By Ben Reinberg, CEO of Alliance Consolidated Group of Companies.
Looking ahead to 2025, Denver's commercial real estate (CRE) market is a mix of promise and risk. The city continues to grow and add new businesses and residents, but there are also challenges navigating this changing landscape.
Growth will bring many challenges and staying informed will be paramount. Understanding market dynamics, changing tenant preferences and regulatory changes will be important for stakeholders looking to maximize available opportunities.
Positive projections for Denver CRE in 2025
- Growth in mixed-use development
Mixed-use development growth is expected to accelerate in Denver in 2025. As demand for live-work-play increases, developers are creating spaces that combine work, dining and entertainment in walkable areas. Mixed-use development has created some of the most vibrant neighborhoods, offering amenities and services right on residents' doorsteps. Developers who can integrate retail, office and residential space into cohesive communities are likely to achieve strong returns on investment. - Expansion of the industrial sector
The industrial real estate market has experienced exceptional growth in recent years and there are signs that it will continue to grow through 2025. Since most companies prefer centers close to the population and need fast delivery, Denver is one of their main locations for their branches.
Advances in manufacturing technology are also spurring the industrial sector. Automation and robotics are transforming industrial facilities, increasing efficiency and driving demand for flexible, high-tech spaces. - Office spaces rethought
While traditional office demand has declined, the good news for 2025 is that office space will be reinvented. Many companies today long for flexible spaces that promote collaboration, creativity and hybrid working models. Denver is a pioneer in transforming old facilities into modern, multifunctional workspaces. That has led developers in Denver to respond by building with biophilic design, adding outdoor spaces and offering flexible lease terms to a diverse tenant pool. - Investing in sustainable buildings
In Denver's CRE market, sustainability is becoming a key differentiator and designing buildings with a focus on environmental responsibility. Environmentally conscious and sustainable design efforts are expected to gain even greater momentum in the coming years. Developers are now seeing green building initiatives as a great way to reduce bottom-line operating costs and attract environmentally conscious tenants.
Pitfalls to Avoid in the Denver CRE Market – 2025
- Ignore changing tenant preferences — Those left behind in the race for mixed-use and flexible office space may be the owners who don't keep up with the trend. A lack of investment in high-amenity buildings or buildings that enable flexibility and hybrid work-friendly environments could lead to prolonged vacancies or a failure to attract quality tenants. Modern renters need an environment suitable for their well-being and socialization. The landlord cannot avoid this aspect, as such measures often mean the loss of the best rental opportunities. Fitness centers, green spaces and even common areas are some of the necessary considerations to improve the tenant's experience.
- Changes in regulations are underestimated — Looking forward, Denver will likely place greater emphasis on sustainability and housing affordability, which could lead to new regulations in the CRE sector. Developers and investors would be wise to proactively address potential changes to zoning laws, green building standards, or rental regulations. In 2025, developers will most likely face increased environmental regulations and zoning changes related to increasing the supply of affordable housing. This can be mitigated by keeping a close eye on the horizon for upcoming regulations and consulting with a legal expert early in the development process.
- Excessive leverage in a dynamic market — Higher interest rates and looming economic challenges could increase financial pressures in 2025. Some investors may be unprepared and risk significant overleverage to take advantage of growth opportunities. In a dynamic market like Denver, this overstates financial commitments to achieve rapid expansion of activity, potentially leaving an investment vulnerable if market conditions change. Investors should maintain healthy cash reserves, diversify their portfolios and remain cautious about debt exposure.
- Ignoring the suburban market – Denver’s outskirts are changing rapidly, with major infrastructure investments in schools and community facilities. With remote work options increasing, many workers are opting for larger living spaces outside of the city while still staying close to the city's many attractions. Don't underestimate suburban markets with their potential for retail centers, mixed-use developments and residential real estate.
Ben Reinberg, CEO of Alliance Consolidated Group of Companies, is a leading commercial real estate investment provider specializing in facilitating investments in medical, retail, office and multifamily properties in major markets throughout the United States. The company is at the forefront of large commercial real estate purchase transactions with a portfolio value of more than $500 million.