Short answer: U.S. office demand just posted its best year since 2020, and very little of it has reached a Denver negotiating table. National vacancy is 20.1% and falling. Denver's runs 26.6% on Cushman & Wakefield's basis and 28.7% on CBRE's, with downtown at 38.6%. Denver's second quarter was genuinely its most encouraging since the pandemic. It still isn't the market the national headlines are describing, and if you have a lease decision in the next 24 months, the national numbers are useful to you for one reason: they tell you which piece of your leverage moves first.
Cushman & Wakefield's second-quarter national report is the strongest office reading since 2020. Four-quarter net absorption reached 14.3 million square feet, the seventh consecutive quarter that rolling figure has improved. Vacancy fell in 49 of 92 tracked markets. Sublease inventory is down 28% from its cyclical peak. Deliveries hit a 14-year low. Allwork.Space summarized it in late August under a headline about demand broadening across the country.
Denver is not in that story yet.
Metro office vacancy here runs 26.6% on Cushman & Wakefield's competitive set and 28.7% on CBRE's. The two firms track different building universes, which is why the numbers differ. Both are roughly seven to nine points above the national 20.1%. Downtown sits at 38.6% on CBRE's basis, close to double the national rate. Average metro asking rent is $34.07 per square foot full service, down 0.8% year over year, in a national market where rents are firming.
Give the second quarter its due, though. Denver moved back into positive absorption, 119,700 square feet on Cushman & Wakefield's count and 179,000 on CBRE's, alongside 1.7 million square feet of leasing, the strongest quarter since Q1 2022. CBRE called it the market's most encouraging showing since the pandemic. That is real and it matters.
It also is not a recovery yet. The first quarter was negative on both firms' numbers, Denver is still negative year to date, and one good quarter is a turn rather than a trend. The national and local markets are answering different questions right now, and only one of those answers is on your side of the table.
Four things I'd tell an occupier reading the national headlines with a Denver lease in front of them.
Do not let the national number into your renewal conversation
Your landlord will happily cite the national recovery. A rolling absorption figure improving for seven straight quarters, vacancy falling in more than half of U.S. markets, a construction pipeline 30% below its long-term norm. Every one of those facts is true, and none of them describes the building you're sitting in.
The number that prices your deal is your building's vacancy, then your submarket's, then the metro's. In Denver that stack currently reads 38.6% downtown, 42.3% in RiNo, and 22.8% total in the DTC against 19.1% direct. Against a national 20.1%, Denver is not a market in recovery. It's a market where the tenant still sets most of the terms, and building and submarket vacancy is where that leverage actually lives.
Concessions confirm it. Denver landlords are still competing on roughly one month of free rent per year of term plus elevated improvement allowances, because they will protect a face rent long before they will cut it. That is not the concession posture of a market that has turned.
Denver's vacancy is a product problem, not a demand problem
This is where most occupiers read the market backward, and it changes what you should be shopping for.
CBRE's Allison Berry put the cause plainly to the Colorado Sun: vacancy is high here because the market has a lot of aging product. Denver's empty space is concentrated in commodity and dated stock rather than spread evenly across the market. The national report says the same thing in a different vocabulary. Class A absorption ran 24.5 million square feet over the past year, 71% more than the market absorbed overall, which means the rest of the inventory was net negative.
Two markets, one vacancy rate. The commodity market is oversupplied and likely to stay that way for years. The quality market is tightening.
Denver's own submarket table shows both. Cherry Creek's Class A vacancy is below 2%, the tightest in the metro, with Class A rents around $68 per square foot and the newest product quoting into and above $100. Overall Cherry Creek vacancy is considerably higher than that Class A figure, but the space most tenants actually want is exceptionally tight. Meanwhile the DTC has roughly 2.3 million square feet standing empty at $33.39 direct.
Those two submarkets sit twelve miles apart inside the same "27% market." Quoting the metro average at either one misprices the deal badly. Cherry Creek's scarcity math has almost nothing in common with the DTC's.
If you need good space, stop treating the metro vacancy rate as your leverage. It isn't describing your inventory.
Your leverage on good space decays before the vacancy rate moves
Three Denver supply facts, all from the second quarter, that don't show up in a headline vacancy number.
