August 2008
Metro Denver economy remains strong despite nationwide downturn
While commercial real estate in Metro Denver is not immune to nationwide financial woes, the region's markets remain highly competitive, according to data compiled by the Metro Denver Economic Development Corporation (Metro Denver EDC) in its Monthly Economic Summary for August 2008.
Many companies in energy, bioscience, and other rapidly-expanding industries are relocating to or expanding in Metro Denver. The region's housing downturn has proven comparatively mild, and relatively high levels of personal income and consumer confidence continue to support retail spending. Overall, local commercial real estate brokerages view Metro Denver’s markets as poised for a strong recovery when the national markets turn.
"The effects of a protracted housing downturn, declining consumer and business confidence, and tight credit have clearly reached the nation's commercial real estate markets," stated Patty Silverstein, chief economist for the Metro Denver EDC. "However, strong job growth is helping our region weather the national economic downturn."
Metro Denver's strong job market helped the region advance six spots in the Midyear 2008 National Industrial Index by Marcus & Millichap. The index ranks 24 U.S. markets based on supply and demand indicators including construction, vacancy, and job growth. Above-average job growth – particularly in technology-related industries – helped Metro Denver move from a 19th-place spot in the 2007 index to a 13th place ranking in the 2008 edition.
A second quarter report by CB Richard Ellis describes Metro Denver's office market as one of the most competitive in the nation, even as uncertainty delays expansions and relocations. The company's analysis shows that Metro Denver’s office market absorption remained positive in the second quarter despite an increase in sublease space, and strong pre-leasing activity continued for many development projects. While Metro Denver will not escape national turmoil, the report suggests the local market is well positioned to weather a downturn.
Additionally, much of the industrial market slowdown reflects a tension between national challenges and local opportunities, says a second quarter report by Grubb & Ellis. As oil and transportation costs continue to rise nationwide, many distribution companies are reconsidering the location and nature of their industrial space. At the same time, a changing energy environment is driving rapid growth both for traditional and renewable energy companies, many of which are hoping to locate or expand in Metro Denver. Overall, the report expects Metro Denver's favorable geographic location and strong employment base to support solid market activity.
CNBC named Colorado the fifth-best state for business in its annual America's Top States for Business ranking. The state placed among the nation’s top 10 for quality of life and business friendliness, and among the top 15 for workforce quality, access to capital, technology, and the overall economy. Colorado's 2008 ranking bettered last year’s seventh-place standing, and CNBC attributed much of the improvement to Colorado’s advancements in a New Energy Economy.
A report by the Washington, D.C.-based Brookings Institution named Colorado's Front Range among five "Mountain Megas," or regions that are becoming the new economic and political centers of the central U.S. Rapid population growth, a well-educated workforce, and strong infrastructure give the Front Range and several neighboring regions a larger national influence, policymakers say. They note, however, that Colorado and other states in the Intermountain West could need federal help with the infrastructure development and resource preservation needed to support growth.
In total, nine of 18 economic indicators showed positive monthly trends and four moved in a positive annual direction. Recent trends are steady, as this month's number of positive indicators match last month's number.
The Monthly Economic Summary provides a snapshot of metro area economic activity, as well as its relationship to national and regional economic trends.