The city of Denver now has a clearer picture of what distressed downtown office buildings would make the best candidates to switch over to residences, part of a larger effort to make it easier for investors and developers to take on the task.

Denver has designated 16 buildings as prime candidates for conversion and behind them another 13 that score highly in terms of their convertibility, according to a study that Denver commissioned the global architectural firm Gensler to conduct.

“Downtown towers are a different animal to demolish. It would be a shame to waste them,” said Jennifer Ramsey, adaptive reuse administrator at Denver’s Department of Community Planning and Development.

Fewer employees are going to the office after the big shift to remote work during the pandemic and in Denver employee counts downtown in June were only at 60% of the levels seen in 2019, according to the High Frequency Economic Update from the Downtown Denver Partnership.

While that rebound beats the close to 50% rate seen nationally, the region struggles with a glut of office space. The Denver-wide vacancy rate is at 26.8% and in the Central Business District, it is about 40%, according to Savills, a Chicago brokerage firm.

Unable to service their debt payments from the rents coming in, owners of several of the city’s signature buildings are stressed to the point that they could eventually face foreclosure. That has created a sense of urgency in finding alternative uses for the massive structures to give current owners or the lenders on the hook an exit ramp before the buildings go down a path of slow deterioration and eventual demolition.

Denver has launched a pilot program on two conversions not included in the study in an effort to streamline the process and create more accommodating regulatory criteria and building codes, Ramsey said. One building, for example, had a stairwell railing that wasn’t high enough under current codes but was still functional.

“There also has been discussion of some financial incentives,” she said.

Gensler’s study focused on five downtown neighborhoods: the Central Business District, Union Station, Civic Center, North Capitol Hill and Capitol Hill. Of the 69 buildings initially looked at in that area, 29 were identified as strong candidates for a residential conversion, located mostly in the CBD and North Capitol Hill.

Newer buildings, the kind that tenants still prefer, and older structures with a low vacancy rate were excluded. Lease expirations and the financial status of the debt used to purchase a building were also used to screen buildings. And floorplans that would waste too much space or cost too much to switch over were left out.

If a building becomes distressed, meaning the rents can’t service the debt payments, its value drops. And the lower the price falls, the better the chance a developer can step in and attempt a conversion. Many buildings aren’t there yet, but Denver is working to head off the downward spiral, and also address another problem it has, too few housing units.

Zillow estimates metro Denver is short 70,000 housing units. While Downtown has a higher residential vacancy rate than other parts of the metro area because of a heavy pace of apartment construction, it is only one-fifth of the vacancy rate seen in office space.

Adaptive reuse or residential conversions, in short, offer a way to tackle two problems at once and breathe new life into the urban core, replacing employees with residents.

Denver’s city center has 46,500 residential units, about double the number it had in 2010, according to the Downtown Denver Partnership. Adding an additional 7,500 units via the 29 conversions identified in the Gensler study would represent a 16% increase.

Smaller unit sizes could hopefully boost affordability, which is sorely lacking in Denver, and so could efficient conversions.

“We are really interested to see how this housing could meet the needs of people throughout the income spectrum,” said Andrew Iltis, vice president of planning and community impact at the Downtown Denver Partnership.

Gensler used its “residential conversion compatibility assessment” tool to determine how convertible buildings were. The tool looks at five categories, chief among them the building form or how easy it would be to fit in standard-sized units without a lot of wasted space and the floor plate, which influences the distance of windows to the core of the building.

Those two categories account for about 60% of the weighting. The rest involved servicing or items like available parking, elevators and loading docks; the envelope, which includes the usability of the windows, walls and exterior; and the site context, things like the proximity of transit and nearby amenities that residents would find attractive.

Based on those five items, buildings were assigned a score. Buildings with a score above 80% were considered prime candidates for conversion to residential, while those above 70% but under 80% fell into the second tier. About 22 buildings were in the first tier, and the other seven in the second.

From the list, Gensler and the city’s planning department created a shorter list of 16 buildings that they studied individually.

“We started to look from a city perspective, which buildings could be paired together. That is how we arrived at 16,” Ramsey said. The proximity of buildings to transit, parks, child care and schools was also studied, with an intent to cluster conversions as much as possible to create residential pockets.

The prime buildings had 4.8 million square feet of space, of which 4.3 million could be converted to residential, which would allow for 5,124 apartments or condos at an average size of 650 square feet.

Reusing existing high-rises greatly reduces the energy and climate impact versus a demolition followed by new construction, Ramsey said. Denver could preserve the historical continuity in its architecture and head off missing teeth in its skyline, preventing a resurgence in the surface parking lots that prior urban renewal efforts created.