Construction stands at 708,000 square feet, and roughly 73% of it is in Cherry Creek. The metro's entire new-supply answer is concentrated in its most expensive and tightest submarket. If you aren't shopping Cherry Creek at the top of the market, there is very little speculative new product coming for you.
Denver's office inventory has started shrinking, as demolitions and conversions outpace additions. And downtown currently has no meaningful new office pipeline at all.
The better suburban product has already begun to price up. Southeast asking rents hit $29.50 per square foot in the second quarter, up 0.3% year over year, the first annual increase in three quarters, in a metro where the overall average is still falling. Small number. It's also the first one to move, and it moved where the good buildings are.
Put those together and this isn't a market that stays soft forever in every segment. Commodity space stays cheap for a long time while the supply of good space thins quietly, and the metro vacancy rate sits near 27% through all of it. That rate won't warn you. It's an average, and averages move last.
Buy the buildout, not the rent
Built-out sublease space in Denver can trade 25% to 35% below direct asking rents. The direct-to-sublet spread runs near $9 per square foot, against just over $2 historically. What you're buying at that discount isn't only cheaper rent. It's someone else's finished capital: their improvements, their furniture in many cases, their construction timeline already spent.
Run it on net effective rent, not face rent, or the comparison is meaningless. The gap between the two is where Denver deals are won and lost right now.
That discount pool is draining, and the reason gets read backward almost every time.
Denver's sublease availability is down to about 3.9 million square feet, off 24.6% year over year on CBRE's count, after falling to 4.1 million and 20.0% in the first quarter. CBRE calls it a steady unwind. Read quickly, it looks like tenants absorbing a million square feet of cheap space and your window closing behind them.
Some of that decline is real leasing. Not all of it is. CBRE's own first-quarter commentary named the other mechanism directly: sublease availability fell as more available spaces went direct upon lease expiration. A master lease runs out, the sublandlord hands the premises back, ownership takes control of the suite, and if it stays empty it comes back as direct availability, often with substantial improvements still in place.
Same suite. Same square footage. Different column.
I'm not going to tell you what share of that 24.6% is expiration rather than leasing, because nobody has published the split. The useful point doesn't require it. A falling sublease number is not a clean read on occupier demand. Some of it is demand. Some of it is a calendar.
And for the blocks that do cross that line, the supply isn't what leaves. The discount is.
Which raises a question worth sitting with. What was that discount ever paying you for?
Part of it compensates you for a different risk package. A shorter remaining term, as-is condition, a thinner improvement allowance, fewer renewal rights, no direct relationship with ownership. One of those risks is the credit of the company standing between you and the landlord, and that's the one almost nobody prices.
The other part is motivation. A sublandlord is minimizing a loss on space it pays for either way, so it will go below what ownership will accept. As an illustration, a company on the hook for $35 a foot will take $24 and count it a win, because the alternative is paying $35 for an empty room. Ownership has a different problem. It may have a lender, a basis, and a valuation to protect, which usually makes it more willing to spend on TI and free rent than to permanently reset the building's quoted rate. Denver landlords are under real pressure right now, plenty of it. It just points a different direction.
The published rents show it. While sublease space sat well under direct, downtown Denver's average direct asking rent held at $41.19 per square foot full service in the second quarter, essentially flat quarter over quarter and down only 2% on the year. Southeast went the other way, to $29.50, up 0.3%. Direct pricing did not follow sublease pricing down.
Two things get overstated when this story gets told, including by me in an earlier draft of this piece.
The buildout doesn't always survive the handoff. Landlords make that call suite by suite. Some are marketing the improvements hard: a 16,401 square foot plug-and-play suite at 1670 Broadway with 75 workstations at $23.50, built-out space at Denver Place in the mid-$20s, a fully furnished 40,251 square foot floor at 16 Chestnut with 236 workstations where ownership will flex on term. That same building is offering another floor in shell condition. Others are whiteboxing or building spec suites. Whether the improvements come with it is a question about a specific suite, not an assumption to carry into a search.
And the pool refills. Downtown sublease availability was down 26.5% year over year in the second quarter but up 5.1% quarter over quarter, because new blocks keep listing as companies keep making the same decision. This isn't a door closing on a schedule. It's a pool draining on trend and refilling unevenly, which makes the useful instruction watch rather than hurry.
