Downtown Denver Economic Update October 2013
Downtown Denver Partnership, Inc.
Research Department Research Department • 511 16th Street, Suite 200, Denver, CO 80202 • 303-534-6161 • www.DowntownDenver.com
EXECUTIVE SUMMARY
The most recent data show that Downtown Denver’s economy is strong. Employment increased over the year in Downtown Denver for the 10th quarter in a row and retail sales continue to rise. While the office real estate market in Downtown Denver improved in the in the third quarter 2013, the retail market slowed and residential real estate indicators were mixed. Employment increased over the year by 1% in Downtown Denver and 1.9% in the Business Improvement District (BID) in the first quarter 2013 (the most recent data available), representing the tenth consecutive quarter of employment gains in Downtown Denver. The sectors with the highest percent increase in employment were Natural Resources and Construction and Other Services, while Downtown’s largest sector, Professional and Business Services, added the most number of jobs with an increase of 1,430 employees. Retail sales tax collections were 4.6% higher in Downtown Denver and 2.6% higher in the BID in the fourth quarter 2012 than the previous year. In Downtown Denver’s largest category, restaurants, retail sales tax collections were up 6.7%. Retail sales tax collections from hotels, the area’s second largest category, rose 5.4% in Downtown Denver and 3.9% in the BID. While occupancy rates for Downtown Denver hotels decreased slightly in the first half of 2013, the average room rate increased by 6.4%. The residential real estate market remained healthy with existing home sales increasing significantly in the BID, Downtown Denver and City Center Neighborhoods in the second quarter. However, average sales prices in all areas decreased. Residential development in Downtown Denver and the City Center Neighborhoods continues to thrive with 7,846 rental units and 193 for-sale units under construction or planned as of September 2013. Commercial real estate indicators were positive in the first quarter of 2013. Office market vacancy rates in Downtown Denver and the BID decreased over the year, and average lease rates increased. While the retail market in Downtown Denver and the BID experienced slightly higher vacancy rates and lower lease rates, retail market fundamentals remain strong. Construction began or continued on a number of new office and hotel developments through the third quarter 2013.
This report includes the most recent quarterly data available and covers economic conditions in three areas. The first and smallest area is the Downtown Denver Business Improvement District (BID). The second area – which aligns with the 2007 Downtown Area Plan – is referred to as “Downtown” and includes the BID and several surrounding districts. The home sales section of the report also covers the City Center Neighborhoods, which include both Downtown and the BID in addition to other neighborhoods. Please see the last page of the report for a detailed map of the three areas. Metro Denver in this report refers to the seven-county region comprised of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, and Jefferson Counties.
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ECONOMIC UPDATE, October 2013 The economy in Downtown Denver showed promising signs of continued growth. Employment grew by nearly 1,100 jobs and unemployment fell to the lowest quarterly rate since the fourth quarter of 2008. The better employment situation, coupled with rising consumer confidence, was reflected in higher retail sales tax collections during the second quarter. Home sales accelerated, and robust residential development points to strong growth for the residential real estate market in the future. Nonresidential development was also strong, as low vacancy rates of commercial properties continue to point to the need for additional space in Downtown Denver. Downtown Economic Highlights
♦ The U.S. Department of Labor awarded a $25 million grant to nine colleges across the state to develop a
pipeline of skilled manufacturing workers. The Emily Griffith Technical College in Downtown Denver was awarded $418,000 through the Colorado Helps Advanced Manufacturing Program. The grants are part of the Trade Adjustment Assistance Community College and Career Training program to increase the attainment of manufacturing degrees and certificates that align with the industry’s recognized skills and competencies.
♦ Aleo Solar AG will shut down its U.S. operations immediately, including its headquarters in Denver. The German solar module manufacturer announced that although sales had increased over the year, the U.S. operation had not met recent sales targets and was not operating profitably. The company did not indicate how many employees in Denver will be affected.
