At the end of the second quarter, commercial property vacancy rates continue to be a challenge for property owners in 2025. This blog discusses current commercial vacancy rates in the United States and in the Denver/Boulder markets, what is causing higher vacancy rates to continue in 2025, and steps property owners can take to protect themselves when they are experiencing increased vacancies.
The Problem: Commercial Vacancies
The National Association of Realtors reports in its July 2025 Commercial Real Estate Market Insights Reports that the national vacancy rates for commercial properties break down as follows:
- Office Property = 14.1%
- Industrial Property = 7.4%
- Retail Property = 2.6% [1]
However, in the Denver/Boulder area, commercial property vacancy rates at the end of the second quarter were even higher than the national averages:
- Office Property = 25.9% [2]
- Industrial Property = 7.9% [3]
- Retail Property = 4.8% [4]
Higher vacancies put stress on commercial property owners in several ways. The most obvious concerns are lost rental income and increased operating costs. But higher vacancies can also drive down property values and negatively impact the desirability and reputation of the property if vacancies persist.
The Cause: A Variety of Factors
At a recent BizWest CEO Roundtable, a group of real estate brokers discussed the commercial leasing market in and around Boulder County. [5] They identified a variety of factors influencing vacancy rates, including (1) remote work; (2) business uncertainty driven by tariffs and other national policy decisions; (3) higher interest rates; and (4) rising insurance costs. [6] The shift to suburban living following the pandemic may also be a factor. Pre-pandemic, mixed-use urban developments thrived. With the advent of remote work and the desire for more space during the pandemic, suburban migration increased. [7] Suburban residents favor suburban office and retail space over dense urban developments, making urban commercial properties more difficult to rent. [8]
Take Steps to Protect Your Investment
Continued remote work, an uncertain economy, national and global politics, the setting of interest rates, insurance costs, and situations unique to the local market are often beyond a property owner’s control. Because of the multifaceted nature of the problem, there are no overnight solutions to the problem. However, there are steps property owners can take to mitigate risk and protect the value of their investment. These include, for example, the following:
- Inspect, Maintain, and Repair. Routinely inspect, maintain, and repair vacant properties both inside and outside.
- Have Adequate Property Insurance. Confirm that vacant properties are adequately insured against vandalism, theft, property damage, and natural disasters. Update insurance policies accordingly, if needed.
- Enhance Safety and Security Measures. Consider implementing enhanced safety and security measures, such as outdoor lighting, surveillance cameras, and access control systems.
- Keep Existing Tenants Happy. Build relationships with current tenants and take steps to ensure that they will continue leasing space despite vacant units on the property.
- Revisit Rental Rates. Review and set competitive rental rates. Consider incentives for leasing s,uch as rate abatements.
- Revisit Lease Terms. Review lease terms and conditions to determine if they may be a contributing factor to vacancies. Work with a lawyer to overhaul your base lease agreement to make the property more marketable and to protect your investment.
- Review and Improve Your Marketing Strategy. Work with a marketing specialist to conduct market research and update and implement a new marketing strategy that keeps pace with potential tenants’ needs and desires in the current business environment.
- Wait and See OR Consider Diversifying Your Portfolio. Many property owners are choosing to wait and see what happens before making any major decisions about the future of their commercial property. Others are considering diversifying their commercial property portfolio by purchasing suburban office, industrial, and retail space or repurposing urban commercial property for affordable housing, which remains in demand nationwide and particularly in Colorado.
Our Team
BHGR’s Real Estate Group represents commercial clients in all aspects of commercial real estate, including commercial transactions, commercial leasing, and commercial portfolio management.
This article is informational only. The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. Readers of this website should contact their attorneys to obtain advice with respect to any particular legal matter. No reader, user, or browser of this site should act or refrain from acting based on information on this site without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein—and your interpretation of it—is applicable or appropriate to your particular situation. All liability with respect to actions taken or not taken based on the contents of this site is hereby expressly disclaimed. The content on this posting is provided “as is;” no representations are made that the content is error-free.