Martin Goldstein, founder and principal of Venture Architecture, said conversions come down to what he calls the “architectural fabric” of a given building.

“The trick is trying to figure out what is reusable and what condition that reusable fabric is in. How usable is each building?” said Goldstein, whose firm is currently working on four conversions. Goldstein serves on the partnership’s Adaptive Reuse Task Force, which is trying to connect investors and developers with landlords and building owners in need of an exit strategy.

It is important that developers have expertise in both tenant improvements in office buildings and in multi-family design and construction, which isn’t easy to find, Goldstein said. And it is important for Denver to have successful conversions from the get-go, which is why creating a list of prime candidates was so important.

“About a third of the buildings in Denver are really right and about a third are not worth a conversion,” he said.

A middle third falls into a grey area whose fate could depend on how low commercial real estate prices fall, how comfortable developers get in finding creative uses for excess interior space, and how willing Denver is to lend a helping hand via more flexible building codes and outright incentives.

The office market’s failure to rebound, the steady torrent of expiring leases and a massive wave of commercial debt coming due all create a sense of urgency, a rush to evaluate every structure. Goldstein said he hoped the process is done thoughtfully so conversions become a long-term solution and not another fad of the moment.

“Everyone needs to take a deep breath,” Goldstein said. “These buildings will tell you what they want to be.”

Here is a list of the buildings screaming “convert me” the loudest, according to the Gensler study.

1. 910 16th St. – University Building

At the top of the list for conversion is the University Building, which was built in 1910 and renovated in 1982. Older buildings, with a more rectangular design, smaller floorplates and windows that can be opened and closed, tend to be more efficient in terms of allocating space. But bringing systems, like elevators and HVAC, up to date can add to the costs. While employers, especially larger ones, increasingly shun older office buildings, a distinctive exterior and historic look are a bonus in attracting residential tenants. About 11 floors of the building are convertible, allowing for the creation of 132 units. A key drawback is that the building lacks parking. But its vacancy rate of 51% creates a strong financial incentive to find other uses.

2. 1775 Sherman St. – Lincoln Crossing Tower I

The buildings populating the conversion list tend to fall into two categories. There are older pre-war buildings or the towering high rises that went up in the 1980s and early 1990s during the oil and gas construction boom. Lincoln Crossing Tower I, built in 1983, is the second leading candidate with a conversion score of 91%, which matches the University Building. In its favor, it has a rectangular design with a 40-foot distance from the windows to the core of the building, a size that works for 35-foot-deep apartments or condos. As an added bonus, it has a facade with steps and cutouts, which will make it easier to install balconies. There is on-site parking and nine elevators, more than double the number needed for a residential tower. An estimated 341 units can be created in the building. The vacancy rate of 40% matches the downtown average.

3. 1401 17th St. – LoDo Towers

The LoDo Towers were built in 1983 and renovated in 2014 and have a convertibility score of 90%. The building, like Lincoln Crossing, has a rectangular design with a 40-foot space between windows and the core and plenty of parking. Fifteen floors are convertible and could generate 210 units.  On the downside, the building’s two stairwells aren’t separated by enough distance to meet current codes. And the vacancy rate of 32% makes it one of the more popular buildings from that era.

4/5. 1625 and 1675 Broadway – Denver Energy Center

Once home to the World Trade Center, the twin buildings just off the 16th Street Mall could provide a large 935 new apartments or condos if converted. The buildings have plenty of parking and an expansive plaza for gatherings. Although the floor plate is on the large side, the spacing of 40 feet from the windows to the core works. But as with the Lodo Towers, the two scissor stairs aren’t compliant with existing codes. Although 1625 Broadway has an above-average vacancy rate of 53%, its twin at 1675 Broadway is mostly occupied, with a low 16% vacancy rate. That could result in a staggered conversion. The two buildings had an 89% score.

6. 1660 Lincoln St. – 1660 Linc

Like other leading candidates, 1660 Linc has a rectangular design, but it has a slightly smaller distance of 35 feet from the windows to the core, allowing for apartments with a depth of 30 feet. It was built in 1972 and renovated in 2021. The 20 floors available for conversion could provide 380 units. It has parking and enough elevator capacity, but the stairwells are not code-compliant in terms of their spacing. It has “ribbon” windows that could be preserved or more easily replaced than the window types used in later decades.

The other 10 buildings making the top 16 list for a residential conversion: 225 E. 16th Ave., 370 17th St., 1801 Broadway, 1900 Grant St., 1776 N. Lincoln St., 821 17th St., 621 17th St., 700 17th St., 303 W. Colfax Ave. and 1605-1615 California St.