August 2009
Metro Denver's livability and corporate environment help buoy economy
Despite a declining commercial real estate market, Metro Denver’s high marks for livability and corporate environment will continue to attract business interest that fundamentally supports commercial real estate, according to data compiled by the Metro Denver Economic Development Corporation (Metro Denver EDC) in its Monthly Economic Summary for August 2009.
Tight financing is one of the largest challenges facing property owners with maturing loans, and developers are also struggling to fund projects. Additionally, heavy job losses have cut demand for office property and retail traffic has fallen considerably as consumers remain worried. Despite these obstacles, Metro Denver’s commercial markets have weakened less than they did in prior downturns.
"On the other hand, restrained development has limited the excess inventory that now burdens other metro area markets,” stated Tom Clark, executive vice president of the Metro Denver EDC. “We are continuing to report a better-than-average outlook for Metro Denver’s economy.”
Colorado is the nation’s third-best state for business, according to an annual ranking by CNBC.com. The ranking was based on 40 metrics in ten broad categories, including workforce, quality of life, and costs of living and doing business. Colorado received top-10 rankings in the categories that measure business friendliness, access to capital, and overall economy.
Forbes.com recently named Boulder to its list of ten “Best Cities for Recession Recovery.” Analysts identified the areas best positioned to rebound using projections of metropolitan area gross domestic product plus data on unemployment, home prices, and other economic factors. Many of the cities expected to recover more slowly have heavily burdened real estate markets or concentrations of employment in manufacturing or finance.
Also, Louisville ranked first on Money magazine’s 2009 “Best Places to Live” list. Magazine editors say the city’s low unemployment and crime rates plus its sense of community and outdoor recreation contribute to a top quality of life.
Metro Denver employers added 3,000 jobs between May and June, although seasonally adjusted data suggest the gain was smaller than expected for this time of year. Three of the region’s 11 industry supersectors reported net job losses in June, although typical summer-season layoffs in education represented a considerable portion of the cuts. Three other supersectors – natural resources and construction, wholesale and retail trade, and professional and business services – account for more than three-quarters of the jobs lost in Metro Denver so far this year. Data suggest, however, that hiring in professional and business services may be starting to revive.
A second quarter report by CB Richard Ellis shows Metro Denver office market vacancy increased in the second quarter and average lease rates declined. Office market development activity has all but halted and investment activity has also slowed, although the June sale of Seventeenth Street Plaza in downtown Denver was the fifth-largest office transaction closed so far this year. The report also observes a “flight to quality” driven by lower lease rates in Metro Denver’s industrial market. Vacancy rates have risen as tenants downsize and close, but the region’s industrial market is nonetheless in a stronger position than many other markets in the West.
While commercial real estate indicators weakened in this month’s report, other indicators showed better trends. Home sales rose, stock markets rallied, and the pace of Metro Denver foreclosures has slowed from 2008. Overall, seven indicators moved in a positive monthly direction, and three showed a positive annual trend. Nine indicators moved in a positive monthly direction in the July report and two moved positively on an annual basis.
The Monthly Economic Summary provides a snapshot of metro area economic activity, as well as its relationship to national and regional economic trends.