Denver eyes turning a dozen downtown office buildings into apartments and condos

Denver officials want to better understand what it would take to turn obsolete office buildings downtown into sorely needed housing and plan to approach property owners next year about tackling those conversions.

At the direction of Mayor Michael Hancock’s office, the city planning department plans to hire a consultant next year to study 10 or 15 foundering downtown office buildings and the potential to be transformed into apartments or condos, officials said.

“Results would then help guide conversations, led by city staff, with property owners and developers to encourage and support residential conversions, and provide more space for more people to make downtown their home,” Denver Community Planning and Development spokeswoman Alexandra Foster said.

Denver is not the only city reconsidering what to do with downtown areas glutted with suddenly less desirable office space in the wake of the COVID-19 pandemic. In New York City, an Adaptive Reuse Task Force has been convened and is expected to recommend changes to regulations that could clear the way for more office conversions by the end of the year, Axios reported.

The Downtown Denver Partnership, the area’s lead economic development organization, pinned the population in the downtown area at just north of 7,500 people in 2000. As of this year, there are more than 33,000 living in the same core neighborhoods, according to the partnership’s 2022 State of Downtown Denver report.

Transforming the city’s urban core from primarily a 9-to-5 business hub and tourist destination into a full-fledged neighborhood only got more urgent when the COVID-19 pandemic upended office jobs in Denver and in cities across the country.

As of June of this year, daily employee foot traffic downtown was still roughly half of what it was in June 2019, the State of Downtown Denver report shows. Vacancy rates in lower-quality Class B and Class C office buildings downtown sat at 30.2% and 33.7% respectively at the end of June, according to real estate services and investment firm CBRE.

The partnership has been in talks with the city’s planning department about the office building conversion study, president and CEO Kourtny Garrett said.

“Adaptive reuse is a very significant priority for us as an organization,” Garrett said. “The benefits are far and wide from an environmental standpoint, ensuring we’re not just tearing buildings down but reusing them. We can develop a complete neighborhood in traditionally one-dimensional places like Upper Downtown.”

(Upper Downtown is the southeastern part of the city’s core official named the Center Business District.)

Garrett is keeping an eye on the Revitalizing Downtowns Act, a bill introduced in the U.S. Senate last summer that would create a tax credit to cover 20% of qualified office building conversion costs. She is hopeful the city will also take steps to help close the financial gaps those projects often face and not just focus on making the development process smoother.

There are some tools cities can employ to support adaptive reuse, said Tracy Hadden Loh, a fellow with the Brooking Institution. Loh specializes in researching place-making and commercial real estate and has recently been looking into commercial building conversions.

Methods Loh suggested include offering property tax breaks over a fixed period of time, either fully or on the new, higher value of a building once it is upgraded and more valuable than just vacant office space.

“That makes sense as long as whatever use is going into the building is not expensive in terms of the public services it requires,” Loh said. “If it’s a residential building full of kids that might go to school and people who might call 911 then the tax abatement does come as a cost.”