April 2011
Progress on commercial real estate front positive for Metro Denver
The region's commercial real estate market is showing clear signs of improvement, according to data compiled by the Metro Denver Economic Development Corporation (Metro Denver EDC) in its Monthly Economic Summary for April 2011.
Data from CoStar Realty Information, Inc. show first quarter direct vacancy rates in the region's office, industrial, flex, and retail markets were equal to or below last year's rates.
"While vacancy has not fallen enough to support higher lease rates—or the significant commercial development that tends to come with them—several public and nonprofit development projects are still moving forward," explained Patty Silverstein, president of Development Research Partners and chief economist for the Metro Denver EDC.
Metro Denver builders recently broke ground on projects including the Denver Police Crime Laboratory, Metropolitan State College of Denver's Hotel and Hospitality Learning Center, and The Children's Hospital's Broomfield Therapy Center. GID Urban Development Group also broke ground on phase two of its luxury apartment project in downtown Denver's Riverfront Park, and the Urban Land Conservancy revealed plans for a transit-oriented development along the West Corridor light rail line.
The nature of the projects moving ahead clearly speaks to the opportunities and challenges of today's real estate market. Public projects underway are in most cases those that were planned and funded before the recession. The deficit challenges now facing governments at all levels will almost certainly mean fewer public projects break ground in the near future. Apartments and other high-density housing are the increasingly favored developments among residential builders, as many are struggling to finance and sell new detached homes and many potential homebuyers remain on the sidelines. The limited number of commercial projects suggests companies still face challenges. Business confidence has clearly improved, but many companies are still treading cautiously amid high commodity costs and political unrest both here and overseas.
On the employment front, Metro Denver employers added 5,200 jobs between January and February. Job growth has not yet returned to levels seen during healthier economic periods over the past decade. Employers added closer to 10,000 jobs in February. Still, job gains are positive news and a variety of industries are reporting growth.
February year-to-date percentage job growth was strongest in education and health services (+3.2 percent) and professional and business services (+2.6 percent). Of the four industry supersectors that reported year-to-date job loss in February, percentage declines were largest in natural resources and construction (-4.8 percent) and information (-4 percent).
All challenges aside, the indicators for commercial real estate vacancy were among 15 Metro Denver indicators that moved in a positive annual direction in this report. (Fourteen indicators moved positively in the previous report.) Twelve of the indicators moved in a positive monthly direction, compared to nine indicators in the previous report.
The Monthly Economic Summary provides a snapshot of metro area economic activity, as well as its relationship to national and regional economic trends.