#561: $112M to $3.2M: Denver Office Towers Becoming 700 Apartments

Denver Investment Real Estate

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The Colorado real estate landscape continues to show remarkable variations across different market segments, with some properties commanding multiple offers while others linger for months. As recent economic volatility and policy changes create ripples throughout the market, understanding these trends is essential for making informed investment decisions. In this month’s update, I’ll share what’s happening on the ground with single-family homes, condos, and alternative investment strategies that are working in today’s dynamic environment.

Episode Overview

In our March 2025 market update, I was joined by Troy, Brandon, and Jeff to discuss the latest trends in Denver and Colorado Springs real estate. We analyzed the stark contrast between property types and locations, examined changing rental market dynamics, and highlighted a remarkable downtown office-to-residential conversion project that shows how dramatically commercial real estate values have shifted. We also discussed the growing popularity of multigenerational housing arrangements, explored a parent-child house hacking strategy, and addressed how recent economic volatility is affecting interest rates and buyer behavior.

https://youtu.be/fn0v0YcpNWE

Timestamps

(00:00) Introduction
(03:40) Condo Market Financing and Inventory Challenges
(07:12) Rental Trends Across Different Property Types
(10:35) Office Tower Conversion to Residential Units
(14:45) First Time Buyers and Multigenerational Housing
(19:30) Parent Child House Hacking Success Story
(25:10) Tariffs Impact on Mortgage Interest Rates
(31:20) House Hacking During Economic Uncertainty

Denver Real Estate Market: The Growing Divide Between Property Types

The divergence between single-family homes and condominiums continues to widen, with detached properties showing modest appreciation while attached units face significant headwinds.

“Single family homes are still appreciating. Condos have knocked off, depending on the market, 5 to 15% since the peak a couple years ago,” I noted during our discussion, highlighting the stark contrast that has become a defining feature of today’s market.

Year-over-year, detached home prices are up 0.6% (average) and 3% (median), while attached properties have declined 6-7%
Condo challenges are compounded by financing obstacles, with many complexes falling out of lending eligibility due to insufficient reserves and insurance coverage issues

When asked how many condo transactions he’s closed this year, Troy was emphatic: “Zero.” He explained that many complexes don’t qualify for FHA financing, severely limiting the pool of potential buyers. The situation is further complicated when units that don’t sell become rentals, increasing the investor ratio in the complex and making financing even more difficult to obtain.

Commercial-to-Residential Conversions: New Life for Vacant Office Towers

One of the most fascinating developments in the market is the emerging trend of converting distressed office properties to residential use, with a recent deal highlighting just how dramatically commercial property values have fallen.

“A real estate developer purchased two downtown office towers for $3.2 million with plans to convert them into 700 residential units. The buildings, once valued at $112 million, are nearly vacant and well suited for the conversion,” I shared, noting that this represents less than 3% of the property’s 2008 value.

The total projected cost for the conversion is $150-200 million, partially funded through the Downtown Denver Authority
This project aligns perfectly with the timeline when new apartment construction is expected to fall dramatically, potentially filling a critical supply gap

Brandon observed that this timing could be ideal: “Apartment builds fall off a cliff or there’s nothing new coming online. This could be kind of in that timeline that’s out 18 to 24 months.”

Rental Market Trends & Investor Strategies

The rental market continues to show softness across most segments, though with some interesting variations by property type and price point that savvy investors can leverage.

“Year over year on apartments, we’re seeing the data down 4.8%, but as a whole, down 6% across all asset types,” Brandon reported, with attached properties showing the steepest declines.

Single-family homes over $3,300/month and one/two-bedroom medium-term rentals are showing stronger demand than other segments
Section 8 payment standards decreased slightly in 2025, the first decline since 2009, though Denver maintains higher payment levels than the published HUD standards

For investors considering selling, Jeff noted a significant shift in exit strategies: “None of your investors are doing 1031s right now. That was the way things went before… you sold something and went to the next thing and kept going up and up, but that’s still not making sense right now.”

