Vision 2020: Economic Forecast for the Denver Metro

Patricia silverstein
President and Chief Economist,
Development research partners

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Is our vision crystal clear or clouded by conflicting information in 2020? Slowing growth in China and other key trading partners, tariff and trade disputes, market disruptions from COVID-19 and geopolitical concerns around the world mean a high degree of uncertainty in the economic outlook national. Yet current economic data suggests continued expansion at a slower pace as businesses and consumers await the outcome of the presidential election.

Use. The Denver metro area, which has seven counties, is home to about 62% of the state’s jobs. Employment increased by almost 34,000 jobs or 2% in 2019, reaching 1.7 million jobs. Job growth was constrained by a tight labor market and the average unemployment rate fell to a record low of 2.7% for the year. Low unemployment put upward pressure on wages, and the Denver metro saw a rapid 5.1% increase in average annual wages, faster than the state and nation. Job growth is expected to slow to 1.6% in 2020, adding almost 28,000 jobs, and the unemployment rate will increase slightly to 2.9%. The still tight labor market will temper job gains.

Metro Denver posted an increase in employment in the industry’s 11 supersectors in 2019. Transportation and warehousing was the region’s fastest growing supersector, although most of the jobs were created in the professional and business services, government, natural resources and construction supersectors. Notably, professional and business services added nearly 32% of jobs in the region over the past year and were supported by computer systems and design services, software programming and development, engineering and other professional and technical services.

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All supersectors are expected to add positions again in 2020, the eighth consecutive year of such diverse job growth. Transportation and warehousing employment will once again be the fastest growing supersector in the Denver metro area as the record amount of completed industrial space in the region comes on stream and businesses increase demand. use. Professional and business services will add the most positions, supported by the continued demand for high-tech workers.

Commercial real estate. The commercial office and industrial real estate markets remain healthy with low vacancy rates and generally rising rental rates. The office vacancy rate fell to 9% in the fourth quarter and the average rental rate increased by 1.4% over the year. The industrial vacancy rate increased to 4.9% in 2019, as a record number of new constructions were completed, but strong positive absorption resulted in a 4.3% increase in the average rental rate. On the flip side, the Denver metro retail market posted weaker conditions as the direct vacancy rate rose to 4.6% and the average rental rate fell 3.5%. The outlook for retail beyond 2020 remains uncertain as the market continues to adjust to rapidly changing purchasing preferences and slowing population growth.

Commercial construction activity peaked in the Denver metro in 2018, when a record 11.6 million square feet was completed. Completions fell 22% in 2019, falling to 9 million square feet. The contraction was driven by lower office and retail completions, which offset a record level of new industrial space added. Although analysts have expressed concern about the outlook beyond 2020, completions are expected to exceed 10 million square feet in 2020 as new large buildings are delivered to the market.

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Consumer activity. Consumer confidence for the mountain region, which includes Colorado, remained stable in 2019, with the confidence index edging up 1%. While confident consumers tend to spend more, and consumer spending is responsible for nearly 70% of total economic activity, the spending habits of the 3.3 million residents of the Denver metro area are dying. ‘of crucial importance to the region’s economy.

Retail sales activity in the Denver metro area has slowed since peaking at 8% annual growth in 2014. Retail sales are expected to grow 3.4% in 2020, the slowest rate since 2016, in part due to the slowdown in population growth. Indeed, net migration activity in the Denver subway peaked at nearly 45,000 people in 2015 but will slow to less than 23,000 in 2020.

Residential real estate. Sales of homes in the Denver subway rebounded in 2019, increasing 3.4% after falling 4.6% in 2018. In 2020, sales are expected to increase 2% to about 59,600 sales. Low interest rates are expected throughout 2020 and price growth is expected to continue at a more moderate pace as new offers are added to the market at a slower pace.

New residential permit activity in the Denver metro contracted 16% in 2019 due to a sharp decline in multi-family building permits. In 2020, the activity of housing permits is expected to contract by 3% to 19,700 units. Nonetheless, this slowdown in construction activity is not of concern as the level of activity will remain above historical norms for the region and the number of new units added to the market is expected to exceed the formation of new households for the fifth year. consecutively, thereby improving the affordability of the home.

Home price appreciation slowed significantly in 2019, following the 8% or more increase in the previous seven years. In 2019, the median home price rose 2.7% to $ 462,100, reflecting an increase below the national rate for the first time since 2012.

In 2020, buyers and sellers will adjust to lower interest rates and home price appreciation in the Denver metro area is expected to reach 3.5%. The continued economic expansion that is fueling wage and employment growth will support the residential market over the coming year.


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