Colorado’s commercial real estate market is entering a period of limited stability, which is reshaping development strategy, capital deployment and the legal work surrounding deals and restructurings.
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Mark Bell of Stinson LLP, who advises lenders, developers and investors on complex commercial real estate matters, said today’s environment is defined by a bifurcation across asset classes, with dips in office real estate balanced by strength in retail, industrial and select multifamily segments. “It’s an interesting time,” he said.
Creativity and Pressure in the Office Sector
Office real estate continues to face the steepest challenges, driven by pandemic-era workplace shifts that have not fully reversed.
Converting empty office buildings into residential spaces was once thought to be the best answer to the office space surplus. However, many buildings do not have the necessary structure for a residential space, and long-term leases complicate adaptive reuse. “It’s often more expensive than new builds,” Bell said. He cited one analysis estimating that only about 6% of office inventory is suitable for conversion.
Owners are exploring partial repositioning strategies, including selective demolition or maintaining occupancy on lower floors while “mothballing upper floors” in hopes of future demand recovery. “Simply changing them all to residential is not going to work,” he said. “It’s just not viable.”
Bell sees potential in repurposing empty office spaces for scientific and medical uses, collaborative workspaces, dormitory-style housing and entertainment venues.
Retail Strength, Industrial Normalization
Population growth across Colorado supported retail performance in 2025, pushing vacancy rates to record lows in some submarkets.
That said, industrial development, after a significant construction boom, is entering a rebalancing phase. Bell noted that improvement is expected into 2026 as absorption catches up with supply.
Investor appetite remains strong for logistics assets, including distribution centers and cold storage facilities in areas such as Commerce City and north Denver.
Multifamily Irregularity
Multifamily presents one of the market’s more complex dynamics. Despite an ongoing housing deficit in Colorado, many newly delivered apartment projects are struggling.
Large developments, which have dominated Denver’s skyline in recent years, are offering concessions, with rents down roughly 10%, according to Bell.
The trend is creating an unusual overlap with affordable housing. “You’ve got a housing deficit that remains, but you’ve got all of these apartment complexes that have been overbuilt,” he said. Discounted market-rate units are attracting tenants who might otherwise pursue income-restricted housing.
On the other side of multifamily housing is a “flight to quality,” Bell said. Capital is increasingly concentrating in amenity-rich assets. “Higher-end developments in certain core areas, like Cherry Creek, seem to be thriving,” he said.
Shift toward Proactive Loan Restructuring
On the finance side, Bell is seeing an evolution in lender behavior. “There was a period of time where there was a lot of kicking the can down the road,” he said, referring to maturity extensions and covenant waivers common around 2020.
That posture is shifting toward earlier engagement and disciplined restructuring. Lenders and borrowers are focusing on realistic net operating income projections, updated valuations and transparent refinancing strategies. “Alternative financing sources are also being layered into capital stacks to bridge valuation gaps,” Bell said. “Clients and their counsel are getting more proactive.”
Even as national banks tend to be more hesitant, regional and local banks are actively pursuing deals, particularly in smaller commercial transactions. Medical office and specialized owner-occupied assets remain among the most competitive lending categories. Other attractive sectors include neighborhood retail, smaller multifamily properties and specialized industrial assets.
Policy Changes
Bell said the current legislative landscape is defined more by targeted policy than sweeping reform.
Denver’s recent single-stair housing ordinance, for example, permits building up to five stories to be built with a single stairwell, enabling more flexible layouts and larger interior units.
The approach could help address middle-market housing gaps by delivering more attainable rentals without high-rise cost structures.
Manufacturing preservation zones, which are designed to prevent residential encroachment on industrial land, are another emerging policy tool, alongside incentives aimed at encouraging office repurposing and downtown reinvestment.
Stabilization in View
After several years of volatility, Bell believes the commercial real estate market is moving toward equilibrium.
“It really feels like we are trending toward stabilization,” he said, describing the shift as positive for lenders, developers and investors.
That said, uncertainty has not disappeared. Elevated interest rates continue to challenge project feasibility. Tariffs and persistent construction cost pressures complicate budgets and timelines. Capital stacks remain harder to assemble than they were just a few years ago. Each of these factors still clouds underwriting and lending decisions, requiring sharper analysis and more conservative assumptions.
In counseling clients, Bell emphasizes that risk management today extends beyond spreadsheets. He urges investors and developers to cultivate deep local engagement, attending planning meetings, participating in municipal policy discussions and staying active in industry groups. In his view, proximity to decision-makers and community conversations can provide an early read on regulatory shifts, infrastructure priorities and neighborhood momentum.
“Boots-on-the-ground knowledge helps you see where things may be going,” Bell said.