Denver Barrels Out of Recession
“Renaissance” was how Mayor Michael Hancock described the economic recovery of the region at Bisnow’s Denver State of the Market last week at the Four Seasons. (Would that make David Sternberg da Vinci?)
Denver was near the top of the nation coming out of the slump, the mayor told the 350 guests watching "in-the-round." Both employment and tax collections have rebounded past the mid-2000s. Last year, 1,000 new businesses started in Denver. Commercial real estate is an engine of the renaissance, he says, pointing to the activity in Union Station, the Wright Corridor, Cheery Creek, and other places: “Denver has made the right infrastructure investments to make the city a live-work-play environment,” with the caveat that the investment has to continue to keep Denver competitive in global markets.
Brookfield Office Properties SVP David Sternberg says the movement of people to downtown is only just getting underway. “We believe in dense cities and transportation networks,” he says, and Denver’s going to be at the cutting edge of the mass migration to downtown cores. Brookfield bet on the robustness of downtown Denver two years ago when it bought 1801 California, a building that was largely vacant, and a bit outside of the company’s comfort zone. That bet’s paying off: Brookfield leased 300k SF there last year; one-third of that was to tenants new to the market.
McWhinney CEO Chad McWhinney leads the company co-developing Union Station. He says he’s a believer in the experience economy, and Denver is going to profit mightily from the growth of businesses whose main business is creating memorable moments. (While you remember fast food later, that doesn't count.) Companies now have to go where people—especially skilled workers—want to live, work, and play.
Hines Interests managing director Jay Despard, whose company is at work on 1601 Wewatta adjacent to Union Station, says new transit infrastructure opened up opportunity in the Central Platte Valley quicker than most expected. And he believes spec office is back in Denver: “It can be risky if you do it wrong, but if you focus on equity rather than juicing returns with debt, and you’re patient, it’ll work.” The market is so dynamic that for now new construction office isn’t getting that much more in lease rates than older trophy buildings.
East West Partners managing partner Chris Frampton, whose company develops resorts and urban properties (including involvement at Union Station), says rental units are going to be developed at transit stops for the foreseeable future, mostly because the construction defect risk is still too great to develop condos. Microunit apartments (about 350 SF, or about big enough to swing your cat) have been developed in SF and Seattle, and Denver might see some next year. (Inventors, how are we doing with that shrink ray?)
Mortenson Construction director of project development Gene Hodge says that the next three years look good for the construction biz, now that private investment is back. (By that math, we won't just be twiddling our thumbs until the next Winter Olympics.) The metro EDC is recruiting companies, bringing more jobs here, and that’s going to drive development. Public projects at the state and local level are going to start picking up in the next few years, and federal work—there’s quite a backlog of projects—might even pick up, too.
Sage Hospitality prez Walter Isenburg, whose company’s largest market is Denver (with 25 properties, plus the Crawford Hotel at Union Station, opening in July) says the new infrastructure downtown has been a game-changer for hospitality, and there’s still opportunity for new hotels. “We’ll be able to absorb the new supply,” he says. The No. 1 issue for meeting planners was the location of the HQ hotel vis-à-vis the Convention Center. The opening of the Hyatt increased supply and solved that. (Now the No. 1 issue for meeting planners: planning meetings.)