March Economic Summary
Growth in Metro Denver’s economy and population continues to create demand for goods and services, spurring increased economic activity and growth, according to data released by the Metro Denver Economic Development Corporation (Metro Denver EDC) in its Monthly Economic Summary for March 2014.
Forbes released its ranking of the 20 fastest-growing cities with population and economic growth as the ranking criteria. The 2014 ranking placed Metro Denver at number six, which is up 10 spots from the previous year’s report. The report accounted for unemployment rates, median salaries for college-educated workers, and job growth rates.
Population growth has led to more people commuting throughout Metro Denver. The majority of commuters still drive their own vehicles, as witnessed by an 8.2 percent increase in toll transactions on E-470 in 2013. This was the fourth-straight year of traffic growth along the high-speed toll road along the eastern edge of Metro Denver.
Metro Denver residents are also embracing public transportation options. Ridership on the Regional Transportation District (RTD) system totaled 101.9 million total boardings in 2013, a 2.5 percent increase compared with 2012. This was the first time that ridership broke the 100 million passenger mark, likely spurred by the opening of the West Rail Line in April 2013.
“All of these factors point to positive momentum in Metro Denver’s economy,” said Patty Silverstein, president of Development Research Partners and chief economist for the Metro Denver EDC. “We see additional opportunity through the region’s continued infrastructure development including the FasTracks project, Union Station redevelopment, and Denver International Airport’s South Terminal and Westin Hotel and Transit Center construction. These projects are and will continue to be significant generators of jobs and associated growth.”
Metro Denver also attracts a large share of visitors. DIA served slightly more than 4 million passengers in January, a 0.8 percent increase over last year. Further, the average occupancy rate for Metro Denver hotels in January (66.4 percent) was 8.1 percentage points higher than the previous year average, and the January average room rate ($110.49) was up 4.2 percent compared to the level last year.
Hotel occupancy and the number of DIA passengers were two of the 15 Metro Denver indicators that moved in a positive annual direction in this report, up from 14 reported in the previous month. In a typical seasonal response, eight of the indicators moved in a positive monthly direction, compared with 10 in the prior month’s report.
The Monthly Economic Summary provides a snapshot of metro area economic activity, as well as its relationship to national and regional economic trends.
Highlights from this month’s report include :
Labor and Employment
The Colorado Department of Labor and Employment is currently conducting its annual benchmark revision to the employment data series. Data for January 2014 and revisions to 2013 data will be available in the Metro Denver EDC’s Monthly Economic Summary to be released on April 1.
Commercial Real Estate
The fourth quarter 2013 Denver Office Market Trends report from Newmark Grubb Knight Frank stated that Denver had healthy performance through 2013, placing it as the best year since 2007. The 16-quarter declining trend in vacancies continued throughout the year, reaching a vacancy rate of 15.8 percent. With vacancies on the decline and rents rising, the development pipeline is showing solid increases. The report described 10 projects totaling 1.6 million square feet under construction, with many others on the drawing board.
The fourth quarter analysis in the Office Market Snapshot reports that the office market in Denver experienced a strong year of growth including declining vacancy, increasing rental rates, and new investments. According to Cassidy Turley, the Denver office market achieved its fifth-consecutive quarter of decreasing vacancy as well as the eighth consecutive quarter of increased average direct rents. Average asking rents for class A space ranged from $21 per square foot along Colorado Boulevard to $31 per square foot in the Central Business District.
The CBRE Market Outlook for 2014 presents positive expectations for the year due to healthy growth in the office market in 2013. While most submarkets in Denver experienced progress, the Downtown submarket led the area in activity and perceived market strength. The total vacancy rate declined to 14.1 percent in 2013 with 1.5 million square feet of net absorption. Denver’s vacancy rate is the fifth lowest of the 13 major markets tracked by CBRE.
Residential Real Estate
Home sales closed in Metro Denver decreased 29.2 percent from December to January, and were 4.3 percent lower than in January 2013. There was a nearly 55 percent decline from 13,996 to 6,310 in unsold houses on the market compared to the total last year. Due to lack of inventory, the average home sales price increased over the year. Single-family attached homes, which include condominiums, townhomes, and multi units, increased 17.7 percent compared with January 2013. The average price of a single-family, detached home increased from $306,243 to $339,639, a change of 10.9 percent over-the-year.
