Denver Commercial Real Estate Market Insights: December 2024
Denver’s commercial real estate market paints a diverse picture as 2024 draws to a close. While the city faces challenges in some sectors, opportunities are emerging across the multifamily, office, and retail spaces. From an oversupplied apartment market to retail’s resilience and the office sector’s adaptation to hybrid work, here’s an in-depth look at the latest trends shaping Denver’s real estate landscape.
1. Multifamily Market: Navigating Oversupply and Shifting Demand
Denver’s multifamily market is working through an oversupply challenge, as robust construction activity in recent years has created a glut of available units. The numbers tell the story:
• Vacancy rates hit 10.7% in Q4 2024, marking a two-decade high and nearly doubling since mid-2021.
• Over 10,000 units were absorbed in the past 12 months, driven by steady population growth and strong demand for rental housing. However, this still lags the 19,000 units delivered during the same period.
The luxury market bears the brunt of this oversupply, with high-end units comprising 75% of the new construction pipeline. These properties report the highest vacancy rate (13.3%), as renters prioritize affordability. Middle-tier units, on the other hand, are seeing a resurgence in demand, although this segment also faces pressure from new developments.
Rents Under Pressure
As vacancy rates climbed, average asking rents fell 2.8% over the past year. This places Denver below the national average rent growth of 0.8%, marking a significant shift from the 11% rent growth surge seen in 2021. Despite this decline, Denver remains one of the most expensive non-coastal markets, with average rents at $1,820/month.
Future Prospects
The market is seeing a dramatic decline in new construction starts, with just 13,000 units currently under construction, compared to higher levels in previous years. This slowdown is expected to ease supply-side pressures by mid-2025. In the meantime, property managers are focusing on tenant retention by offering concessions such as free rent periods.
2. Office Market: Adjusting to the New Normal
The office market in Denver is navigating a slow recovery as businesses continue to embrace hybrid work models and reevaluate their space requirements. As of Q4 2024, the sector presents a mixed bag of challenges and opportunities.
Vacancy Rates and Leasing Activity
The office vacancy rate stands at 17.3%, among the highest in the nation. This trend is fueled by a combination of high-tech employers’ adoption of flexible workplace policies and reduced space-per-worker needs. Leases signed in 2024 were 42% smaller than in 2015, reflecting this shift.
Despite elevated vacancies, new leases are being signed, often in newer, higher-quality spaces. Notable deals include Xcel Energy’s 220,000-square-foot lease at T3 RiNo and Davis Graham & Stubbs’ 77,000-square-foot lease at Paradigm River North. Tenants are downsizing but opting for Class A buildings to enhance employee satisfaction and retention.
Investment Market Trends
Investment volumes in the office sector have declined by 60% compared to the five-year average. Price corrections and the lack of clarity on future demand have slowed sales activity. However, newer buildings continue to attract interest due to their energy-efficient designs and modern amenities.
Opportunities and Adaptation
Cherry Creek stands out as a resilient submarket, with landlords able to command premium rents exceeding $45/SF thanks to the area’s vibrant mixed-use developments. Meanwhile, landlords in older buildings, especially in Downtown Denver, are exploring adaptive reuse strategies to convert office space into residential units.
3. Retail Market: A Model of Resilience
Denver’s retail market remains a bright spot, showing strong fundamentals despite broader economic concerns. The sector’s resilience stems from tight supply, steady consumer demand, and a focus on experiential retail.
Low Vacancies and Steady Rents
Retail vacancy rates are at a low 3.8%, supported by limited new construction and high pre-leasing levels for projects under development. The market has recorded positive net absorption in eight of the past ten quarters, highlighting ongoing demand for retail space.
Rental Growth Trends
Average asking rents reached $26/SF in 2024, representing a 2.2% year-over-year increase. While this growth is modest, certain submarkets like Cherry Creek are outpacing the rest of the city. With rents averaging $46.50/SF, Cherry Creek highlights the strength of high-demand neighborhoods.
Experiential Retail Leads the Way
The retail market is benefiting from a rise in experiential tenants. Pickleball clubs, indoor ski centers, and unique dining experiences are driving demand for larger spaces. Notable openings include 3rd Shot Pickleball in Wheat Ridge and SNÖBAHN in Thornton. In mixed-use developments, ground-floor retail is thriving, providing opportunities for local businesses to expand alongside national chains.
Looking Ahead: Key Takeaways for 2025
As Denver enters 2025, the city’s commercial real estate market is poised for continued evolution. Here’s what lies ahead:
1. Multifamily: Slower construction and stronger tenant demand should stabilize vacancy rates and support modest rent growth by mid-2025.
2. Office: Landlords may face continued challenges, but premium spaces and adaptive reuse projects offer a path forward in an oversupplied market.
3. Retail: The focus on experiential concepts and limited new supply will keep this sector resilient, especially in vibrant neighborhoods like Cherry Creek.
Why It Matters
Whether you’re a developer, investor, or tenant, Denver’s commercial real estate market offers both challenges and opportunities. Success will require staying informed, understanding market trends, and being ready to adapt to changing dynamics.
Contact Us
For insights into navigating Denver’s real estate landscape, connect with Corken + Company today. Let us help you make informed decisions in a rapidly changing market.
Key Metrics for Infographic
1. 10,000 multifamily units absorbed over the past year, reflecting strong rental demand.
2. Cherry Creek retail rents at $46.50/SF, nearly double the metro average.
3. Retail vacancy rate at just 3.8%, among the lowest across all commercial sectors.
Ready to make the most of Denver’s dynamic real estate market? Whether you’re looking to invest, lease, or buy, Corken + Company is here to guide you every step of the way. Our team of experts offers personalized insights to help you achieve your goals.
Contact us today to start your journey and stay ahead in Denver’s ever-evolving commercial real estate landscape!
