Fewer People Are Moving To Colorado's Front Range
The heyday of migration to Colorado’s Front Range might be over, or could just be taking a break, stalled partially by the coronavirus pandemic, but economists say there’s no need to panic about the impact on the state’s economy at this stage.
Fewer than half as many people moved to the Front Range in 2021 than the peak in 2015, on a net basis, data from the Colorado State Demography office shows. Of course, it should be noted that 2015 saw a staggering number of new Colorado residents, with more than 64,800 people moving to the Front Range alone.
Keeping such a pace would have been unsustainable, and the rate of new migrants fell to 46,600 just a year later. In 2021, the Front Range welcomed 28,000 net new residents from migration, just a tick below the 2019 figure of 29,000.
Migration figures for 2020 and 2021 are projections that have yet to be finalized.
That period of rapid population expansion placed a strain on systems that is still felt today. Roads are thick with traffic that makes lifelong Coloradans curse, and home prices have skyrocketed, a trend that was well on its way long before the pandemic upended society and the economy.
Still, all those new people served an important function for the local economy and the commercial real estate market.
“If you really look historically at this state, I would argue that periods of very, very high migration were a function of the fact that we didn’t have a labor force that was homegrown that could fill the jobs that were being created as the state had rapid growth periods,” said Phyllis Resnick, executive director and lead economist at the Colorado Futures Center, a part of Colorado State University.
Resnick said the slowdown in migration from the historic peak in 2015 is expected, although its length and depth depend on a number of factors that were significantly complicated by the pandemic.
“I think we need to wait and see as the economy continues to normalize to see if we’re filling jobs or if we have a void,” she told Bisnow. “We perform a six-month forecast of the state GDP and aren’t seeing a significant slowdown yet. There’s no evidence that labor market drag is slowing the economy down, even in the wake of slower in-migration.”
Other statistics indicate that the slowdown in population growth could be short-lived, according to Patty Silverstein, president and chief economist at Development Research Partners. She points to apartment vacancy rates, which have fallen back to 4.3% after spiking in the early days of the pandemic, even as new product delivered.
“Those vacancy rates indicate that people are flowing back in,” Silverstein told Bisnow.
And, although Denver experienced some of the same flow of people toward the suburbs that many large cities saw, Silverstein doesn’t expect it to continue.
“I’m not convinced that the out-migration trend is something that is going to continue for a while,” she said.
However, the talent shortage plaguing companies in Denver and across the country does pose a problem, she said.
“Our companies right now are struggling to find the workers they need, the talent they need, so they can move forward on their business growth plans,” she said. “If we want to see our economic pie as a whole increasing, we need people, we need jobs.”
The job market in metro Denver and across the state is tight, and employers of all kinds report difficulty finding the talent they need. Before the pandemic, Colorado's unemployment rate was at a record low of 2.7%. As it did everywhere, that figure shot up beginning in March 2020, but has since coasted back down to 3.6%, on par with the national rate, according to the Colorado Department of Labor and Employment.
The other factor at play, though, is what jobs will look like in the future, and where the jobs will be performed. By all accounts, hybrid work is here to stay, as are its implications for the office market as a whole.
“As it pertains to office, that’s one of those areas where it’s a little bit too soon to tell whether the Covid disruption was a blip that will return to trend, or if it did create a new way that we organize ourselves economically,” Resnick said.
Before the pandemic, metro Denver enjoyed a healthy office market, with steadily rising rents, plenty of new development and interest from companies looking to plant a flag, especially in the downtown market.
The office market, particularly downtown, felt the impact of Covid-19, and the preponderance of big companies searching for space fell, according to Andrew Blaustein, senior managing director for Newmark’s Denver office.
Some companies with plans to open offices downtown abruptly halted those efforts, placing the space up for sublease when the pandemic set in.
But now, the big fish of office space are coming back, Blaustein said.
“They’re circling the runway waiting for the fog to lift,” he told Bisnow. “A lot of these companies are still hiring, it’s just not translating to a stood-up office yet.”
Some are “window-shopping” for office space, he said. Time will tell if that translates to leases. The north end of downtown, with trendy neighborhoods like Lower Downtown and the Central Platte Valley, continues to garner more attention and lease rates that are $7 higher per SF on average than the downtown market as a whole, according to Newmark research.
Overall, the Denver office market in the first quarter of 2022 posted positive absorption for the first time since the onset of the pandemic, an encouraging sign that office users are returning to the market, potentially bringing new jobs with them, which in turn will require more people.