Before you fall in love with the buildout
Six questions I ask on a live deal, whichever column the space is in.
- Does the furniture actually convey, in writing, or is it there because nobody has moved it yet?
- Does the cabling, AV, and security infrastructure stay, and does any of it still work?
- Will ownership warrant or repair the existing improvements, or are you taking them as-is with the maintenance obligation?
- What TI is available on top of what's already built, particularly on a direct conversion where the landlord has recaptured a finished suite?
- Does the existing layout create a restoration obligation at the end of your term, so you're inheriting somebody else's exit cost?
- What's the effective cost after free rent, TI, moving expense, and construction downtime, not the quoted rate?
The two questions that outrank the discount
Everything above is a price question. These two aren't, and on a sublease they matter more than the rent.
A sublease is a derivative instrument. Your right to occupy runs through the master lease, not around it. If that master lease terminates because the sublandlord defaults, files, or hands the space back, your sublease generally goes with it. You can be current on every dollar you owe and still lose the space, because your counterparty stopped paying someone you have no contract with.
Is the sublessor in financial trouble? Ask directly, then go find the answer yourself. And sit with the uncomfortable part of this: the reason a company offers space at 30% off is often the same reason it might not be around in three years. It took more space than it needed, it's carrying the loss every month, and it's trying to stop the bleeding. That discount is priced by somebody's problem. Sometimes the problem is benign, a merger or a hybrid shift at a company with a clean balance sheet. Sometimes it isn't. The listing looks identical either way. Look at their remaining term, whether this sublease is one piece of a larger contraction, whether they're current with the landlord, and what the business underneath actually looks like.
Will ownership let you stay if the sublessor defaults? That's a recognition agreement, sometimes called a sublease non-disturbance agreement, and it's the most valuable thing you can negotiate on a sublease. Ownership agrees in writing that if the master lease dies, your occupancy survives and you convert to a direct tenant on stated terms. Get it at signing, while the landlord wants the building occupied and you still have something to trade. Once trouble surfaces it becomes much harder to obtain, and after the master lease has actually terminated it may be too late. It's negotiated at the same table as the subordination and estoppel documents you'll be asked to sign anyway.
Without recognition, you aren't buying a discount. You're buying a discount plus somebody else's credit risk, and almost nobody prices the second half. With it, the discount is durable.
The same physical suite can reach you two ways. On a sublease: a real discount, a short remaining term, a sublandlord between you and the owner, and a counterparty whose financial condition is now your problem. On direct: a full negotiable term, privity with ownership, the improvements often still standing, and a landlord who will pay you in concessions before cutting the number. Those can land close on net effective rent. They land nowhere near each other on first-year cash, term flexibility, speed to occupancy, or risk.
Which is the honest argument for paying ownership's number on a suite that just came back direct. You may be able to get essentially the same physical space as a direct tenant, without the sublessor credit risk riding along with it.
What I'd actually do
If your lease expires inside 36 months and you want better space than you have, start now. Not when the renewal notice arrives. The quality inventory is thinning while the average holds flat, and the average is what your landlord will quote you.
If cost is your first priority and you're flexible on building quality, you have considerably more runway. The commodity market isn't tightening at anything like the same speed.
Be precise about which clock you're watching, because two are running. The supply of genuinely good buildings is thinning slowly and close to permanently, since almost nothing speculative is being built outside Cherry Creek and the inventory is shrinking. The sublease discount is draining faster, but a good share of that space isn't leaving. It's changing hands and coming back at the landlord's number.
The first is a reason to move now. The second is a reason to move on a specific suite, not on the market. And if that suite is a sublease, underwrite the sublandlord before you underwrite the rent. The discount is only worth what your right to stay is worth.
What you shouldn't do is read a national recovery headline and conclude that your leverage is expiring across the board. It isn't. It's moving in two specific places, on two different timelines, and neither of them is the metro vacancy rate your landlord will quote you.
If you have a Denver office lease decision in the next 24 months and want an honest read on where your leverage actually sits, schedule a conversation.
Brian McCririe is Executive Managing Director at SVN | Denver Commercial and National Council Chair for Occupier Services at SVN. He has spent 25 years on the tenant's side of the table.
