“I’ve been in this business for almost 36 years, and in the last few years, we’ve seen the highest vacancy rates we’ve ever witnessed,” said Becky Gamble, CEO of commercial real estate firm Dean Callan & Co., speaking at the Downtown Boulder Partnership’s Town Hall on April 22.
Today, nearly 29% of downtown office space sits empty as efforts to bring workers back face headwinds. In response, city leaders, business owners and community members are working together to reimagine the future of downtown.
To turn things around, they’ll also need to contend with high property and housing costs, shifting industry dynamics, remote work normalization and economic uncertainty at the national level.
Workers can’t live in Boulder
The topic of Boulder’s affordability crisis is covered a lot, but that’s because it’s one of Boulder’s biggest issues. When the median housing price exceeds $1 million, like it does in Boulder, people can’t afford to live here.
According to population change data, Boulder’s population has decreased over the last decade while surrounding areas, especially Longmont, have grown. Longer commutes and fewer workers able to live in Boulder affect companies’ ability to bring workers together in an office and into downtown.
“More of my employees were moving further and further away,” said Chris Schwalbech, a business and property owner in downtown Boulder. “The whole location equation just changed a lot. What didn’t change for us is that we were working primarily remotely before COVID, except for a small group of us, then even that group said, ‘Well, why can’t we just work remotely like the rest of the team?’”
After almost a decade of having an office downtown, Schwalbech is planning to move their company to fully remote work and sell or lease their property at 15th and Pearl.
Connor Cantrell, an employee at Wunder Capital, lives in Golden and comes into Boulder once a week to work in the company’s downtown office.
“I’d say because of the commute, I need to justify the drive with something other than just sitting in the office.” The office’s free EV charging station is his main incentive to come into Boulder.
A side effect of more workers living outside of Boulder is that it’s less likely that they are going to stay downtown for after-work social gatherings.
“I see that with a lot of my colleagues who are on the newer side,” said Alejandro Soto, a planetary scientist at Southwest Research Institute, which has an office on 13th and Walnut in downtown Boulder. “They have to do a 20- to 30-minute commute into downtown and park, and then are potentially less likely to stay after hours because they have to get back out to where they live.
“That makes it hard to recreate a social culture when more people are like, ‘Well, I got a half-hour drive home, and I don’t want to do that after sitting at a bar having one or two drinks and some food.’”
Downtown isn’t what it used to be
More on downtown Boulder
This is the conclusion of a three-part series investigating downtown Boulder’s economic woes. Read Part 1 (bit.ly/EmptyDowntownBW) and Part 2 (bit.ly/EmptyRestaurantsBW)
The 2010s were a booming time for Boulder. In 2013, Inc. Magazine named Boulder “America’s Startup Capital” and the Kauffman Foundation claimed that Boulder had the highest “high-tech startup density” of any metro area in the U.S.
A lot has happened in the past decade. Private equity and corporations like Google, Microsoft, X (formerly Twitter) have acquired many of the startups. Investors and incubators like The Foundry Group, TechStars, Boomtown and others have decreased or ended activity in Boulder.
“I think it has a lot to do with Techstars and Foundry — they were such a strong magnet,” said Schwalbech. “The technology scene has moved to Denver where people can live and they can transit into town much more easily.”
When companies like Microsoft and X initially acquired businesses in Boulder, they kept offices here, but since the pandemic, they have left or downsized, turning mostly to remote work. The shrinking software industry in Boulder has had an impact on the downtown energy and businesses.
“Twitter employees would get a gift card each month to buy coffee, so we’d have great sales from those employees,” said Justin Hartman, co-owner of OZO Coffee, which has two Pearl Street locations. “Now, they are gone.”
COVID-era habits are hard to kick
“In the 2010s, Boulder was at its highest point of venture-backed energy for companies doing awesome stuff,” said Peter Genuardi, a business owner who works from home and rents a desk at Kiln coworking on the east end of Pearl Street. “After the big tech giants moved in and things have changed with regard to who lives in Boulder, who’s starting businesses here and the pandemic, it became easy to just work from home.”
Boulder has the highest share of the workforce that works from home in the country, according to Axios: 28% of people in Boulder work from home, compared with the national average of 13.8%.
“One of the major hurdles we have to clear is the allure of rolling out of bed and going to your home office versus having to actually get in your car, ride your bike or whatever, and get to an office,” said Dave Reiss, co-founder of Wunder Capital.
Wunder has adopted a hybrid model, offering incentives to come into the office, such as free lunch, group gatherings and EV charging. Reiss estimates about 60% of the company comes into the office throughout the week.
The hybrid model is being increasingly adopted by companies. But as the cost of a downtown office space becomes untenable, businesses are rethinking even that option.
Downtown office space is too expensive
“I would say that property taxes are probably, other than the team not wanting to be there, the next biggest reason for me to say, this doesn’t work,” said Schwalbech, who reports that property taxes make up 25% of his costs to run the business.
Commercial property taxes in Boulder are 27.9% of the property value — on top of already high costs, that makes a huge difference to businesses deciding whether or not they want to be downtown.
Renters feel the impact of property taxes since owners often pass the expense onto tenants.
“We’ve been at Pearl Street West since 2011, so we’ve had 3-5% rent increases every single year,” OZO’s Hartman said. “Then during that tenure, when that new building was built across the street, [county assessors] argued our property value increased, and our property taxes went up by like 30%. Our rent is more than double right now from when it started.”
The significant expense is likely keeping vacancy rates high. Right now, nearly a third of downtown offices are empty.
What comes next?
City officials and business representatives are hoping that new industries will come into Boulder to fill the gaps left behind by the software industry and remote work.
Whatever specific actions the city chooses, they will also need to take into account the economic crisis that the federal government is causing. As John Tayer, president of the Boulder Chamber, wrote in an email to city staff and council prior to the study session, “There is no hyperbole in suggesting that the paradigm for our community’s economic success is under assault.”
During an April 24 city council study session, city staff presented the emerging opportunities including the potential expansion of the film industry with the Sundance Film Festival’s relocation in 2027, as well as promising local growth in artificial intelligence, life sciences and quantum technology.
To address the stagnation of Boulder’s business districts, officials are proposing the creation of a Downtown Development Authority (DDA). DDAs are quasi-governmental entities that function as taxing districts, providing a stable source of revenue; voters in Lafayette approved one last year.
These opportunities and efforts could have the impact of attracting and keeping businesses downtown, but don’t address issues of affordability and remote work.
City council member Ryan Schuchard highlighted this gap during the study session when he asked who the economic vitality plan was for and how the plan addresses the ability for “folks who are at lower-than-average income levels” to “maintain and improve their economic choices.”
In response, Jennifer Pinnsoneault, the city’s economic vitality manager, pointed out that the city is working with Boulder County and other groups to help low-income individuals.
Yet there’s a large group of people not addressed in the plan: middle-income earners. These are people who make over $100,000 per year but still can’t afford to own a home in Boulder, people like Soto, a planetary scientist with a PhD.
Soto used to live and work downtown until the owner of his apartment decided to move back in. He realized he had been benefiting from below-market rent for three years. Without it, he couldn’t afford to stay in Boulder.
“It was cheaper to buy in Lafayette than to rent in Boulder,” Soto said.
Attracting more businesses might strengthen the city’s revenue base, but it won’t help Soto or others like him buy homes here.
“Is Boulder still great?” wonders Genuardi. “I would say if anybody asked me, that Boulder’s a great place to live, but it’s not as great as it once was, 15 years ago. The thing that keeps me from saying Boulder is still great is the class stratification that’s happened in the last 10 years.”