What’s Ahead for Colorado’s CRE Market in 2025? Key Trends and Predictions

As we move into 2025, the commercial real estate landscape in Colorado is evolving in response to economic conditions, shifting tenant preferences, and industry trends. While some sectors face challenges, others are seeing strong demand and new opportunities. Below are my key predictions for the year ahead.

Interest Rates & Investment Market

Based on current economic indicators and expert analyses, I do not anticipate interest rates decreasing in 2025. This has a significant impact on pricing and demand for investment properties. Higher borrowing costs continue to put downward pressure on valuations, making it difficult for some deals to pencil out. However, as we enter another year of elevated interest rates, I expect more sellers to accept this as the new normal and adjust their pricing expectations accordingly. While transaction volume may not return to the peak levels we saw in 2021, we are seeing increased transactions. Some bright spots are solid demand from owner users. As the economy stays strong, many businesses are looking to invest and purchase space for their companies. We are also seeing opportunities in acquiring distressed assets.

Office Market: A Shift to Quality

The office sector continues to be defined by a flight to quality. Well-located buildings with strong amenities and attractive environments remain in demand, while lower-tier office spaces struggle with high vacancies. This has presented opportunities to acquire struggling assets at significantly reduced prices. However, given these trends, it is important to evaluate the costs to upgrade and hold these distressed buildings. Medical office also remains a bright spot, benefiting from consistent demand driven by healthcare needs. I am seeing little to no vacancy and increasing rates in the medical office buildings that I represent. On the sale side, we are seeing significant demand for office condos from owner users. One such example was an office condo I sold at the end of 2024 that went under contract at full asking price within a matter of weeks from listing.

Industrial: A Market in Transition

Industrial real estate in Colorado has been hit with a mix of challenges. The closure of many marijuana cultivation facilities and breweries has left a noticeable number of vacancies, impacting absorption rates. Additionally, the wave of new industrial inventory delivered in recent years has led to increased competition for tenants. While the industrial market continues to have strong overall demand, we are seeing a need to adjust pricing and leasing strategies to attract tenants. Additionally, increased property taxes and insurance rates are hitting industrial buildings especially hard, as industrial tenants tend to be more price-conscious and willing to move locations. All of this is creating opportunities to purchase some industrial buildings at a discount, which was hard to find in previous years. We are especially seeing opportunities in distressed previous marijuana buildings.

Retail: The Rising Star

Retail appears to be the new darling of commercial real estate in Colorado. Consumer preferences are shifting toward experiences, with people eager to gather, shop, and engage in activities together. Well-located retail centers, especially those with entertainment, dining, and service-oriented tenants, are performing strongly. As communities seek to foster connection and social engagement, well-curated retail spaces are thriving. This trend is expected to continue into 2025, making retail one of the more resilient asset classes in the current environment.

What It All Means for Real Estate Investors

While challenges remain across certain sectors, commercial real estate in Colorado is far from stagnant. Investors and business owners who understand these trends and adjust accordingly will find opportunities. Whether it’s adapting to new pricing expectations in investment sales, focusing on quality in office leasing, rethinking industrial strategies, or capitalizing on the resurgence of retail, 2025 will be a year where market awareness and strategic decision-making are key to success.

For over a decade, I have been helping real estate investors maximize their returns through action-oriented leasing and strategic investments. If you are looking to fill vacancies or purchase a property, get in touch today to discuss how we can achieve your goals together.