Colorado Office Property Tax Appeals

Fee simple value: the question that decides office assessments

An office building’s county value is supposed to be the value of the fee simple estate: the building as the market would price it, at market rent, market expenses and market occupancy, as of June 30, 2026. That is the statute (§ 39-1-103(5)(a), C.R.S.) and the assessor’s manual, which tells every county that “market value of the fee simple estate should reflect market assumptions, including market rent, market expenses, and market occupancy” (Assessors’ Reference Library, Vol. 3, Ch. 2). What the county’s model actually does, for most income-producing office, is capitalize a stabilized pro forma: a rent by class and submarket, a vacancy allowance, an expense ratio and a capitalization rate applied across the class. When the county holds the building’s own rent roll, from a prior appeal or an income questionnaire, the model tends to capitalize that instead.

Both shortcuts miss the same thing. A rent roll signed in 2019 or 2021 is not the June 30, 2026 market, and a class-wide rent is not the building. The office appeal is the record of where the building’s market value, by all three approaches, sits below the number the county capitalized. The statute requires the assessor to “consider and document all elements” of the cost, market and income approaches before setting a value. A value that rests on one pro forma, with the other two approaches unexamined, is the first thing a case tests.

The arguments below are the ones that move office values in Colorado: above-market leases, market rent net of concessions, lease-up for vacant space, and the cross-check of sales and cost. Each is backed by the statute, the Division of Property Taxation’s manual, or a decision of the Board of Assessment Appeals, cited where it applies. The Colorado guide’s office section covers sublease overhang, flight to quality and the county board disclosure in more detail.

Five places an office appeal finds value

• Above-market leases and the in-place income approach. The county values the fee simple estate, not the landlord’s leased fee position. A lease signed in a stronger market, a sale-leaseback, or a build-to-suit with rent set to repay construction cost can leave contract rent well above what the space would lease for today. The assessor’s manual calls that gap excess rent, “created by a lease favorable to the landlord,” and tells assessors it “may be calculated separately and capitalized at a higher rate,” not folded into the building’s stabilized income (ARL Vol. 3, Ch. 7). The manual’s general rule is market rent, market expenses and market occupancy. A long-term non-market lease is treated as an exception with its own procedure, which values the leased fee and the leasehold as separate estates and brings them back to one unit value under § 39-1-106. SVA’s reading of that procedure is that on an above-market lease the tenant’s leasehold is a burden, not an asset, so the unit value comes back to the market. The Colorado Supreme Court’s decision on non-market leases, City and County of Denver v. Board of Assessment Appeals (Regis Jesuit Holding), 848 P.2d 355 (Colo. 1993), allowed a below-market lease to be considered because a buyer would consider it, and the court was careful to say that actual rent is neither the only factor nor necessarily the main one. The statute directs the assessor to consider multi-year leases (§ 39-1-103(5)(a)(III)); considering a lease is not the same as capitalizing its rent. The evidence is the lease abstract, the leases signed in the submarket in the eighteen months before June 30, 2026, and the spread between the two.
• Market rent means effective rent: tenant improvements and concessions. Face rent on a 2025 or 2026 office lease is rarely what the landlord nets. Free rent on a seven-year term, tenant improvement allowances that can exceed a year of rent, and leasing commissions all come off before any investor capitalizes the deal. If the county’s market rent is a face rent from listings or a survey, it overstates the market by the value of those concessions, and the manual’s standard is market rent, not asking rent. Two deductions follow. The rent in the pro forma is the effective rent of signed deals in the base period, net of free rent and amortized allowances. And the tenant improvements and commissions a buyer must fund to re-lease the rollover inside the holding period come off the value, as a line below net operating income or as a reserve. Neither appears in a class-wide model. The state board measured a 2026 lease-up deduction with the market’s own leasing commissions and tenant improvement allowance (Docket 2025BAA84, Aug. 31, 2026); the same figures belong in every pro forma. The evidence is the building’s executed leases and the comparable leases in the submarket with their full economics, not the headline rate.
• Lease-up: vacant space is not stabilized income. The county’s pro forma assumes the building is stabilized. A building at 60% occupancy on June 30, 2026 is not, and a buyer prices the rent it will not collect, the improvements and commissions it must fund, and the time it takes to get there. Counties have argued that this deduction values a lesser interest than the fee simple. The Board of Assessment Appeals rejected that argument in a series of decisions in August 2026: “a deduction for lease-up expenses is consistent with valuing the fee simple estate and is not the same as a leased fee interest,” because the cost to lease a building up “is an anticipated buyer expenditure” (Dockets 2024BAA2984 to 2988 and 2025BAA84, Adams County). In the case where the deduction changed the result, a vacant 546,000 square foot warehouse, the Board took $8.79 million off the stabilized value for twelve months of rent loss, commissions and tenant improvements and cut the county’s value 31%. The Board measured the deduction with base-period market figures and rejected a discounted cash flow for it, because assessors are “statutorily bound to rely only on conditions existing in the base period” (Padre Resort, Inc. v. Jefferson County Board of Equalization, 30 P.3d 813 (Colo. App. 2001)). For office, where lease-up runs longer and tenant improvements run higher than for industrial, the deduction is usually the largest single item in the case. Sublease space is part of it: space on the rent roll that is listed on the sublease market is income and supply at the same time, and the asking rents on those listings are direct evidence of what the market pays for the building’s space.
• Three approaches, not one: the sales and cost cross-check. The statute does not let a value rest on an income pro forma alone. The assessor “shall consider and document all elements of such approaches that are applicable prior to a determination of actual value” (§ 39-1-103(5)(a)). For office at the June 30, 2026 date, the sales are the check. Buildings traded in the base period at prices that no stabilized pro forma would produce, often below replacement cost and sometimes below the land and the cost to re-tenant. A sale of a comparable building, adjusted for its occupancy and lease profile, is evidence of fee simple value in its own right, and the market approach must rest on “a representative body of sales, including sales by a lender or government” (§ 39-1-103(8)(a)(I)). The cost approach matters where the building is new, or where deferred capital, a reposition or a conversion is the buyer’s first deduction; a capital needs assessment dated near the valuation date puts a number on it. When the three approaches disagree, the appeal explains why. When the county has only one, the appeal says so.
• Energize Denver compliance. Denver office buildings of 25,000 square feet or more carry an energy-use target under Energize Denver, with penalties of $0.15 to $0.35 per kBtu short from late 2029. A buyer on June 30, 2026 deducted the retrofit or the penalty stream from the price, and a 2027 value should do the same; the county’s model will not unless the owner brings the target gap and a dated audit as a cost to cure. How the cost enters the 2027 value.