♦ Recent notable rankings for Denver and area businesses: • The Daily Beast identified Denver as the 16th-ranked city on its list of cities where people go to “change their circumstances and improve their lives.” Factors considered for the rankings included employment growth, demographic factors, and quality of life issues such as traffic congestion. The top city was Austin, TX, followed by New Orleans, LA. • Forbes ranked Denver as the sixth-best U.S. city for business and careers. The rankings are based on 12 factors related to jobs, the cost of business and cost of living, income growth, quality of life, and education of the labor force. The magazine ranked 200 metro areas for the study. The number one city was Des Moines, IA, and Boulder ranked 26th. • The Daily Beast ranked Denver as the 13th-top thriving city in America. The website looked at the 100 largest cities in the country and ranked them based on factors including population growth, employment and earnings, and intellectual capital. Irvine, CA was the top-ranked city on the list. • Denver-based Chipotle Mexican Grill Inc. ranked as the 16th largest quick-service restaurant chain by QSR Magazine with revenue of $2.7 billion and 1,410 locations. The list, “QSR 50,” also included Quiznos (32nd). The top-ranked restaurant chain was McDonalds with revenue of $35.6 billion. • IndustryWeek’s annual ranking of America’s largest public manufacturers included several Denver companies. Molson Coors Brewing Co. was the highest ranked Downtown Denver company at 237th. Also on the list were QEP Resources Inc. (337th), Whiting Petroleum Corp. (351st), Cimarex Energy Co. (422nd), SM Energy Co. (437th), and MarkWest Energy Partners LP (443rd). • Outside magazine released its annual rankings of the 100 best places to work in the U.S., naming 26 Colorado companies. The rankings were based on companies that offer employee perks designed to
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encourage an active lifestyle. GroundFloor Media in Downtown Denver was ranked first on the list. • Forbes ranked the Denver Broncos as the 22nd most valuable sports franchise in the world. The team has an estimated value of $1.1 billion. The most valuable sports team in the world was Real Madrid with a value of $3.3 billion. • Forbes ranked the Denver Broncos as the 13th-most valuable NFL team in 2013, unchanged from the rankings in 2012. The Broncos’ value rose to $1.16 billion from $1.13 billion in 2012. The team’s annual revenue in 2013, $283 million, was 2.5 percent higher than 2012 revenue. The most valuable team was the Dallas Cowboys. • Working Mother magazine and Flex-Time Lawyers LLC ranked Denver-based Holland and Hart law firm as one of the 50 best law firms for women. The firms on the list offer flex time and reduced hour options. At Holland and Hart, 27 percent of equity partners are women, and attorneys at the firm are able to work reduced hours while still remaining eligible for partnership and management positions. Other law firms on the list that are located in Denver but headquartered elsewhere included Faegre Baker Daniels and Hogan Lovells. • Fortune magazine released its annual ranking of the fastest-growing companies in the world. The companies must have a market cap of at least $250 million, and then revenue growth rates, EPS growth rate, and the three-year annualized total return are used to rank the contenders. Whiting Petroleum Corp. (64th) in Downtown Denver was one of the two Colorado companies on the list. • Denver was ranked as having the 13th top event-planning industry in the U.S. The rankings were based on unique requests for proposals that 5,700 cities in the U.S. received from event planners and requests for proposals that were awarded to them. The total and awarded number of room nights in each city were also considered. The rankings were put together by Cvent in McLean, VA. The recently completed renovation of the Grand Hyatt Denver hotel and FasTracks progress toward a line from Denver Union Station to Denver International Airport helped Denver rise two spots from its ranking of 15th in 2012. • A Harris poll showed that Colorado was the fifth most-desired state to live in, according to nearly 2,300 adults surveyed in August. According to Harris Interactive, the company that administers Harris polls, California was the top choice of respondents to the survey. Colorado ranked fifth among baby boomers and women, and Americans over 68 years old ranked Colorado third. Among top cities, Denver was ranked as the seventh most-desired city to live in, behind New York City, San Diego, Los Angeles, San Francisco, Honolulu, and Seattle. • Forbes predicts the Inland West, which includes Denver, will be the fastest growing region in the country over the next decade. The area also includes Boise and Salt Lake City and extends from the foothills of the Rockies to the coastal ranges near the Pacific Coast. The region grew 21 percent to 32.3 million people between 2003 and 2013, and Forbes predicts it will grow 7 percent between 2013 and 2023. • USA Today released its list of the best urban bike paths in the U.S. The Cherry Creek Bike Path was ranked fifth.
