such as Optiv Security and Palantir Technologies, are moving to other states.

To fill vacant office space, landlords are offering aggressive concessions, which brokers don’t want to lose.

“The concession market is the most aggressive I’ve seen in my career,” said Link, who has worked in commercial real estate for 13 years.

Concessions include top tenant improvement allowances, free rental packages with free multi-year rent, and free parking for up to three years. TI allowances have grown from $90 to $100 per SF to $125 to $150 per SF, Cullen said.

“If you find the right landlord who is able and willing to transact in this environment, the terms you get are super aggressive,” Link said.

There are still outliers, such as office space in Cherry Creek and new construction in Denver, where concessions can be hard to come by. But large tenants looking for long-term deals outside the building are getting “an incredible package of concessions from this landlord,” Link said.

Concessions are a byproduct of a soft market, building owners in a debt crisis and increasing construction costs.

“There’s still a lot of space to be absorbed, so I don’t think it’s going to turn around, and all of a sudden this concession package is gone, and it’s a landlord’s market,” Link said. “I think there’s a lot of wood to be cut down, if you will, it’s still going to be a renter’s market for a while now.”