3660 Blake Street

Denver’s office market continues to face turbulence as The Hub, an eight-story office building in RiNo, has been surrendered to its lender, Ares Commercial Real Estate Management. The previous owners, Farallon Capital Management and Eagle Point Capital Partners, opted to return the property rather than extend their loan.

According to CoStar, Farallon and Eagle Point purchased The Hub in September 2021 for $40.5 million, largely backed by a $37 million loan.

With leasing demand still slow to recover post-pandemic and interest rates making refinancing difficult, the owners chose to cut their losses. The price per square foot for the 115,700-square-foot property was approximately $350 at the time of purchase.

Farallon, with $39 billion in “flexible capital,” won’t feel much financial strain from this default, but it signals bigger concerns for Denver’s office market.

Despite modern amenities like a fitness center, EV charging stations, and outdoor terraces, The Hub remains largely vacant, reflecting struggles seen across the city. Denver’s office vacancy rate has climbed past 25%, per JLL, as hybrid work models and tech-sector downsizing weigh on demand. Leasing in RiNo and Cherry Creek remains active, but many tenants are reducing their footprints rather than expanding.

This default isn’t a residential foreclosure—tenants like The Colorado Trust, KTGY, and Solidcore aren’t necessarily leaving. However, the fact that a well-located, newer building is struggling suggests even Class A properties are vulnerable.

Adding further uncertainty, the Federal Reserve’s meeting on March 19, 2025, resulted in holding interest rates steady at 4.25% to 4.50%, citing increased economic uncertainty.

The Fed revised its 2025 projections, lowering GDP growth to 1.7% from 2.1% and raising inflation expectations to 2.7% from 2.5%, fueling concerns of stagflation—a combination of stagnant growth and rising inflation. Rising borrowing costs and tighter financial conditions could further pressure commercial real estate markets.

The challenges facing The Hub and the broader Denver office market are symptomatic of a shifting national landscape. Across the United States, commercial real estate is being reshaped by several converging factors, including technological advancements, changes in workforce preferences, and economic pressures.

Companies are prioritizing flexibility, which translates into shorter leases and a preference for office spaces that can be easily adapted to changing needs. In response, landlords are increasingly offering incentives such as shorter lease durations, flexible terms, and tenant improvement allowances to attract and retain tenants.

The rise of coworking spaces has further impacted demand for traditional office space. Operators of coworking facilities can offer the kind of agile working environments that many companies are seeking. This trend, along with the higher availability of sublease space, has added pressure on rental rates and vacancy levels.

While the return of The Hub to its lender highlights significant challenges, it also underscores the need for adaptability and innovation in the real estate sector.

The future will likely favor landlords and developers who can pivot to meet the changing demands of the market, whether through embracing technology, leveraging flexible workspaces, or enhancing the tenant experience with amenities and services that go beyond the traditional office setting. As economic conditions evolve, stakeholders in Denver and other markets will need to closely monitor trends and adjust strategies to remain competitive.