Median home prices increased throughout the area. The Denver-Aurora MSA had an 11.2 percent increase in home prices through 2013 ($280,600) compared with 2012 ($252,400), and the Boulder MSA posted an annual increase of 8 percent. From the third quarter to the fourth, the Denver-Aurora MSA experienced a 2.6 percent decline in median home prices to $279,300 while the Boulder MSA showed an increase of nearly eight percent to $442,800. Both MSA’s reported growth over the year with Boulder prices increasing 15.2 percent and Denver increasing 9.6 percent. The United States median price declined roughly five percent from third to fourth quarter but did experience an annual increase of 11.4 percent. Of the 171 MSAs, the Boulder MSA reported the seventh-highest annual increase and the Denver-Aurora MSA increase was 19th highest.
Metro Denver reported an increase in housing foreclosures through the month of January compared with December. Foreclosures in the region were up 11.1 percent from December but down nearly 42 percent from the level last year. The largest monthly increase from December to January was Jefferson County (70 percent) with Broomfield County closely behind (50 percent), though the latter reported a nearly 61 percent filing decrease compared with the previous year level. Denver County and Adams County were the only two counties that reported declines in foreclosures over the month, but filings in all of the counties were lower than their January 2013 level.
Metro Denver reported 7.2 percent decline in residential building permits from December to January. While single-family, detached homes increased 8.4 percent to 516 permits, the other two permit categories showed declines in activity. Multifamily unit permits decreased by 25 percent over the month as single-family attached fell by nearly nine percent. Though permits declined over-the-month, they were still higher than in January of the previous year. Total residential permits issued for January 2013 were 9.7 percent higher than January of 2012.
The Denver Metro Apartment Vacancy and Rent Survey for the fourth quarter of 2013 showed a trend of increasing vacancy rates. The Metro Denver apartment vacancy rate increased 0.8 percentage points to 5.2 percent between the third and fourth quarters, due to increased vacancy rates in five of the six submarkets. The only submarket to report a decline in vacancy rates over-the-quarter was Adams County with 5.3 percent, which fell from the quarter three rate of 5.7 percent. Each Metro Denver submarket showed elevated vacancy rates in quarter four compared to last year’s data except for the Boulder/Broomfield area where vacancy declined. For the year, the 2013 annual average vacancy rate (4.6 percent) in Metro Denver was 0.1 percentage points lower than the 2012 annual rate (4.7 percent). The average annual vacancy rate declined in Arapahoe County and the Boulder/Broomfield market in 2013, while the other four submarkets had increases compared to the 2012 annual rates.
With minor increases in vacancy rates, the average rental rate of apartments in Metro Denver grew steadily with an over the year increase of 6.4 percent. The 2013 average annual rate ($1,026) was 5.3 percent higher than the 2012 average rate ($974) in Metro Denver. The Boulder/Broomfield submarket had the largest increase in rental rates for the year at 8.1 percent while the smallest increase was in Adams County with 3.5 percent. The average annual rental rates in the six submarkets ranged from $1,184 in Boulder/Broomfield to $939 in Adams County.
The Denver Industrial Market Trends report from Newark Grubb Knight Frank stated that in 2013 Denver observed the best growth in the industrial market compared with the last five years. The market moved out of recovery mode and into expansion with 4.4 million square feet absorbed over the year. Overall, the year ended with nine new industrial buildings for a total of 1.2 million square feet, compared to the 496,045 square feet built in 2012. The report also forecasts continued growth and expansion throughout 2014.
The improvement of overall economic conditions led to increased tenant demand within the industrial market in 2013. The CBRE Denver Market Outlook report states that the market is expected to continue to experience increases in rental rates and absorption due to increased activity in sectors such as construction, energy, and manufacturing. The fourth quarter 2013 direct vacancy rate decreased to 4.6 percent and average leasing rates were up from the prior year.
According to the Denver Retail Market Trends report from Newark Grubb Knight Frank, the 2013 Denver retail market achieved its lowest vacancy rate since 2007 at 7.4 percent, down from 8.3 percent at year-end 2012. Investment sales have been stable for the past seven quarters, which is expected to continue. Demand for prime business locations in Denver by national and regional retailers is expected to drive speculative development through the year, helping to attract new retailers.