Funding for all this comes from $570 million in city bonds approved by downtown voters in 2024. And so far, DDA has approved $225 million in loans and grants, mostly to commercial applicants, some small merchants and the city for work to upgrade properties such as the McNichols Building and Civic Center and Skyline parks. Eventually, the loans must be repaid and the DDA must return the money to the city — plus interest.

The way Luzzatto sees it, this isn’t really a risk at all for the city or the future taxpayer dollars funding the loan.

This story first appeared in Colorado Sunday, a premium magazine newsletter for members. Experience the best in Colorado news at a slower pace, with thoughtful articles, unique adventures and a reading list that’s perfect for Sunday morning.

The public funding is fueling fast decisions. The DDA board has approved at least 16 projects in less than a year. None of the multimillion-dollar loans to commercial developers have been funded, though. That’s largely because projects are still in the planning stage, getting permits and arranging other financing. Downtown’s high office vacancy rates, which include buildings that are no longer actively leasing, continue to rise, according to real estate broker CBRE. The pressure is on.

“We’ve lost, oh, I don’t know, 30, 40% of our employees, particularly in Upper Downtown just through flex work and some companies, many companies downsizing and such,” said Bill Mosher, a consultant to Denver Mayor Mike Johnston who is working with DDA to figure out how to attract more life to Upper Downtown.

Mosher’s done this before. In 2008, he helped create the DDA to pay back a $300 million federal loan to renovate Denver Union Station. DDA used a tool called tax increment financing, or TIF, which let the authority borrow money from future downtown property and sales taxes and pay it back in 30 years. The renovated Union Station opened in 2014 with a hotel, the A line to the airport, shops and restaurants. The loan was paid off in 2024.

“It got paid off early,” Mosher said. 

And the payoff coincided with the mayor’s plan to use TIF again to solve the economic crisis in downtown. In 2024, the city’s downtown office market was more than 30% vacant. But the emptiness was far greater. Many companies still had leases, but their employees worked remotely, turning downtown office towers into zombie buildings with few people showing up in person. As leases came due, many opted for a smaller footprint, if they renewed at all. Vacancy rates kept rising.

Downtown voters overwhelmingly approved the plan in late 2024 and allowed DDA to tap $570 million in future taxes to invest in the city’s center. The TIF was amended to include Upper Downtown.

The DDA’s plan was straightforward. 

“We’ve made a goal to try and eliminate over the years about 7 million square feet of vacant or obsolete office space. And we want to do that by either filling them with office workers, which is a challenge right now, or converting space to residential,” Mosher said. “And, you know, people always ask about demolition. We say that’s probably a third choice, but we’re not at the point where we want to buy buildings to tear down.”

But that’s the kind of quandary the city faced. Nobody was stepping up. Downtown restaurants, retailers and the office market were not recovering on their own. 

Denver buys a mall and then some

In December, the Denver City Council gave the DDA its blessing to buy the Denver Pavilions, the shopping mall between Welton Street and Tremont Place, for $37 million. That wasn’t in the plans a year earlier. 

“We had no intention of buying it,” Mosher said. “But if you’re going to focus on 16th Street and you’re going to focus on Upper Downtown and you’re sitting there with a potential foreclosure of Pavilions, it’s not a good situation.”

The 354,407-square-foot mall had shed anchor tenants like Uniqlo, Hard Rock Cafe and Banana Republic. “It had been in a precarious position for almost a year,” Mosher said. Financed in 2016 for $140 million, the Pavilions had an $85 million loan that was past due by the time DDA purchased the mall. The bank hadn’t been paid in six months, Mosher said. 

“Frankly, the feeling we got from the bank, and the word we got from the bank, is they would sit on it for a couple of years and see what happened with Upper Downtown. And we felt this was a situation that we didn’t want to live with,” Mosher said. “We needed to control our own destiny.”

Co-owner Tim Borst said he was thrilled to get the DDA funding. Combined with historic tax credits and their own investment and city support, the $70 million project aims to convert offices into 178 residential units with amenities like a yoga and fitness center, a penthouse dog park and gardening spaces. Ironically, there’s been one snafu so far: An office tenant who bought Borst’s coworking business still has a lease and is trying to renegotiate. 

“Those tax credits, along with the DDA loan, are critical components for the project,” Borst said in an email. “We are in discussions with our final remaining office tenant and expect to have a resolution prior to construction commencement, which is currently anticipated for (January).”

But one DDA project has already fallen off the list. The Symes Building, at 16th and Champa, was approved for a $17 million loan last July. Plans call for converting the historic office building into 116 apartments. Developers had received city approval on their site development plans but then the lender booted them out. If the lender finds a new development partner, the project could return. But for now, it’s on hold for DDA funding.