Every one of these is argued from the building’s own documents and from the leases and sales that closed before June 30, 2026. Nothing signed after that date supports the county’s value, and nothing signed after it supports the owner’s either.

What the county boards decided for office

Denver’s county board decided 1,339 office, retail and mixed-use petitions in 2025. Only 22.1% won a reduction, the lowest rate of the city’s commercial classes, but the median winning cut was 11.4%, the largest. Office cases that carried evidence had a lot of ground to cover, and covered it. In El Paso County, office petitions ended below the protested value 56% of the time, with a median cut of 15.8%. Across the Front Range, the strongest predictor of winning was whether anyone argued the case. The 2025 results, county by county.

A headquarters office campus cut 53%

A headquarters office campus in the north Denver metro was carried at $90.6 million for 2025. The appeal settled at the state board at $42.5 million, a 53% cut, and the 2025 tax fell by $1.34 million on the county treasurer’s books; the 2026 roll carries the settled value. A multi-building office campus in Greenwood Village, carried at $36.6 million for the same year, settled at $26.0 million, a 29% cut worth $274,000 of 2025 tax. A settled first-year value carries into the second year of the cycle unless the property changes. Both engagements were at a prior national firm; results from SVA engagements will be published with client consent.

The fee, per building, before you sign

The fee is a contingency share of the tax actually saved, set per property by its annual tax bill: 20% under $200,000 of tax, stepping down to 8% at $2 million and up, quoted in writing before anything is signed. There is no invoice unless the taxes go down.

An office building with a $600,000 tax bill over-assessed by 10% recovers $60,000 a year. That bill sits in the 15% row, so the fee is $9,000 and the owner keeps $51,000, and the reduction usually holds for both years of the cycle. The full fee schedule.