According to CoStar, Denver’s office market faces persistent challenges with a record vacancy rate of 18.2% as of Q1 2026, driven by annual net absorption of -1.5 million square feet and tenants downsizing footprints—average lease sizes have dropped 40% since 2015 to about 3,200 SF. The Central Business District (CBD) reports the highest vacancy at over 31%, though move-outs have slowed recently, with only 200,000 SF of negative absorption in the past year. Early positive signs include steady leasing activity and reduced negative absorption across fewer submarkets, suggesting potential stabilization if economic uncertainty eases.
Supply pressures are easing as construction slows to 1.5 million SF underway—down from pre-pandemic averages—and demolition outpaced deliveries for the first time on record, shrinking inventory slightly. Government tenants, like the Colorado Department of Labor and Employment’s 128,000 SF lease in the CBD, are driving activity in older commodity spaces, while tech-driven flexible work continues to hinder demand, particularly in newer properties. Submarkets like Cherry Creek remain resilient with low 4.5% vacancy and premium rents up to $75/SF NNN, attracting established firms.
The tenant-favorable environment sustains modest 0.7% asking rent growth at $30.04/SF., with concessions like free rent and 30% sublease discounts prevalent, especially amid high availability. Investment sales volume hit $1.2 billion in the past year, up from mid-2024 lows, with average prices at $200/SF and cap rates at 9.4%, favoring opportunistic private equity buyers targeting distressed older assets. Forecasts indicate vacancy may stabilize by year-end, supported by adjusted corporate space needs, though risks from federal job cuts via DOGE initiatives loom.