Multigenerational Housing & Parent-Child Investing Strategies

As affordability challenges persist, more families are exploring creative living arrangements and investment partnerships that leverage family relationships.

“In early 2021, 18% of the US population was living in multi-generational households. Especially as large baby boomer generation ages up and younger generations have children,” I noted, sharing an emerging trend that’s both an economic necessity and quality-of-life choice for many.

Multigenerational households provide economic advantages through shared costs while offering practical benefits like built-in childcare and property oversight
Parent-child house hacking partnerships represent an innovative strategy where parents provide capital while adult children manage the property and build equity

Troy highlighted the intergenerational benefits: “Gets the kids into real estate in their early 20s at a young age.” Jeff added a practical example, describing a client who’s helping a second daughter purchase a duplex after successfully house hacking with their first daughter: “First house hack was a single family with a separate entrance… and now the other daughter’s got the bug and buying a straight up duplex.”

Interest Rate Volatility & Market Impact

Recent economic and policy developments have created significant volatility in the mortgage market, with rates experiencing substantial day-to-day and even intra-day fluctuations.

“We’re seeing a steady diet of day over day increasing in the interest rates. And so we’ve probably overall, I’d say at least a half percent to the rate up from where we were and maybe in some cases 3/4 of an increase,” Troy explained, describing how recent tariff announcements have impacted the lending environment.

Mortgage rates have increased approximately 0.5-0.75% from their recent lows, though they remain below their highest points of the past six months
Rate volatility has caused some traditional buyers to pause their home search, though house hackers remain active due to their reduced risk profile

Jeff emphasized why house hacking remains a solid strategy even amid uncertainty: “What is fear and uncertainty? House hacking is actually a pretty freaking good strategy if you’re doing it because you’re doing a thing that most people don’t do… Works even better in a bad market. Because if you do lose your job, at least you know, you got your housing taken care of.”

Conclusion

The Denver and Colorado Springs real estate markets continue to show significant divergence across property types and locations. While condos and commercial properties face challenges, single-family homes in desirable locations continue to perform well. Creative strategies like house hacking, parent-child partnerships, and medium-term rentals offer potential solutions to navigate the current market conditions.

As Troy aptly noted, “Recessions are great for real estate… you get some better rates. They’re talking about the Fed doing some more cuts here than what was expected before.” With forecasts now suggesting 3-4 rate cuts in 2025 instead of the previously anticipated 2-3, strategic investors have reason for optimism despite short-term volatility.

If you’re considering a real estate investment in today’s market, focus on property types and locations showing strength, explore creative strategies like house hacking, and work with experienced professionals who understand the nuances of our local market. For more detailed insights and monthly updates, be sure to subscribe to our podcast and reach out if you need personalized guidance for your situation.

Links from Podcast

Keyrenter Property Management Denver: https://keyrenterdenver.com/

Nova Home Loans: https://troyhowell.novahomeloans.com

Connect with our Guests:

Brandon Scholten: [email protected]

Troy Howell: [email protected]

LinkedIn: Troy Howell

Jeff White: [email protected]

LinkedIn: Jeff White

Who is Keyrenter?

Keyrenter Property Management Denver provides rental solutions for homeowners and real estate investors in the metro area who are interested in transforming their properties into passive income. It offers various services, from property marketing and thorough applicant screening to tenant placement and 24/7 maintenance services. Keyrenter Denver’s team of experts can take the clients’ burden of managing their rental off their hands so they can get back to what matters to them.

Who is Nova Home Loans?

For over 40 years, we’ve been focused on helping homeowners find the perfect loan to fit their financial needs and personal goals. Working with NOVA is a personalized experience from initial application to final loan closing and beyond. We will be with you every step of the way toward successful homeownership. Start working with NOVA & Troy Howell today!

NOVA FINANCIAL & INVESTMENT CORPORATION, DBA NOVA HOME LOANS NMLS 3087/ EQUAL HOUSING OPPORTUNITY/8055 EAST TUFTS AVENUE, SUITE 101/DENVER, CO

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