“We’re not reserving the money,” Mosher said. “They would have to reapply and we would have to consider it. The advantage they have is the site development plan. And if a developer comes along and picks up the existing plans then they can move pretty quickly. We’re really interested in projects that can get going now. We’re not funding projects and saying, if you get your act together in five years, we’ll give you money.”

The plan for the 12-story University Building, at 910 16th St., is to turn the old office building into income-restricted housing. DDA approved a $14.5 million loan in July to convert it into 120 affordable rentals. The project is the furthest along with construction expected to begin in early 2027, according to Mosher.

The state’s large of work-from-home force is largely thanks to the Denver, Boulder and the Fort Collins metro areas. Boulder had the highest rate of work-from-home population in 2019 and 2024, at 13.7% and 28.7%, respectively, out of nearly 400 metro areas nationwide. Denver ranked fourth in both years, at 9.1% and 22.6%. Fort Collins, ranked seventh, had doubled to 20.9%. The U.S. average was 5.7% in 2019 and 13.3% in 2024.

Postpandemic was indeed different in Denver, said Kourtny Garrett, president of the Downtown Denver Partnership, which promotes the city’s economic center. Garrett pushed for city intervention to help distressed landlords and small businesses that suffered as 16th Street spent more than three years under construction. It reopened last fall.

“Tech and government were two of our primary employers in downtown Denver and are also the two (with) the slowest to return to the office,” Garrett said. “Also, because of 16th Street construction, when a lot of downtowns were starting to see offices opening up and employees coming back, we had over a mile of our downtown under construction. … We’re enjoying the fruits of that construction today.”

Local experts say that now six years after the pandemic began, companies have figured out remote work. Many employers kept hybrid schedules, including the city of Denver, which expects its 14,280 employees to come in three days a week, though a recent HR survey found that 64% were showing up five days a week, a city spokesperson said.

Office leasing activity for commercial brokerage firm CBRE is “incredibly busy,” said Allison Berry, a senior vice president at CBRE in Denver. Tenants want the newest and nicest office spaces and always have, she said. “The vacancy rate is high in Denver because we have a lot of aging product.”

At the end of the first quarter, CBRE data had the city’s total vacancy rate at 38.9%, creeping up from 36.9% a year earlier. The vacancy rate includes buildings slated for apartment conversion or other non-office uses. 

Remove those, Berry said, “and that obviously has an impact on our vacancy rate,” she said. Her back-of-the-napkin math on that would drop the downtown vacancy rate at least a few percentage points. Of course, she added, “It’s not just an issue for Denver. We’re just a smaller city so every tenant, every large tenant, has a huge impact on our vacancy rate.”

But there’s not enough public money to save every old building.

In April, the DDA board rejected a project from Revesco Properties, a Denver real estate investment firm that purchased Elitch Gardens with Kroenke Sports and Entertainment more than a decade ago. Revesco’s pitch was to get a DDA loan to turn the 16-story office tower at 475 17th St. into apartments. It was rejected because of the overall cost.

DDA officials said the project asked for nearly twice the amount of other approved conversion projects, much higher than the 20% maximum as outlined in the authority’s policy.

There’s a chance the proposal can be restructured to better fit the DDA’s objectives, so Revesco president and CEO Rhys Duggan doesn’t call it dead yet. 

“But these projects are financially challenging and they’re expensive. Ironically, they’re less expensive than new build projects, but they still take a fair amount of government assistance to get them going,” Duggan said. “What we learned through COVID was that when office workers stopped showing up, we were over-officed downtown and we were under-residentialed downtown. We need bodies downtown, not just 9-to-5 bodies.”

Denver’s office market isn’t actually dead

The city still needs offices downtown, so developers have stepped up.

In February, the Florida-based commercial real estate company CP Group grabbed the massive Denver Place complex for $47.5 million. Occupying the entire block at 999 18th St., the nearly 1 million-square-foot building was essentially purchased at a 75% discount, though the deal wasn’t as much of a fire sale as it may seem. 

“We like the Denver market a lot,” said Angelo Bianco, CP Group’s managing partner whose company first became a local landlord when it purchased the nearby Granite Tower five years ago. “The Denver market has been suffering severely for a while. As a business model, we look to buy assets when they or the markets are what I call broken, with air quotes around broken.”

CP Group’s plan is to invest another $20 million into Denver Place and add amenities that potential tenants actually want. That includes a gym with towel service, indoor/outdoor tenant lounges and a place to buy food “because in our entire 21 million-square-foot portfolio, that’s the number one request,” Bianco said. “And we subsidize all vendors because you do not make money on the amenities. You make money because of the amenities.” 

It’s not a blind gamble. Bianco said he is motivated by the city’s highly educated workforce, the city’s reputation for worst return-to-office recovery (he believes there will be a big turnaround soon), and the public and private push to convert aging office towers into other uses. 

“We’re a very good buyer, and so we’re able to close during really tough times,” Bianco said in an interview in early February. “Right now is a terrible time to sell any office in any market.”