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Employment Activity
♌ Covered employment1 in Downtown Denver during the first quarter increased over the year for the 10th
consecutive quarter. The 1 percent increase in Downtown was mainly due to a 4.3 percent increase in professional and business services, the largest supersector in the area. The sector added 1,430 jobs during the period. Natural resources and construction also showed a large increase of 632 jobs or 7.9 percent. The highest percent increase in the area was in the other services sector, which rose 8.5 percent (210 jobs). Four of the eleven supersectors showed a decrease in employment during the first quarter. The government sector, the second largest sector in Downtown, reported a drop in employment of 1.1 percent (251 jobs). Information (-17.2 percent), education and health services (-14.8 percent), and wholesale and retail trade (-0.7 percent) also reported declines.
A subset of the larger Downtown area, the BID, reported strong employment increase during the first quarter. Employment increased by 1.9 percent over the year, the 10th such consecutive increase. The largest increase in employment was the addition of 1,869 jobs (6.1 percent) in the largest supersector, professional and business services. The largest percent increase was in other services (12.2 percent). Like Downtown, four of the 11 supersectors showed declining employment during the quarter. The largest decrease in terms of jobs was in the information sector, which decreased 716 jobs or 16.8 percent. Education and health services reported a drop of 12.4 percent (224 jobs), the government sector lost 612 jobs (-3 percent), and the manufacturing sector showed employment was 10.2 percent lower (13 jobs). (Sources: Colorado Department of Labor and Employment, Quarterly Census of Employment and Wages (QCEW); Development Research Partners.) COVERED EMPLOYMENT1 Business Units* (1Q13) BID
Industry
Downtown
1Q13
BID 1Q12
Employment % ch
Downtown 1Q13 1Q12 % ch
Private Sector Natural Resources & Construction
328
344
8,410
7,803
7.8%
8,591
7,959
7.9%
23
41
114
127
-10.2%
894
879
1.7%
320
415
2,834
2,713
4.4%
3,472
3,497
-0.7%
29
35
1,299
1,283
1.3%
1,377
1,368
0.7%
Information
113
141
3,538
4,254
-16.8%
4,242
Financial Activities
633
727
11,733
11,663
0.6%
14,225
14,358
-0.9%
1,695
1,957
32,615
30,746
6.1%
34,792
33,362
4.3%
Education & Health Services
123
174
1,578
1,803
-12.4%
2,646
Leisure & Hospitality
313
441
12,865
12,450
3.3%
17,303
16,765
3.2%
Other Services
216
269
2,247
2,003
12.2%
2,694
2,483
8.5%
69
95
20,007
20,619
-3.0%
23,087
23,338
-1.1%
3,862
4,639
97,241
95,463
1.9% 113,323 112,238
1.0%
Manufacturing Wholesale & Retail Trade Transp., Warehousing & Utilities
Professional & Business Services
Government Total
5,123 -17.2%
3,106 -14.8%
Note: Data covers only those businesses with an address listed in administrative records. Most, but not all, businesses meet this criterion. As a result, changes in the data series over time are not always due to changes in actual employment – some changes are due to differences in address reporting. *The count of business units is generally larger than the count of individual businesses because some businesses have multiple units. Jobs covered by unemployment insurance as reported in the QCEW. These positions represent the vast majority of total employment,although the self-employed, some agricultural workers, some domestic workers, and several other categories of workers are excluded. This data series lags the CES series by about six months and is available for the nation, states, MSAs, and counties. 1
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♦ Employment in Metro Denver improved during the second quarter, increasing by 2.5 percent (36,000 jobs)
compared with the first quarter. Ten of the 11 supersectors reported employment gains during the period. The only sector that declined was transportation, warehousing, and utilities, which shed 200 workers or 0.4 percent. Both the natural resources and construction and professional and business services sectors reported employment increases of 7.6 percent during the period, the largest increases of the supersectors. Over-the-year, total employment was 2.6 percent (37,000 jobs) higher, and employment in each of the 11 supersectors rose. Natural resources and construction increased the most compared with the second quarter of 2012, rising 6.6 percent (5,100 jobs.) The largest number of jobs added was in the professional and business services sectors, which showed an employment increase of 12,100 workers or 4.8 percent.
Employment in Colorado increased 2.4 percent in the second quarter compared with year-ago employment. The U.S. reported slower growth of 1.6 percent during the period. (Sources: Colorado Department of Labor and Employment, Labor Market Information, Current Employment Statistics (CES); U.S. Bureau of Labor Statistics.)
♦ The unemployment rate in the City and County of Denver was 7.3 percent during the second quarter, a 1.2
pecentage point decline over the year. The rate was also an improvement over the first quarter rate of 8 percent.
