Will a return to work fill Boulder’s growing office vacancies?

BOULDER — As the rest of the country struggles with high office vacancy rates, Boulder is right there with it while local leaders try to create another cultural shift back to the office.

COVID-19 ushered in an entirely new perspective on working from home — necessity demanded it, and Boulder companies were among those who adapted to the changing times.

But the unintended consequences of that shift, compounded by the prices in the Boulder office and commercial sectors, have seen plummeting vacancy rates, well below the healthy 10% rate or less that real estate professionals would like to see.

Boulder County reached a 23% vacancy rate in its office space in 2024, while downtown Boulder experienced a 29% vacancy rate, according to Dean Callan & Co.’s 2024 year-end review of the local market.

Dean Callan CEO Becky Gamble said the presidential election, combined with interest rates and the geopolitical climate, made the markets full of uncertainty in 2024.

“Now, headed into 2025, we understand where we are in terms of a new administration and some of the focuses that they will have that will be perhaps more favorable in terms of business climate,” she said. “There are still some interest rate adjustments that could occur in 2025, or maybe nothing. Everyone will still watch inflation a bit. The wait-and-see maybe is tempered a bit, but there is still enough out there that I don’t think it’s going to all of the sudden open the floodgates as it relates” to lowering vacancy rates and bringing people back to work.

While companies spent four years or so adjusting to the work-from-home concept, it will take a while to get people back in the office.

“These are questions we’ve been asking ourselves for several years and right after Covid ended, everyone was like, ‘Okay, the market will start to change,’” Gamble said. “I think what everyone is recognizing is that there are so many variables now that people take into consideration when they look at their work environment.

“It took four years to disrupt what people thought was normal, so it will take a bit of time for each company to understand what their culture is, and to understand what the office means to them.”

At the same time, the flex and research and development spaces in Boulder are filling up a bit better than traditional office spaces, which coincide with the innovation bursting into the area in life sciences, aerospace and quantum computing. There were some significant lease deals in 2024 that will herald some good things to come for 2025. A total of 14.4 million square feet was leased in the flex and industrial sectors of Boulder County last year. The sheer numbers of transactions in 2024 easily edged out the previous two years, with several big deals in those sectors, according to Dean & Callan’s report.

“Those vacancies are really more in line with healthy numbers,” Gamble said of the industrial and flex spaces in Boulder. “Certainly, as an office user, it is a tenant’s market, as we’d say now. They have choices and they have the leverage to be able to put themselves in positions to negotiate a better deal than if there is a 5% to 10% vacancy rate.”

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