From Boardrooms to Bedrooms: How Denver is Turning Vacant Office Towers into Residential Properties Post-Pandemic
All across the country, office tower values have been doing their best Humpty Dumpty impression in 2023.
In Denver, the valuation of Wells Fargo Center (aka the “cash register building”) dropped from $475 million in 2019 to $287 million in 2023.
The bust is largely due to an office vacancy rate that has remained stubbornly high after the great exodus from offices during the COVID-19 pandemic. Appraisers obviously don’t expect remote workers to come back anytime soon.
Tax-increment financing (TIF) can provide another means to spur conversions. In Chicago, Lasalle Street has been hit hard by the exodus of office workers. The city developed a plan last year to add more than 1,000 new residential units to the immediate area by offering developers TIF dollars and other incentives to convert office buildings into apartments and condos. As of mid-2023, the city had selected three concepts that would invest more than $500 million, with about $200 million from the TIF coffers.
Historic preservation tax credits can also help fill the gap, says Aimee Sanborn, principal at Powers Brown Architecture in Denver. Sanborn worked on The National in Dallas when she was with Merriman Anderson Architects. The $460 million conversion of a vacant 52-story office tower to a hotel and apartments was the largest in Texas history.
The project received Texas Historic Preservation Tax Credits of 25 percent of qualified rehabilitation expenditures as well as Federal Historic Preservation Tax Incentives totaling 45 percent. Many projects also leverage TIF dollars for funding.
“Texas has a very lucrative program,” says Sanborn, who moved from Dallas to Denver in 2022. “Once it was implemented, you started to see a lot of conversion deals.
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