Michael Hancock Live
Mayor Michael Hancock now oversees one of the top US cities for office absorption and rental increases, as well as a hotspot of in-migration to feed the multifamily market. That puts us on the verge of a boom. (What would you call a pre-boom? A spark? A powderkeg? High school?) So we're excited the Mayor will be keynoting Bisnow’s Denver State of the Market event on April 30. (Sign up here.)
Brookfield Properties SVP David Sternberg, who will be a panelist, tells us that Downtown leasing is getting a boost from oil and gas firms as well as law firms. Also, companies are reconsidering their location in the suburbs for space Downtown. (Get out of the suburbs. Haven't you ever seen a horror movie? They're all in the suburbs!)
GRS Group director Jeff Coyne, who'll moderate our panel, is excited by all the new-found love for Denver multifamily. “Denver is now more interesting for investors,” he says. The market is no longer second tier to the coasts; it's now known for its educated workforce, job creation, and for the influx of people here from other parts of the country. (It's more than just the setting for Dynasty.)
Cushman & Wakefield head of research for the Americas Maria Sicola tells us that the Denver CBD has benefited from strong job growth, a stable housing market, and the increasing presence of the energy and healthcare industries. Job growth is in the 2.5% to 3% range quarter after quarter, foreclosure rates have fallen below pre-recession levels, and economic output increased 4.1% over the last four quarters, outperforming the national GDP of only 2.8%. (And those numbers aren't simply inflated by the thin air.)
Energy firms occupy nearly 30% of total space available Downtown, Maria says. Companies are leveraging expiring leases to expand into upgraded vacant space, while other energy tenants are looking at opportunities larger than their existing floor plates or that have an option for future expansion. Class-A buildings are approaching new-construction rent levels, compressing the gap between new and existing rents. That trend is likely to remain in the CBD as limited new builds enter the market in 2014, she says.
Another positive factor: Construction costs here haven’t gone up much recently, compared with other major metros. (We might even try to smuggle some of our cheap cranes over state lines if they didn't top out at 8 mph.) Rider Levett Bucknall EVP Peter Knowles, in the company’s Denver office, tells us from Q1 '13 through Q1 '14, overall construction costs in Denver climbed 2.2%. By contrast, NY went up 5.8% and Boston was up 5.2%.
Why didn’t costs go up more? Stable construction material prices—copper has actually fallen by 30%—and the availability of local contractors to meet the demands of new projects, Peter says. But it could change if the number of projects in Denver accelerates rapidly, which might happen if energy booms more. Sign up here to find out more about the dynamics of Denver at our April 30 event. The panel will also have execs from East West Partners, Hines Interests, Mortenson Construction, McWhinney, and Sage Hospitality, along with moderator Brownstein Hyatt Farber Schreck.