Metro Denver also reported a comparatively lower average unemployment rate during the second quarter. The quarterly rate of 6.7 percent was 1.1 percentage points lower than the year-ago rate and 0.5 percentage points below the first quarter rate. The statewide rate during the second quarter (7.1 percent) fell 0.4 percentage points over-the-quarter and 1 percentage point compared with data one year prior. (Sources: Colorado Department of Labor and Employment, Labor Market Information; U.S. Bureau of Labor Statistics.)
♦ According to the Manpower Employment Outlook Survey, hiring is expected to slow during the fourth quarter for
the Denver-Aurora-Broomfield MSA. Compared with the third quarter, the percent of companies that expect to hire fell 8 percentage points to 15 percent. The decrease may be partially due to a typical, seasonal trend. Hiring was also down 2 percentage points from the fourth quarter of 2012. According to Manpower Inc., employers are considerably less optimistic about hiring expectations. However, more employers are confident in their staffing levels, which pushed up the percent of companies planning no change to 77 percent, a 7 percentage point increase over the third quarter level. Companies planning to reduce staffing levels was 2 percentage points higher in the fourth quarter (7 percent) than the third quarter, but this was an improvement from 8 percent recorded one year prior.
Results for the U.S. showed more robust hiring trends. The percent of companies expecting to increase staffing levels declined 4 percentage points between the third and fourth quarters to 18 percent, which was 1 percentage point higher than the year-ago number. Data suggest that more companies plan to lay off workers, as the percent of companies rose to 8 percent in the fourth quarter from 6 percent in the third quarter. The number was 1 percentage point below the fourth quarter of 2012. Seventy-two percent of companies in the survey reported that staffing levels will remain the same through the fourth quarter, up 2 percentage points from the third quarter but unchanged from one-year prior. (Source: Manpower Inc.)
Consumer Activity
♦ Retail sales tax collections were up 4.6 percent in Downtown during the second quarter compared with year-
ago data. The two largest retail tax categories by collections reported increases during the period: the largest category, restaurants, reported collections were up 6.7 percent, and the hotel and other accommodation services industry, the second largest category, showed collections were 5.4 percent higher. Of the 17 categories, seven reported lower collections over-the-year in the first quarter. The largest percent decline was in the furniture and home furnishings category, which fell 53.4 percent. Other services also showed a decrease of over
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50 percent—sales tax collections in this category fell 51.2 percent. Officials with the City and County of Denver did note that two taxpayers, one in the motor vehicles and auto parts category and one in the miscellaneous stores category, reported significantly higher tax collections during the second quarter than in other periods. These two categories showed increases of 35 percent and 4.6 percent, respectively. Retail sales tax collections also increased in the BID area, but by less than the larger Downtown area. Collections in the BID rose 2.6 percent during the second quarter compared with the same period in 2012. The two largest categories, restaurants and hotel and other accommodation services, increased by 2.7 percent and 3.9 percent, respectively. Six of the 17 categories decreased, the largest decrease occurring in the furniture and home furnishings category (-86.3 percent). Like the Downtown area, one taxpayer in the motor vehicles and auto parts reported a much higher return during the second quarter of 2013 than during other periods resulting in a 71.3 percent increase. (Source: City and County of Denver, Office of the Controller.) RETAIL SALES TAX COLLECTIONS BY INDUSTRY BID Industry
Downtown
2Q13
2Q12
2Q13
2Q12
$486,233
$519,696
$586,435
$597,231
$304,433
$177,673
$491,137
$363,781
Furniture & Home Furnishings
$9,229
$67,472
$46,614
$100,003
Electronics & Appliance Stores
$17,630
$6,702
$20,901
$7,247
Bldg. Materials/Improvement/Nurseries
$19,262
$10,294
$26,106
$16,728
Food & Beverage Stores
$96,124
$92,043
$167,334
$155,895
$101,785
$107,651
$115,411
$117,244
$1,635
$0
$7,826
$5,552
Clothing/Accessory Stores
$740,051
$730,607
$746,124
$735,717
Sporting Goods/Hobby/Book/Music Stores
$115,682
$122,277
$174,963
$184,791
$4,205
$7,044
$7,395
$10,386
$319,647
$269,040
$649,539
$621,176
$509,596
$567,217
$512,374
$570,897
$37,752
$36,958
$62,649
$49,039
Hotel & Other Accommodation Svcs.
