What's the difference between face rent and net effective rent on a Denver office lease?
Face rent is the headline number on your lease, the dollars per square foot a landlord quotes and reports. Net effective rent is what you actually pay after concessions: free rent, tenant improvement dollars, and flexible terms. In Denver's 2026 office market, that gap is wide. Downtown vacancy is near 39%, landlords are protecting face rates while handing out 6 to 12 months of free rent and fully funded TI, and the real cost of your deal can sit 25% to 35% below the asking number. Negotiate to the face rate and you leave the concession, the actual money, on the table.
By Brian McCririe | June 9, 2026
Here's the trap. A landlord quotes you $34 per square foot full service gross and won't move off it. You push, they hold, and you assume the deal is what it is. Meanwhile the tenant down the hall just signed at the same $34 face rate, with ten months of free rent and a TI package that covered their entire build-out.
Same face rent. Completely different deal.
The face rate is the number landlords defend. Net effective rent is the number you live with. The distance between the two is the whole negotiation.
Why Denver landlords are protecting face rents instead of cutting them
Downtown Denver office vacancy hit a record, roughly 38.9% in the first quarter of 2026, with pockets east of Larimer above 40%. The suburbs are softer too, averaging around 28%. When that much space sits empty, you'd expect asking rents to fall off a cliff.
They haven't. Here's why.
Landlords have every incentive to keep the reported face rate stable. A building's appraised value, its lender covenants, and its standing with investors all key off the rents on the rent roll. Drop the face rate and you mark down the whole asset. Hold the face rate and bury the discount in concessions, and the building still shows $34, even though the tenant is effectively paying low-to-mid $20s.
So the discount is real. It's just hidden in the structure instead of the headline. The mechanisms doing the work:
- Free rent (abatement). The Denver baseline right now is roughly one month of free rent per year of term, and on longer deals it runs further. A seven-year lease downtown can carry 6 to 12 months of abatement.
- Tenant improvement allowance. Landlords are funding build-outs to win deals. A reasonable TI allowance ranges from about 25% to 150% of one year's base rent. Below 25% and you're probably leaving money behind. At the high end, the landlord is betting real equity on your tenancy.
- Flexible terms. Expansion options, contraction rights, and early-termination clauses that would have been non-starters in 2019 are on the table in 2026.
None of that shows up in the quoted rate. All of it shows up in what you actually pay.
How to calculate net effective rent (the number that matters)
Net effective rent spreads every concession across the full term so you can compare deals apples to apples. The rough math:
- Take the total base rent over the full term (face rate times square footage times years).
- Subtract the value of all free rent.
- Subtract the TI dollars the landlord is funding above what you'd have spent anyway.
- Divide what's left by the rentable square feet and the number of years.
That result, not the face rate, is your real occupancy cost. I've seen deals where the face rate and the net effective rent are 30% apart. Two buildings quote the same number, and one is a meaningfully better deal once you run the concessions through.
The gap between face rent and net effective rent is where most tenants leave real money on the table. It takes someone running active Denver transactions to know what that gap looks like this quarter, not last year.
The submarket spread is where your leverage lives
Denver isn't one office market in 2026. It's two, moving in opposite directions, and which one your building sits in changes everything about your negotiation.
- Downtown CBD and the Denver Tech Center are deeply soft. The DTC corridor toward Lone Tree is running about 19% vacant, roughly 9 million empty square feet. This is where concession packages are richest and where a well-advised occupier can capture structural value. For the right company, DTC offers the best risk-adjusted lease economics in the metro.
- Cherry Creek is the opposite problem. Office vacancy there is at a record low, under 5%, the tightest in the metro, with only about 337,000 square feet under development to relieve it. Scarcity means landlords give up far less. If your business case requires Cherry Creek, your negotiation is about access and timing, not squeezing concessions.
Where you sit determines your entire strategy. Push for a downtown-style concession package in Cherry Creek and you'll stall your deal. Accept a Cherry Creek-style "take it or leave it" downtown and you'll overpay by a wide margin. The submarket matters more than the headline rate.
The window is real, but it's narrowing
Two things should put a clock on this for any occupier with a lease decision in the next 18 to 24 months.
