Three Alternative Options Property Owners and Landlords are Utilizing to Overcome Office Space Vacancy Rates

Office vacancy rates continue to fluctuate across the Front Range in 2026 and vary significantly by region. A higher-than-normal vacancy rate in many areas has required property owners to be creative and flexible to survive market changes. This article looks at three common options used by landlords and property owners to address office space vacancies and highlights important legal issues owners should keep in mind when considering these options.

Tenant-Friendly Leases 

In some areas, rental rates are coming down, and in others, they remain stagnant. In either scenario, landlords are negotiating tenant-friendly lease terms such as those that cap rent increases, have shorter lease terms, limit common area maintenance (CAM) charges, provide for turn-key spaces or tenant improvement allowances, allow for early termination without penalty, provide for lower security deposits, and/or include flexible sub-leasing and assignment options. These types of provisions not only increase a landlord’s financial risks but a landlord’s legal risks as well.

Well-drafted lease provisions created with the help of an attorney are, therefore, crucial for landlords looking to mitigate legal disputes and risk. Landlords must also educate themselves and stay current with ever-changing landlord-tenant laws at the state and local levels. For example, given the increased risks associated with tenant-friendly leases, some landlords may implement improved tenant screening. However, recent legislation in Colorado places new requirements on landlords for notifying prospective tenants regarding the information and data the landlord will attempt to access when conducting general screening. Landlords should also review their insurance coverage to maximize their opportunities to insure themselves against the risk of increased liability associated with tenant-friendly leases.

Flex Space

In some areas, workers are being called back to the office by their employers and office space is filling up again. In other areas, like Boulder, nearly 30% of workers continue to work from home post-pandemic, but need the option of short-term office space for client meetings or other types of interactions with third parties that take place outside the home. Individual or remote workers may want to work outside the home but need an office share arrangement or a single office with shared amenities. As a result, some commercial property owners have developed flexible office space where workers can rent an office or a conference room for a day or a few hours and/or share amenities tailored to the needs of individuals, remote employees, startups, or growing businesses. These types of leasing arrangements present different legal risks than those associated with long-term lease agreements.

As with long-term leases, it is important for landlords to have a well-written base rental or licensing agreement that covers typical commercial lease terms. But to offer truly flexible, short-term rental spaces, lease terms often need to be tailored on a renter-by-renter basis, which may increase a landlord’s risk. Liability and security risks may also be increased in spaces with high turnover. Therefore, it is important that short-term and flexible leases include provisions to address these concerns and that they be thoroughly vetted and reviewed by legal counsel to understand their legal implications.

Short-term office space rentals also pose a variety of other potential legal problems. For example, local municipal laws may regulate or prohibit short-term office rentals in certain zones or require special permitting before flex space can be rented. Converting long-term rental space to short-term rental space may also trigger a change in building occupancy classifications, requiring landlords to upgrade fire-suppression systems, emergency lighting, and to make ADA accessibility upgrades. Zoning, permitting, and building code changes can be costly and time-consuming and can derail landlords attempting to quickly respond to a new short-term rental opportunity. Short-term rentals may also be taxed differently than long-term rentals under state and/or local sales and use tax laws. Thus, it is imperative that landlords research and understand applicable state and local laws before offering short-term or flex leases. Otherwise, landowners may be subject to fines, penalties, and/or closure of the space.

Residential Conversion 

The lack of affordable housing across Colorado is well-documented, and in the past two legislative sessions, the General Assembly passed numerous laws aimed at fixing the problem. The need for affordable housing, together with ongoing office space vacancies, has led many property owners to consider converting commercial space to housing or mixed-use space. From a legal perspective, these projects primarily present zoning and land use challenges that need to be well-understood by a team of experts, including legal counsel, to be successful. Some jurisdictions fast-track these projects, but others do not. Consequently, it is important to know and understand the local zoning and land use laws, development process, and construction timeline because property owners typically carry the cost of being unable to rent the space until it is renovated. These types of projects also require a carefully negotiated and drafted construction contract that provides adequate risk-shifting provisions to minimize construction risks.

Our Team 

BHGR’s Real Estate Group represents businesses, individuals, investors, property owners, builders, and developers in a wide array of commercial transactions. Our attorneys also assist our clients with leasing, financing, land use, and zoning issues.

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