$1,388,505
$1,336,672
$1,554,770
$1,475,267
Restaurants
$3,821,432
$3,719,949
$4,796,156
$4,496,991
$5,065
$3,067
$14,198
$29,082
$7,978,266
$7,774,362
$9,979,932
$9,537,117
Manufacturing Retail Trade Motor Vehicles & Auto Parts
Health/Personal Care Stores Service Stations
General Merchandise/Warehouse Stores Miscellaneous Stores Information Producers/Distributors Bus. Admin, Support, Waste/Remediation
Other Services Total Retail Sales Tax Collections Yr/Yr % Ch
2.6%
4.6%
Sources: City and County of Denver, Office of the Controller.
♦ Metro Denver retail sales – a slightly different, but related measure of consumer activity – rose by 4.7 percent 6
in the second quarter of 2013 compared with the same period in 2012. (Source: Colorado Department of Revenue.)
♦ Consumer confidence in the U.S. rose during the third quarter. The third quarter average (80.8) was up 7.6
percent over the second quarter level and 24.4 percent above the year-ago level. The third quarter average was the highest quarterly average since the fourth quarter of 2007. Despite rising confidence, political uncertainty and modest economic expansion led to weaker outlooks by households for the next six months.
The Mountain Region index, which includes Colorado, reported a higher third quarter average (83.9) than the U.S. and showed an increase both compared with the second quarter (3.1 percent) and over-the-year (19.6 percent). Respondents to the Mountain Region survey gave more negative assessments of current conditions and were noticeably more pessimistic about likely trends over the next six months. (Source: The Conference Board.)
♦ Through the first half of 2013, the hotel occupancy rate in Downtown Denver was 2.1 percentage points lower
than the same period in 2012, falling to 70.6 percent. Despite a lower occupancy rate, the average room rate in the area rose during the period. The average room rate through June ($158.01) was 6.4 percent higher. Metro Denver hotels showed a higher occupancy rate through the first half of 2013 compared with year-ago data. The rate rose 1.4 percentage points to 68 percent. The average room rate throughout Metro Denver also increased during the period by 3.3 percent. The year-to-date average room rate for the first half of 2013 was $113.40. (Source: Colorado Hotel and Lodging Association, Rocky Mountain Lodging Report.)
Residential Real Estate
♦ Existing home sales in the BID and Downtown markets accelerated during the second quarter, showing an
increase of 29.2 percent in the BID and 18.2 percent in Downtown over-the-year. The for-sale market in the BID and Downtown consists almost exclusively of condominiums and townhomes, with all home sales during the second quarter falling into this category. The BID market reported 115 condominium/townhome sales during the second quarter of 2013 compared with 89 during the same period in 2012. Similarly, sales rose to 169 condominiums/townhomes in the Downtown market from 143 in the second quarter of 2012. While sales grew during the second quarter, home prices did not show the same improvement. In the BID market, the average sale price of condominiums/townhomes declined 16.1 percent between the second quarter of 2012 and 2013 to $501,357. The Downtown average price dropped 8.5 percent to $468,122. Neither the BID nor Downtown markets reported a significantly higher number of million dollar homes during the second quarter of 2012 compared with the second quarter of 2013, indicating that these sales did not skew the 2012 number upward. Additionally, the second quarter of 2013 did not show a large number of properties sold for low prices (less than $200,000), further suggesting that lower-priced properties did not skew the 2013 average price downward.
♦ Condominium and townhome sales in the larger City Center Neighborhoods followed a trend similar to the
BID and Downtown market, as sales grew 32.4 percent to 341 during the second quarter. The over-the-year increase did not lead to a higher average price, which fell 6.7 percent to $359,833. Detached single-family homes showed both higher sales and a higher average price in the area. Sales during the second quarter were 31.6 percent above the second quarter of 2012, and the price rose 3 percent to $353,834.
