W hat does the commercial office market look like in 2023 through 2024? In the paragraphs below, we will provide a snapshot of some shocking data points that support our theory about what we expect to hap- pen in the Denver office market over the next 18 to 24 months. We will also look for a silver lining in this bleak story. Since the second quarter of 2022, demand for office space in Denver remained flat to mostly negative due to the normalization of remote and hybrid working initiatives. As we know, this trend was simply acceler- ated by the impact of COVID-19. More and more com- panies continue to right-size their office footprints, which is driving up the amount of available space to historic highs. After unsuccessful attempts to lure employees back to the office, many companies are reassessing their office portfolios. Adding fuel to this fire are sublease inventories that continue to add to the availability rate each quarter. This statistic is concerning because the amount of sublease space on the market is now more than 5% (mov- ing toward 10%) of the total market. Unfortunately, we don’t see an end to this problem for at least another 24 to 30 months, which should take us to the end of the right-sizing, or space disposition, cycle. Due to the fundamental shift in how and where employees work, we are anticipating increased downsiz- ing and more subdued net absorp- tion in the long term. The risks are clear for both the short and long term. The high concentration of tech companies, many of which are more amenable to remote work, have made Denver even more susceptible to this trend that is sweeping the nation. In terms of net absorption as a share of inventory since the start of the pandemic, Denver ranks among the worst-performing office markets in the U.S., and the vacancy rate has surpassed Great Recession levels. Economic headwinds could further delay the office sector’s recovery. The likelihood of a recession continues to increase, which will weaken demand for office space as companies look for ways to cut expenses. Our collective opinion is that the recession has already begun, and you should expect to see the impact of INSIDE Midsize: Big winner PAGE 6 New work habits weigh on office space demand June 2023 PAGE 17 PAGE 26 Strong start Denver’s industrial sector proves resilient despite economy Competitive advantage Colorado market experiences Growth in robotics sector Please see Market Update, Page 14 Finding silver linings in uneven marketplace Alec A. Wynne, MCR Managing broker, Skye Commercial Denver office vacany rate by quarter Source: Downtown Denver Partnership