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Public Projects Buoy Denver Construction Workforce In Broader Commercial Slump

Metro Denver’s slowing commercial real estate industry has weighed on the market’s construction employment base over the last year, while neighboring cities like Kansas City, Kansas, and Omaha, Nebraska, saw growth. 

But a slate of municipal and infrastructure projects, along with some industrial multifamily projects under construction, should insulate construction employment from slipping further as property values slide, according to Nicholas Sly, vice president and Denver branch executive of the Federal Reserve Bank of Kansas City. 


Construction employment levels typically rise and decline alongside commercial real estate values, Sly told Bisnow. That means that when commercial real estate values fall, construction employment levels usually follow within six to 12 months.

This time, Sly said he expects the construction employment loss to be more muted as municipal projects make up a larger chunk of the work performed by contracting firms. 

“The reason one might not expect to see as significant of a decline in construction employment is there are some sectors and some market segments of commercial real estate where there's been real headwinds, but other sectors that have received other support,” Sly said. 

Over the last 12 months, commercial transaction activity across the Federal Reserve’s 10th District, which includes Colorado and its neighboring states, has declined to about 1.3 points below historical norms as tightening financial conditions reduced absorption and use of the properties, according to the Kansas City branch’s latest CRE index

The index seeks to measure the performance of commercial properties against their historical averages. An index of zero would mean the market is performing equal to its historic norms, so a number above or below zero indicates the performance trajectory. 

Construction employment in the Denver metro area fell by roughly 3.2%, or about 4,400 jobs, year-over-year in 2023, according to data from the Bureau of Labor Statistics. 

That decline has come as values for commercial properties have declined significantly. Denver’s famous Republic Plaza, a 56-story office building in the heart of downtown, saw its value decline by roughly 44% from when it was purchased more than a decade ago. A similar story unfolded with 1670 Broadway, a 690K SF office at the corner of 17th Street and Broadway in downtown that has seen its appraised value tumble 45% since 2018.  

Metro Denver’s construction employment is also trending in the opposite direction of fellow 10th District cities like Kansas City and Omaha. Both have seen their construction employment grow by more than 2% year-over-year, BLS data shows.

Sly said one reason Denver is moving in the opposite direction from its peer cities is it is a larger market that faces more headwinds because of its size. States like Wyoming and New Mexico are seeing increased residential construction as well. 

But Sly said he doesn’t expect Denver’s struggling commercial market to significantly impact its construction employment figures because many contractors are taking on municipal infrastructure projects, public school renovations and other jobs to stay busy.

One such project in Denver is the two-year, $133M interior renovation project for the Wellington E. Webb Municipal Office Building, which is home to city agencies like the Denver Clerk and Recorder, Denver Parks and Recreation, and Community Planning and Development. The project seeks to expand the building’s capacity to serve up to 600 city employees and includes renovations to the bathrooms and kitchens. 

Denver is also working to convert some newly acquired hotels into supportive housing for people experiencing homelessness. The city is working to convert a 96-unit former Stay Inn at 3805 Peoria St. into a supportive housing shelter. The property will also include a 54-micro-unit community as part of Mayor Mike Johnston’s House1000 initiative, according to press secretary Jordan Fuja. 

On the private side, Denver’s construction pipeline is still active but losing steam relative to its blockbuster pre-pandemic years. In the fourth quarter, CBRE measured a more than 46% decline in multifamily permitting activity, which could constrain apartment deliveries. 

As of Q4, Denver’s office market had roughly 2M SF in its construction pipeline, an 18.9% decline year-over-year, according to CBRE. 

The industrial segment had roughly 6.3M SF under construction in 2023, well above the market’s pre-pandemic average, but construction starts saw a 35% decline year-over-year. CBRE predicted developers will maintain a “cautious” approach to the market, which could result in fewer construction starts in 2024 and 2025.