♦ Total home sales were 30 percent higher over-the-year throughout Metro Denver during the second quarter. 7
Sales of condominiums/townhomes increased by 36.4 percent, and detached-single family sales were up 28.3 percent. Higher demand for homes led to higher prices for the region. The second quarter average price for condominiums/townhomes was $205,848 or 6.5 percent higher than the second quarter average price in 2012. The average detached single-family home price increased by 9.7 percent over-the-year to $351,517. (Sources: Colorado Comps; Development Research Partners.) EXISTING HOME SALES BID 2Q13
Downtown
2Q12
% Ch
2Q13
City Center Neighborhoods
2Q12
% Ch
2Q13
2Q12
% Ch
Metro Denver 2Q13
2Q12
% Ch
Condominiums/Townhomes Sold During Quarter
115
89
29.2%
169
143
18.2%
341
257
32.7%
3,688
2,703
36.4%
Average Sales Price
$501,357
$597,579
-16.1%
$468,122
$511,734
-8.5%
$359,833
$385,645
-6.7%
$205,848
$193,357
6.5%
Ave. Price per Sq. Ft.*
$388
$405
-4.3%
$368
$367
0.0%
$312
$313
-0.2%
$172
$159
8.4%
Detached Single-Family Homes Sold During Quarter
0
0
-
0
0
-
104
79
31.6%
13,182
10,273
28.3%
Average Sales Price
N/A
N/A
N/A
N/A
N/A
N/A
$353,834
$343,411
3.0%
$351,517
$320,455
9.7%
Ave. Price per Sq. Ft.*
N/A
N/A
N/A
N/A
N/A
N/A
$254
$215
18.0%
$191
$172
10.9%
Total Home Sales
115
89
29.2%
169
143
18.2%
445
336
32.4%
16,870
12,976
30.0%
*Excludes homes where total square footage was not reported. Note: Data could include a small number of new home sales. Source: Colorado Comps.
♌ Foreclosure filings in the second quarter
continued to show a decreasing trend, falling on a quarterly basis for the fourth consecutive quarter. Foreclosures in the City and County of Denver were down 21.5 percent during the second quarter to 377 from 480 in the first quarter. Compared to year-ago data, filings were also 58.2 percent lower. Foreclosures in the City and County of Denver hit a high during the recent recession of 2,030 filings in the fourth quarter of 2007. The second quarter of 2013 showed that filings were down 81.4 percent from the recession high.
The entire Metro Denver area reported similar declines in foreclosures. Filings during the second quarter (2,043) were 10.9 percent lower than first quarter filings and were 52 percent below the second quarter of 2012. (Source: Colorado Division of Housing.)
Commercial Real Estate Note: lease rates for industrial, flex, and retail property are triple-net. Office rates are full-service
♌ The office markets in the BID area and Downtown improved during the third quarter. Compared with the third quarter of 2012, the office market in the BID reported a vacancy rate (12.1 percent) that was 0.9 percentage points below the year-ago rate, and the average lease rate ($28.46 per square foot) rose 3.8 percent.
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Similarly, the vacancy rate in the larger Downtown submarket fell 1.1 percentage points over-the-year to 11.5 percent. The average lease rate responded positively to the lower vacancy rate and increased 4.4 percent to $28.11 per square foot.
Data from Costar Realty also show improvement in the Metro Denver office market. The vacancy rate in the third quarter fell 1.2 percentage points to 11.3 percent. The average lease rate was $21.58 per square foot during the second quarter, a 5 percent increase over the third quarter of 2012. (Source: CoStar Realty Information, Inc.)
♌ The BID area industrial market consists of two buildings. One building is currently vacant, leading to an
unusually high vacancy rate of 68.1 percent. The vacancy rate was unchanged between the third quarters of 2012 and 2013. The Downtown market showed improvement during the third quarter, as the vacancy rate fell 0.2 percentage points to 1.7 percent. The lower vacancy rate helped boost the average lease rate, which was 10.4 percent higher over-the-year at $11.04 per square foot.
The industrial market throughout Metro Denver showed similar progress during the third quarter. According to CoStar, the vacancy rate fell 1.6 percentage points to 4.6 percent in the region. The average lease rate of industrial space rose 5.6 percent to $4.92 per square foot. (Source: CoStar Realty Information, Inc.)
♌ The retail market in the Downtown area slowed
in the third quarter. Despite this, the BID and Downtown retail markets consistently show lower vacancy rates and higher average lease rates than the rest of Metro Denver. During the third quarter, the vacancy rate in the BID area increased slightly by 0.3 percentage points over-the-year. The lease rate ($21.46 per square foot) decreased by 11.5 percent during the period.
The Downtown retail market, as a larger area that encompasses the BID, also reported a higher vacancy rate in the third quarter compared with year-ago data. The vacancy rate increased 0.4 percentage points to 4.3 percent. The higher vacancy rate led to a decline in the average lease rate of 8.8 percent to $20.44 per square foot.