First, the cheap-space pressure valve is closing. Downtown sublease availability fell 14.9% quarter over quarter and 30% year over year, down to about 1.0 million square feet. Sublease space, typically priced 25% to 35% below direct asking, has been the bargain tier of this market. As it gets absorbed, that discount floor rises, and direct deals lose their cheapest competition.
Second, occupiers are finally moving. Macro uncertainty and tariff noise pushed a lot of companies to extend in place rather than commit to new space. Understandable, but it also meant they sat out the richest concession environment in 30 years. The companies acting now, while vacancy is at a record and landlords are still defending face rates with concessions, are the ones capturing the gap.
Don't size your space for the wrong number
One more place Denver companies leave money on the table: they sign for the footprint they had, not the one they use.
Across the market, 57% of occupiers now expect their footprint to contract over the next three years, up from 48% a year ago, and hybrid work is the driver for two-thirds of them. The mistake isn't downsizing. It's downsizing to average daily attendance and then discovering the office can't hold a Tuesday-through-Thursday peak.
Design for average and your space feels empty Monday and Friday and oversold midweek. The right answer is rarely "cut to the bone." It's sizing to your real peak, then capturing the savings through term structure and concessions instead of square footage you'll regret. That analysis, how much space, on what term, in which submarket, is the work that pays for itself many times over.
Frequently asked questions
What is a good TI allowance for a Denver office lease in 2026?
It depends on your term, credit, and the condition of the space, but TI allowances generally range from about 25% to 150% of one year's base rent. In downtown Denver's high-vacancy environment, fully funded build-outs are achievable for creditworthy tenants on longer terms. Below 25% of annual base rent, you're likely leaving negotiating room unused.
How much free rent should I expect on a Denver office lease right now?
The current Denver baseline is roughly one month of free rent per year of term, and longer downtown deals are seeing more. Six to 12 months of abatement on a seven-year lease is realistic given record vacancy near 39%. Cherry Creek, at record-low vacancy, offers far less. The number is entirely submarket-dependent.
Is now a good time to negotiate a Denver office lease?
For most occupiers, yes, but the richest part of the window is tightening. Downtown vacancy is at a record and landlords are still protecting face rents with aggressive concessions, yet sublease space (the cheapest tier) fell 30% year over year. The concession environment is strongest now and likely to compress as space is absorbed.
Should I look at DTC or Cherry Creek for my next office?
They solve different problems. DTC, at roughly 19% vacancy, offers the strongest concession packages and structural value for cost-focused occupiers. Cherry Creek, under 5% vacancy, is about access to a supply-constrained, amenity-rich submarket where you'll pay closer to full freight. The right answer follows your business case, talent strategy, and budget, not the headline rate.
Why won't my landlord lower the face rent even though the building is half empty?
Because the reported face rate drives the building's appraised value and its lender covenants. Landlords protect that number and bury the discount in concessions, free rent, TI, and flexible terms, instead. The deal can still be excellent. The savings just live in the structure rather than the quoted rate.
The bottom line
In Denver's 2026 office market, the headline rent is theater. The net effective rent is the deal. Landlords are defending face rates while loading transactions with free rent, TI, and flexibility, which means the real price runs 25% to 35% below the number on the quote, and it varies sharply between a record-soft downtown and a supply-starved Cherry Creek. The occupiers who win negotiate to the effective number, size to their real peak, and move while the concession window is still open.
This is the analysis I run with every occupier before we even look at space: what's your current cost, what's the gap to market, and which submarket actually fits the decision. Lease economics shift quarter to quarter, so confirm any structure against your own counsel and CFO before you commit.
If you're working through a lease decision in Denver, whether that's a renewal, a relocation, or a footprint question your CFO is pushing on, I'm happy to run the numbers with you. Schedule a conversation at calendly.com/mccririe.
About Brian McCririe
Brian McCririe is Managing Director of SVN | Denver Commercial and National Council Chair for Occupier Services across the SVN network. After 25 years representing tenants and investors across global markets, he now focuses on the Denver Metro area helping companies navigate leases, acquisitions, and the gap between what landlords offer and what occupiers deserve. He leads one of the metro's top tenant rep practices and writes about the deals, decisions, and market shifts that matter to corporate real estate leaders.
