D
enver's office real estate market is struggling to recover from the pandemic, with a recent sale of two downtown skyscrapers for $3.2 million highlighting the dramatic decline in commercial property values. The buildings at 621 and 633 17th Street sold for nearly 90% below their estimated 2019 value of around $200 million.

    Developer Asher Luzzatto purchased the properties with plans to convert them into over 700 apartment units, a trend that experts say could be a solution to the office space surplus. "Everybody went home" during the pandemic, said Jeff Peshut, Assistant Professor of Finance at MSU Denver, leaving office buildings vacant and owners facing significant losses.

    Experts estimate that downtown Denver's office buildings have lost 40-50% of their pre-pandemic value, with vacancy rates ranging from 25-30%. The city's central business district is experiencing a high level of distress in the office market, with empty buildings and decreased occupancy, rents, and operating incomes.

    The sale reflects multiple market pressures affecting commercial real estate nationwide, including increased interest rates and a shift towards remote work. "We've had a tug of war between return-to-office proponents and work-from-home proponents," Peshut said. Vivek Sah, Director of the Burns School of Real Estate at the University of Denver's Daniels College of Business, described the changes as unprecedented.

    Converting office buildings to residential use requires significant investment but could be a viable solution for some properties. Luzzatto remains optimistic about downtown Denver's long-term prospects despite current market conditions, believing that the city will benefit from more people living downtown than working there.