The Metro Denver retail market did not report the same trend and instead showed an improvement during the third quarter with both a lower vacancy rate and higher average lease rate. The vacancy rate fell 0.6 percentage points to 6.3 percent compared with the third quarter of 2012. The lease rate was 3.5 percent higher during the period at $15.23 per square foot. (Source: CoStar Realty Information, Inc.)
COMMERCIAL VACANCY AND LEASE RATES BY PROPERTY TYPE, THIRD QUARTER 2013 Vacancy Average Rates Lease Rate 3Q13 3Q12 3Q13 3Q12 Office BID 12.1% 13.0% $28.46 $27.43 Downtown 11.5% 12.6% $28.11 $26.93 Metro Denver 11.3% 12.5% $21.58 $20.55 Industrial BID* 68.1% 68.1% Downtown 1.7% 1.9% $11.04 $10.00 Metro Denver 4.6% 6.2% $4.92 $4.66 Retail BID 5.4% 5.1% $21.46 $24.24 Downtown 4.3% 3.9% $20.44 $22.42 Metro Denver 6.3% 6.9% $15.23 $14.72 Note: Vacancy and average lease rates are for direct space only (sublet space excluded). Retail and industrial lease rates are triple-net. *The BID contains a total of two industrial properties with a combined 24,800 square feet of space. Only one of the two buildings was occupied, contributing to a higher-than-average vacancy rate. Source: CoStar Realty Information, Inc.
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Development Activity Several nonresidential projects are either planned or underway in Downtown Denver, including:
♦ Gravitas Development Group broke ground on a five-story office building in Denver’s Lower Highlands
neighborhood. The building will have 17,000 square feet of office space, a 3,900-square-foot restaurant at street level, and 38 parking spaces. The building is expected to be completed in the summer of 2014.
♦ The Aloft Denver Downtown Hotel is underway at 800
15th Street. It will be six stories and consist of 140 rooms. The developer is Starwood Hotels and Resorts
♦ Work continued on 16M, a new office building on 16th and Market Streets. The 10-story building features four
stories of luxury apartments, 130,000 square feet of office space, 15,000 square feet of street-level retail, and underground parking.
♦ First Gulf Corp. unveiled plans for a 21-story office building at 1401 Lawrence Street. The new building will
feature 290,000 square feet of office space with ground floor retail and 347 parking spaces. First Gulf plans to break ground on the project in early 2014.
Robust multi-family development continued throughout the City Center Neighborhoods. There were 709 new housing units in seven different developments completed in 2012, the largest of which was the 231-unit 2020 Lawrence project by Zocalo Community Development. An additional 172 units were completed during 2013 year-to-date in two different developments. Fifty-one projects with 7,846 rental and 193 for-sale units are either planned or currently under construction. Five of these RESIDENTIAL DEVELOPMENTS projects consisted of at least 300 units, with the largest PLANNED OR UNDERWAY AS OF 4/2013 project being 457 units planned at South Lincoln Park Downtown For-Sale Rental Number of on West 10th Avenue and Osage Street. The Highland Neighborhoods Units Units Projects neighborhood had the most projects planned (14 projects), and the Central Platte Valley/Denver Union Auraria Station neighborhood reported the largest number of Ballpark 863 5 units under construction or planned—3,012 units. In Capitol Hill 260 2 addition to projects Central Business District 422 2 currently underway, future construction prospects for Central Platte Valley/ 3,012 12 the City Center Neighborhoods show 940 for-sale units Denver Union Station and 1,622 rental units proposed for the area. Curtis Park/Five Points 44 148 5 Recent highlights of the current residential projects include: Golden Triangle 809 3 ♦ PM Realty Group announced that a 34-story high-end Highland 100 638 14 apartment complex will be built in Denver’s Central Platte Jefferson Park 49 597 4 Valley. The 288-apartment complex will be named the La Alma/Lincoln Park 745 2 Confluence for its proximity to the Cherry Creek and Lower Downtown South Platte rivers. The building will also have groundfloor retail space. Uptown 352 2 Total 193 7,846 51 Source: Downtown Denver Partnership
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Business Improvement District (purple), Downtown Denver (purple and yellow), and City Center Neighborhoods (purple, yellow, and blue)
Written in October 2013 by: Development Research Partners, Inc. 10184 West Belleview Ave, Ste.100 • Littleton, CO 80127 303-991-0070 • www.developmentresearch.net
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