Colorado-Real-Estate-Journal_463658

40 / BUILDING DIALOGUE / JUNE 2025 ELEMENTS Market Growth Long-Term Growth Seen for Denver’s CRE Market A diverse economy, an ideal out- door climate, an awe-inspir- ing mountainous landscape, vibrant nightlife, and other favorable attributes have made Denver one of America’s most desirable places to live. However, bearish macroeconomics and other factors have sapped some of the strength of the Mile High City’s booming commercial real estate market. Stubbornly high borrowing costs and rising prices for construction materials and labor have prompted market participants to tap the brakes on the rapid pace of building activity in Denver and other major U.S. urban centers. This situation has caused Denver to lose some of its luster as one of the country’s top real estate markets. A joint Urban Land Institute and PwC study ranked Denver in 36th place for real estate investments, compared with 12th place in a previous ranking. n Saturated multifamily market poised for rebound. Multifamily projects are one of CRE sectors feeling the pinch. Besides higher construction costs, supply and de- mand issues have stunted the torrid growth in this mar- ket segment. An influx of thousands of apartments built to accom- modate the metro area’s population growth limited ab- sorption, resulting in fewer multifamily projects and flattening rents. The multifamily deluge has also forced landlords to sweeten rent concessions to attract tenants. According to a recent ECO Northwest study of Colora- do’s housing trends, the state’s building permits for mul- tifamily and single-family homes declined from their peak of 61,700 in June 2022 to 34,000 in October 2024, rep- resenting a 45% decline in permitting. The percentage decline in permits was nearly twice as high for multi- family homes (58%) as for single-family homes (29%). Per- mits for multifamily in Denver posted the largest drop (65%). However, the report predicts that Denver’s rent growth and absorption will recover in the long term. Those at- tracted to Denver’s high quality of life, companies relo- cating their headquarters or operations to the city, and the rising cost of single-family home ownership will help boost multifamily demand. n Cooling office market demand to heat up. Denver’s office market reflects a nationwide urban trend of re- duced worker occupancy and increased vacancy rates, particularly for aging downtown office buildings that lack the appeal of amenity-rich, newer ones. But the slump is expected to be short-lived. An Avison Young study said the long-term outlook for the city’s of- fice market is “cautiously optimistic.” That is based on indications of stabilization and recovery, with increased leasing activity and more companies joining the re- turn-to-office movement. Despite slower CRE activity, Denver still has a slew of existing and planned projects fueling its growth. A col- laborative relationship between the city’s private and public sectors has been pivotal in driving building proj- ects. Some of the city’s high-profile CRE projects and devel- opment initiatives include: n Tax-funded investment in downtown’s transforma- tion. Voters overwhelmingly approved a $570 million tax-increment financing fund in November, allowing the city’s Downtown Development Authority to revitalize the city’s core. The DDA funding will be used to subsidize Doug Spuler Principal, The Beck Group Red House Hotel is in the planning stages. The Red House Hotel developer, Nichols Partnership, has proposed the seven-story, 123,000-square-foot luxury hotel on the last great site in LoDo.