July 2008
Metro Denver housing and hiring expectations improve
Several indicators for Metro Denver's housing market have improved, but commercial real estate statistics have weakened from the first quarter of 2008. Business hiring expectations have improved and local job growth still exceeds the national average, according to data compiled by the Metro Denver Economic Development Corporation (Metro Denver EDC) in its Monthly Economic Summary for July 2008.
Over-the-year growth in Metro Denver nonfarm employment measured 1.3 percent in May, compared to 1.6 percent in April and 1.7 percent in March. Recent growth rates across Metro Denver have been relatively equal, and both the Denver-Aurora and Boulder MSAs reported year-to-date employment gains of 1.7 percent. Denver MSA job growth through the first five months of 2008 was strongest in education and health services (+3.9 percent), while Boulder MSA job growth was strongest in natural resources and construction (+3.9 percent).
"While Metro Denver companies are adding jobs, the impact of weak national trends is increasingly evident," stated Tom Clark, executive vice president of the Metro Denver EDC.
Nationwide over-the-year employment gains slowed to 0.1 percent in May, which brought year-to-date job growth to 0.4 percent. Also consistent with national trends, Colorado job growth has slowed and measured 1.9 percent through the first five months of 2008.
Third quarter hiring outlooks for Metro Denver employers improved from the second quarter. According to the most recent Manpower Employment Outlook Survey, the share of Denver area employers planning to add workers in the third quarter rose to 32 percent from 22 percent who planned to add jobs in the second quarter.
The impact of fuel costs on workers is a growing concern for Metro Denver employers, according to a survey by the Mountain States Employers Council. Forty-six percent of respondents said they offer employees fuel-related accommodations, including flexible scheduling, telecommuting, reduced-price transit passes, and gasoline gift cards. Many respondents were also considering increased accommodations, particularly for traveling sales agents, maintenance workers, and other employees who drive a large number of miles for work.
Local foreclosure counts are beginning to trend in a more positive direction. Foreclosure filings in Metro Denver declined 13 percent between April and May, and the May total fell 17 percent below filings from the same month last year. May filings in each of the seven Metro Denver counties except Douglas County declined from April, although total filings remained higher than 2007 levels in all but two counties.
Home sales conditions have also improved in the local market. The number of closed home sales in Metro Denver rose for the fourth consecutive month in May, although year-to-date sales remain 8.6 percent below sales from the first five months of 2007.
"While overall improvement in Metro Denver foreclosure activity could indicate a turning point, several more months of positive trends will determine if local foreclosure counts are truly easing," explained Patty Silverstein, chief economist for the Metro Denver EDC.
Metro Denver's office market weakened in the second quarter as ongoing economic uncertainty limited transactions. According to CoStar Realty Information, Inc., the direct vacancy rate returned to its level last year of 12.1 percent from 11.9 percent in the first quarter. Despite slightly higher vacancy, direct average lease rates rose and ended the second quarter at $21.09 per square foot.
Vacancy and lease rates in Metro Denver's industrial market were essentially flat between the first and second quarters of 2008, according to CoStar. The industrial market direct vacancy rate ended the second quarter at 6.5 percent, and direct average lease rates rose by $0.07 per square foot to $5.19.
Metro Denver's retail market direct vacancy rate rose to a recent high of 7.7 percent in the second quarter, according to CoStar. While direct average lease rates rose to $17.88 per square foot despite the difficult market conditions, retail construction activity slowed.
In total, nine of 18 economic indicators showed positive monthly trends, the same number as last month. However, only four indicators moved in a positive annual direction, down from six indicators last month.
The Monthly Economic Summary provides a snapshot of metro area economic activity, as well as its relationship to national and regional economic trends.