By Katie Rapone, Editor-in-Chief of Mile High CRE
Thursday January 16, SMPS Colorado held their 2020 Economic Forecast luncheon at a modern new location, the Kimpton Hotel Born in downtown Denver. Industry experts discussed the economic, labor, real estate and global trends that will shape our economy and the construction industry in 2020.
Chris Akers, economist at State Demographer’s Office, covered economic and labor forecasts. Jessica Ostermick, Industrial and Logistics Director of CBRE, discussed factors affecting commercial and industrial real estate, as well as changes in the global economy. Joshua Putterman, International Development Finance Risk Specialist and CEO of Extreme event risk, offered an overview of the risks presented by extreme weather events and discussed advanced quantitative tools to address qualitative business planning challenges affecting the architecture, engineering and construction (AEC) industry.
- Population growth slows and concentrates along the Front Range
- The economy has the longest (and slowest) expansion in history
- Racial and ethnic diversity is increasing
- The workforce is tight
- We are aging fast
- Affordability remains a concern
According to Chris Akers, the population is slowing both nationally and in Colorado, but Colorado is growing much faster than the nation as a whole. Colorado’s population is around 5.76 million, up 67,449 or 1.2 percent from last year. Colorado ranks 8th in national growth percentage behind: ID, NV, AZ, UT, TX, SC, WA.
âTo put that in perspective, if we go back to 2015, we added over 100,000 people – our growth pressures are much slower right now because our natural increase is much smaller than it was there. 10 years ago, âAkers said.
Racial and ethnic diversity is increasing rapidly, which is most evident in our elementary schools.
Colorado’s baby boomer population is choosing to stay in the state instead of moving elsewhere for retirement, causing our population to age.
- From 2012 to 2019, average growth was 2.4 million jobs (1.7%)
- 2020 projections (Moody’s Baseline): 1.5 million jobs (1.0%)
- Our state’s economy is growing 2.6% per year, the sixth fastest in the United States
- Denver’s economy grew 3.7% in 2018, compared to the national metro average of 2.9%
- Colorado has the 5th lowest unemployment rate in the country, an unemployment rate of 2.6% recorded in November 2019
- According to a 2019 CBRE Investor Intentions Survey, Denver is the 5th most preferred market for commercial real estate investment in the Americas.
âGiven the state of maturity in which we find ourselves economically, our in-house economists are calling for much slower but still positive economic expansion. We’re not calling for an R-word (recession) in the next two years, âsaid Jessica Ostermick, CBRE’s industrial and logistics manager.
âOver the next 10 years, transportation and warehousing will be our fastest growing industry, growing more than double the rate for the state as a whole. This is due to both strong growth at DIA and tremendous growth in e-commerce, âAkers said. “The construction will be [important] also if we will continue to increase our population at the rate at which we are (70k / year). We will have to build many more houses, apartments and dormitories and we will also have to improve our infrastructure. “
CBRE Research indicates that $ 11 billion of construction has been delivered to Denver since 2017. Multi-family takes the biggest piece of the pie with 55% complete in Denver. However, it should be noted that the percentage of multi-family square feet currently under construction has actually declined.
Affordability concerns persist through 2020. âOur affordability issues are still a problem. We have more in common with coastal communities than some of the peer communities we actually compete with, âsays Ostermick. âWith continued construction and increased supply along with slower population growth, I have a feeling there could be a bit more generosity and a slower appreciation in growth rates. rental. Which is good for our market and maintains some of those competitive advantages. “
Industrial square footage is on the rise with 6.5 million square feet under construction, the highest number since 1997. According to Ostermick, development costs have increased. In particular, land prices have increased on all markets, but particularly for the industrial sector. âFor infill industrial development, the price of land had increased 166% in five years to reach $ 20 / square foot, compared to $ 4 or $ 5 a few years ago. “
Electronic commerce has a huge impact on the industrial market. According to Ostermick, about a quarter of all industrial rental activity in the United States is e-commerce. In Denver, there is currently 3 million square feet of industrial construction and this is likely to increase, especially as the cold storage and food delivery sector of the market has yet to take effect. .
Click here to view CBRE’s Q4 2019 MarketView reports analyzing the year-end performance of the Denver Metro office, industrial and retail sectors.
According to Climate.gov, more than 40 billion dollars of natural disasters have had an impact on the United States over the past three years. Much of the CRE community does not fully understand the risks their buildings face and need more information to manage their resilience and adaptation.
âWe cannot plan for the future by looking only to the past,â said Joshua Putterman, founder and CEO of Extreme Event Risk. The company gives businesses an advantage in assessing catastrophic weather conditions by integrating future climate data.
Key points to remember:
- Current approaches to planning for extreme weather conditions use only historical and real-time weather analyzes. These analyzes do not take into account climate change, as was the case in 2013 when the community of Boulder was affected by catastrophic flooding.
- Climate change is costing businesses billions of dollars in losses.
- Colorado is among the top 10 states for the rate of increase in natural disasters over 20 years. Colorado recorded a rate of increase of 1,350% between 2000-2017, according to QuoteWizard.com.
- Extreme event risk analyzes the time of the event from start to finish (for example, precipitation leading to flooding) to present the extreme event with the greatest probability.
Photos courtesy of The untraceable door