Current capitalization rate benchmarks for Denver office properties by submarket, building class, and risk profile.
Understanding Cap Rates in Today’s Market
Capitalization rates in Denver’s office market have expanded significantly since 2021-2022 as interest rates rose and property fundamentals weakened. For investors evaluating Denver office acquisitions in 2026, understanding current cap rate benchmarks by submarket and property quality is essential for accurate underwriting and pricing negotiations.
Cap rates reflect investor expectations for risk and return. Higher cap rates indicate greater perceived risk and/or lower growth expectations, while lower cap rates suggest investors are willing to accept lower current yields in exchange for perceived safety and appreciation potential.
Denver Office Cap Rate Benchmarks by Submarket
| Submarket | Class A | Class B | Class C |
| Cherry Creek | 6.25-7.00% | 7.50-8.50% | 9.00-10.50% |
| LoDo/Union Station | 6.50-7.25% | 7.75-8.75% | 9.50-11.00% |
| Denver Tech Center | 7.00-8.00% | 8.25-9.25% | 10.00-12.00% |
| Downtown CBD | 7.50-9.00% | 9.50-11.50% | 12.00-15.00%+ |
| Southeast Suburban | 7.25-8.25% | 8.50-9.75% | 10.50-12.50% |
| Boulder | 6.00-7.00% | 7.25-8.25% | 8.75-10.25% |
| RiNo/River North | 6.75-7.75% | 8.00-9.00% | 9.50-11.00% |
Note: Cap rates reflect stabilized, market-rate assumptions. Distressed or high-vacancy assets may trade at significantly wider spreads.
Factors Driving Cap Rate Variation
Location and Walkability
Cherry Creek and Boulder command the tightest cap rates in the Denver market due to their walkable environments, high-quality tenant bases, and limited supply. These submarkets have demonstrated the greatest resilience in the flight-to-quality trend, with tenants willing to pay premium rents for lifestyle-oriented locations.
Building Quality and Amenities
The spread between Class A and Class B/C cap rates has widened dramatically since the pandemic. Class A buildings with modern amenities (fitness centers, conference facilities, outdoor spaces, food service) are achieving rents and occupancy levels far above older product. According to CBRE, prime office buildings in Denver recorded vacancy of just 6.7% compared to the total market vacancy of 22.5%—a 15.8 percentage point gap that translates directly to cap rate compression for quality assets.
Tenant Credit and Lease Term
Buildings with long-term leases to credit tenants trade at materially tighter cap rates than multi-tenant buildings with near-term rollover. A single-tenant building with 10+ years remaining to an investment-grade credit tenant might trade 100-150 basis points tighter than a comparable multi-tenant building with 3-year average lease term.
Occupancy and Leasing Risk
Current occupancy is perhaps the most significant factor in today’s market. A fully-leased Class A building might trade at a 7% cap rate, while an identical building with 40% vacancy might trade at an 10-12% going-in cap rate (or higher) based on significantly discounted in-place NOI. Buyers are requiring substantial risk premiums for lease-up execution.
Cap Rate Trends and Forecast
Denver office cap rates expanded by approximately 150-250 basis points from their 2021-2022 lows, depending on property quality and submarket. According to CBRE’s H1 2025 Cap Rate Survey, cap rates have remained relatively stable despite bond market volatility, with modest compression expected in 2026 as the market stabilizes.
Looking ahead to 2026, several factors will influence cap rate direction:
Compression Factors: Declining interest rates (Fed Funds expected to reach approximately 3% by late 2026), improving leasing fundamentals, constrained new supply, and returning institutional capital could support modest cap rate compression for quality assets.
Expansion Factors: Continued remote work adoption, distressed sales hitting the market, and elevated uncertainty around tenant demand could maintain or expand cap rates for lower-quality assets.
Investment Implications
For investors considering Denver office acquisitions in 2026, cap rate selection should reflect realistic underwriting assumptions:
Exit Cap Rate Assumptions: Given current market uncertainty, prudent underwriting should assume exit cap rates 25-50 basis points wider than going-in rates for 5-year hold periods. Assuming cap rate compression is speculative in this environment.
Stress Testing: Underwriting should stress test scenarios with exit cap rates 75-100 basis points wider than going-in rates, particularly for value-add acquisitions requiring lease-up.
Submarket Selection: Cap rate compression is most likely in supply-constrained, high-amenity submarkets (Cherry Creek, Boulder, LoDo). Downtown CBD and suburban commodity office face the longest road to recovery and highest cap rate risk.
Bottom Line
Denver office cap rates in 2026 reflect a market still digesting the structural changes caused by the pandemic. Quality, location, and occupancy have never mattered more. Investors should focus on submarkets and assets positioned to benefit from the flight to quality, while approaching distressed or commodity office with appropriate risk premiums and realistic exit assumptions.
About SVN Denver Commercial
SVN Denver Commercial provides market-informed guidance on office investment pricing and cap rate analysis. Contact our investment sales team to discuss current market conditions and valuation for Denver office properties.