Downtown’s recovery still lags behind the pace seen in the majority of major city centers and is costing Denver tens of millions of dollars in potential sales tax revenue, according to an analysis by the Common Sense Institute, a corporate-funded think tank.

CSI looked at net taxable sales revenue growth in a dozen Front Range counties, from Larimer and Weld to El Paso and Elbert. Those sales increased 92% in the first half of this year compared to the first half of 2019, with Elbert County leading the way with a 229% gain, according to the study.

Denver had the smallest gain of this group, at 41%. If Denver had matched the regional average gain, it would have recorded an additional $646 million in taxable sales revenue, the report estimates. That underperformance equates to more than $60 million in tax revenue that Denver could miss out on this year based on its 4.81% sales tax rate, according to a Denver Post calculation.

Although the comparison is countywide, Denver’s underperformance appears to be primarily centered in the downtown area, which CSI defines as the neighborhoods of Auraria, Capitol Hill, Central Business District, Civic Center, Five Points, North Capitol Hill and Union Station.

“Compared to other cities, we know we have more potential. This is not something that the Downtown Denver Partnership can solve alone, nor is it something that government or business can solve alone,” said Kelly Brough, an urban development researcher at CSI who co-wrote the report with DJ Summers , director of policy and research at the CSI. and Erik Gamm, senior research analyst.

Downtown Denver’s foot traffic is about two-thirds of what it was in 2019, a recovery rate that ranks 40th, ahead of Pittsburgh and behind Philadelphia, out of 55 metro areas examined by a report. the School of Cities at the University of Toronto. Weekend traffic has recovered better than weekday traffic, but that rebound also lags behind most other cities.

Office vacancy rates are at their highest level in 15 years, with just under a quarter of available space going unused. Downtown has 13.4 million square feet of available office and retail space. A growing number of landlords are unable to collect enough rent to meet their loan repayments and more lenders are foreclosing on defaulted loans.

But there is a paradox in the malaise of the city center. Excess supply in the face of reduced demand should lead to lower prices, but that is not the case. Despite a saturated market, office rents averaged $37.60 per square foot last year, the highest demand ever recorded by landlords.

“The fact that downtown Denver rental rates remain high may indicate that many commercial tenants are still holding on to multi-year leases.
leases. It may also indicate optimistic sentiment about downtown Denver and its chances of recovery,” Brough and his co-authors said.

Owners may also be trying to get ahead of rising expenses. Regulation 28 and Energize Denver will require owners of larger buildings to invest in energy efficiency and other improvements to meet statewide decarbonization goals. These rules, which will cost billions of dollars to implement, only add to the financial stress faced by large landowners.

Denver also has one of the highest minimum wages in the country, at $18.29 per hour for non-tipped employees. If customer traffic was high, that might be easier to absorb, but restaurateurs have cited high labor costs as one of the reasons they’re closing their doors.

Researchers at the University of Toronto studied 80 variables to try to explain why different cities recovered at different rates. Denver’s recovery is 4.8 percentage points behind where it should be in terms of its remote workforce and 9 percentage points behind where it should be based on its population density.

This means that some “X” factors are at play. The Downtown Denver Partnership, in its surveys, found that more than half of respondents cite the 16th Street Mall project, which was very disruptive and lasted longer than expected, as the reason they avoid the city center.

An even bigger deterrent cited, however, was the lack of “a sense of safety and security.” CSI studied crime and homelessness, variables not included in the University of Toronto study and areas that Mayor Mike Johnston, who beat Brough in 2023 for the job, has also targeted.

CSI found that the growth of property crimes was more strongly correlated with a delayed recovery of cities than with economic variables. And although property crime rates have improved from 2022 record levels in Denver, the overall crime rate has not improved.

It is instructive to compare the Cherry Creek North neighborhood to downtown neighborhoods. If downtown’s struggles were just a remote work problem or a Denver-wide problem, then Cherry Creek shouldn’t be doing as well. But it’s one of the hottest office submarkets in the country. Cherry Creek has an office vacancy rate one-eighth that of Denver and a much lower crime rate could be one reason, CSI said.

Brough said downtown Denver is lagging most of its peers across the country in its recovery; Denver ranks last in sales growth among its Front Range peers, and in Denver, Cherry Creek far outperforms downtown even though it’s only a 10-minute drive.

“I don’t think it’s a fair comparison. The dynamics of Cherry Creek and downtown Denver are very different and quite complementary,” said Kourtny Garrett, CEO of the Downtown Denver Partnership. Downtown has significantly more office space, is home to a much more diverse population across all income levels, and serves as a transportation hub.

Cherry Creek, while different, shows that Denver can find formulas to create thriving areas, Brough countered.

Garrett criticized the CSI report for using a broader geographic definition of downtown than that used by the partnership and the city, while also recognizing the strain in the commercial office market that the CSI report and others have captured .

His feeling, as someone who has his feet on the ground and works on downtown issues every day, is that things are turning a corner and the recovery will accelerate. Beyond office worker traffic, which is about 60% to 65% of pre-pandemic levels based on cell phone records, weekend visits and convention traffic are back to 85% or more pre-pandemic levels.

The 16th Street Mall is nearing the final stretch of its $175 million renovation that will bring a much-needed refresh to the spine that unites downtown. And if voters approve Tuesday, the expansion of the Denver Downtown Development Authority, which was launched to redevelop Union Station, could leverage an additional $500 million in capital for improvements.

Johnston pushed for the expansion, one of several initiatives to revitalize the city’s core. His administration achieved a goal of sheltering 1,000 homeless people in the first six months of his term last year and is working on the next 1,000 as part of the All in Mile High initiative. In January, the administration rolled out its “Clean and Safe Downtown” program.

“Downtown revitalization has been a priority for Mayor Johnston since day one, and we are proud of the work we have accomplished in just one year, including closing all downtown encampments, which has resulted in the permanent closure of more than 350 blocks from downtown and beyond to the campground. , accelerating construction on 16th Street, and improving public safety by significantly reducing violent and property crimes,” Jordan Fuja, the mayor’s press secretary, said in an emailed statement.

He added that foot traffic has increased downtown as a result and local businesses are reporting a significant increase since 16th Street reopened and the authority’s approval is expected to generate historic funding.