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Financing Is Flowing As Denver Grows, Particularly In Multifamily, Industrial

There is plenty of room for Denver to grow despite its unprecedented influx of businesses and people in recent years, experts said at Bisnow's Denver 2020 Forecast event last week.

The multifamily and industrial markets are particularly ripe for investors right now, as the city continues to attract large corporate players and the talent that comes with them.

"In my view, there's certainly more room to go in terms of multifamily, as well as industrial," Lainie Minnick, managing director, head of debt for capital markets and chief financial officer at Black Creek Group, said at the event. "Probably a little bit less room to go in terms of office." 

Panelists on BMAC Denver's 2020 financing panel.

Minnick joined Rising Realty Partners Senior Associate John Golden and Pennybacker Capital Managing Director Pat Rippe in debating the future of Denver on Bisnow's Financing in 2020 and Access to Capital panel, moderated by Wipfli partner Damian Ederhoff.

The market remains strong for industrial demand, panelists said, particularly when it comes to financing new projects. So far, investors who have bet on Denver industrial have seen strong returns.

"I think with respect to industrial specifically, funds out there are investing a lot in core value out of development, and they're seeing that [they're] outperforming everything they are underwriting, in large part," Minnick said. "And so with seeing the momentum in the market, they're generally comfortable saying, 'You know, look, I'm willing to take the risk that, that we can lease up this building if I can get some sort of premium over core.'"

Rippe added that Denver's continued boom is pushing up demand for industrial spaces that can provide services to all the new retailers and consumers putting down roots in the city.

The demand for goods and services will likely follow the same trajectory of population growth, he predicted.

"There's a significant migration here, significant job growth, and all those places need people. All those people need places to live, places to work, places to shop, and all that needs to be supported by industrial and industrial infrastructure," Rippe said. "So I think projections for population growth are significant. And that's going to bring in an increase in demand."

When the discussion pivoted to a possible downturn — as many in real estate circles do these days — the panelists agreed that Denver's affordability and access to capital makes it likely to weather a recession just as well as a coastal market.

The flurry of corporate relocations to the city this year is a case in point, Golden said, and a testament to the talent flocking to the region.

"Headquarters are still moving to Denver, so I think there's some resilience there," he said. "When a downturn does hit, you'll have that strong base of these large users here."

Panelists said they expect the tech talents wars to push more skilled workers to the city, along with the businesses looking to court them.

"We're also seeing a lot of tech companies located in San Francisco start to open satellite offices here in Denver, and because the access to the labor market is so tight in the Bay Area, you're going to have to come here to get access to [a] great educated workforce that's extremely talented," Golden added. "We think Denver has a lot of resiliency relative to a lot of the other coastal markets."