It has some of the highest rents in the city and a construction pipeline stuffed with luxury developments, but the Denver Tech Center neighborhood could get a more affordable alternative with one developer's plan to overhaul a long-vacant office building.

Shea Properties, a Southern California-based developer with an extensive track record in Colorado, submitted a preliminary plan to convert a four-story property at 4340 S. Monaco St. into housing, according to information filed with the city and county of Denver. Yet rather than take the high-end route most stakeholders investing in the area have preferred, Shea would focus its proposal on creating a rare option for lower-income renters.

As pitched, the plans call for overhauling the roughly 120,000-square-foot building — which sat vacant for the past five years — and subdividing it into 143 units. The reimagined apartment complex would cater to tenants making between 30% to 70% of the area median income, which has climbed to about $105,000 a year, according to CoStar data.

Shea Properties is currently under contract to purchase the building, Executive Vice President Peter Culshaw confirmed. It was last sold to Orion Office REIT as part of a 94-property portfolio acquisition that closed in late 2021, according to CoStar data. If the deal goes through and Shea's conversion proposal proves feasible, it would be the firm's first office-to-residential project in its extensive development pipeline.

If all goes well, Culshaw said future tenants could occupy the property as early as 2026.

Faced with an unprecedented amount of empty space, office-to-residential proposals have sprouted up across the United States as city officials, developers and landlords contend with how to adapt to post-pandemic demand.

There were about 100 such conversion projects underway across major cities in the United States by the end of last year, according to CoStar and data from brokerage giant CBRE. That is a significant spike compared to the annual average of about 40 office conversions between 2016 and 2022.

What's more, the trend is expected to continue with more than 200 office conversion developments planned or anticipated to be completed in the next three years.

While the overhauls have been viewed as a way to remedy the country's record-high office vacancy rate — it has climbed to nearly 14%, according to CoStar data — conversions face a complicated mix of hurdles. Issues such as complicated financing, environmental challenges and stagnating markets have proven among the biggest hurdles for those looking to transform some of the nation's older office buildings. Then there are the physical attributes of properties themselves that can deliver their own set of headaches, such as irregular floor plans, unsuitable locations or aging systems that would be too expensive to fix and reuse.

The cost of converting an office building into a new multifamily one, for example, averages about 20% more than ground-up development, said Phil Mobley, CoStar's national director of office analytics. That often means developers have to feel confident they'll be able to achieve top-of-the-market rents in order to make the conversion financially successful.

Public incentives might also be necessary, he added, something local governments such as those in San Francisco, Chicago, Seattle, Los Angeles and New York have said they would pursue.

If the numbers can pencil out, however, office conversions could rework underused space to meet higher-demand uses. For Shea, that means creating an option for renters otherwise priced out of the greater Denver Tech Center area.

The neighborhood, a growing employment hub that straddles several suburbs south of downtown Denver, has long been popular among renters, developers and investors. The COVID-19 pandemic accelerated its appeal, providing the region with a layer of durability that has made it possible to avoid the economic pitfalls plaguing other multifamily markets across the country.

"Developers have historically focused on luxury apartment communities in the Denver Tech Center," CoStar's Jeannie Tobin, Denver's director of market analytics, said.

There are upward of 1,700 units in the pipeline — an amount slated to stretch the neighborhood's inventory by nearly 12.5% — but the area still carries some of the highest asking rents across greater Denver with an average of more than $2,000 per month.