Colorado-Real-Estate-Journal_533545

INSIDE Office-to-resi PAGE 5 Is Denver reaching a turning point that will lead to more major conversions? June 2026 PAGE 13 PAGE 20 Boulder industrial Historically high vacancy will be the primary force shaping how the market responds Balancing act Northern Colorado’s industrial market is entering a more balanced phase Denver office: When headlines lag the data H eadlines vs. trendlines: The data suggests that Denver office market momentum is shifting despite persis- tent negative headlines. Like the majority of markets across the country, the recovery in Denver remains highly bifurcated by asset quality, location and, on the invest- ment sales side of the market, by investor type and strategy. In the below response we assess the valid- ity of various headlines and how they compare to the data. n Headline 1: “There is no capital for stabilized office.” The dominant nar- rative suggests that stabilized office assets are effectively uninvestable due to a lack of capital. What the data shows is not an absence of capital, but a repricing of risk and cost of that capital. Through May, there have been 21 office sale transactions in Colorado totaling $243.1 million in value across 4 million square feet. This year’s volume surpassed the same period in 2025, which recorded nine transactions totaling $225.3 million and 3 million sf. Five transactions involved office buildings with 86% or better occupancy, implying an investor focus on core-plus product. Today, high-qual- ity office assets, outside of Cherry Creek North, are pricing at roughly 9% in-place cap rates. From 2017 to 2019, the average cap rate for assets leased above 85% was approximately 6.6%. At that time, the 10-year Treasury aver- aged roughly 3%, or about 145 basis points lower than current levels as of June 1. When adjusting for the interest rate environment, today’s pric- ing implies an office risk premium exceeding 100 basis points rela- tive to prior cycles. In other words, values have adjusted meaningfully ahead of any improvement in sen- timent. The market has already incorporated much of the perceived risk, even if the headlines have not acknowledged that shift. There is a significant opportunity by compressing the risk premium to below 100 basis points, especially given how far rents are climbing in Tier 1 and Tier 2 office assets, but also because core capital will return, as it historically always has. When it does, there will be significant win- ners who focused on fundamental cash flow versus value-add/internal rate of return metrics. n Headline 2: “The CBD is struc- turally broken.” Central business districts are often discussed as a single, distressed category. In Denver, this broad-brush approach over- looks meaningful variation within the urban core. For instance, Lower Downtown tells a much different story. In 2019, Class A office rents in LoDo were only $1 per sf higher than the rest of the CBD. Today, the spread is north of $12 per sf, a 32% climb and more than 4.5x the rent growth seen across the rest of the CBD. Despite Denver maintaining one of the highest work-from-home rates in the country (22% to 26%, according to Axios) the downtown core continues to function as a central hub for busi- ness activity. Performance is increasingly bifur- cated. Well-located, recently improved assets with strong access to amenities are materially out- performing older, less competitive buildings. The data suggests not a wholesale rejection of downtown, but a clear tenant pref- erence for quality and location. n Headline 3: “AI will eliminate more jobs than it creates.” Artificial intel- ligence is frequently framed as a net destroyer of jobs, particularly in office-using sectors. Historically, peri- ods of major technological advance- ment have followed a different pat- tern. Jevons’ paradox describes how increased efficiency often leads to greater overall usage rather than con- traction. Past innovations, from com- puting to automation, initially dis- placed certain tasks while ultimately expanding industries, productivity, and employment categories that pre- viously did not exist. While the long-term labor impact of AI is still unfolding, history sug- gests that technology-driven effi- ciency has tended to reshape office Sean Whitney Senior director, JLL Capital Markets Hilary Barnett Senior director, JLL Capital Markets Larry Thiel Managing director, JLL Capital Markets Please see Thiel, Page 10