Denver ranks 4th in Emerging Trends

Highlights:

  • ULI and PwC sponsor Emerging Trends report.
  • Denver ranked No. 4 in Emerging Trends.
  • Millennials an important reason for Denver’s Emerging Trends ranking.
Denver ranks 4th in ULI's Emerging Trends report.

Denver ranked 4th in ULI’s Emerging Trends report.

A Who’s Who of real estate leaders across the country believe that Denver will be one of the top markets for real estate prospects in 2015, as the Mile High City remains a magnet for Millennials, according to an influential report by the Urban Land Institute.

Denver was ranked No. 4 out of 75 cities in the 112-age, comprehensive Emerging Trends in Real Estate 2015 report sponsored by the Urban Land Institute and PwC, the accounting giant formerly known as PricewaterhouseCoopers.

Only Houston, Austin and San Francisco were ranked higher than Denver in the broad categories of  investment, development and homebuilding. In the 2014 report released last year, Denver ranked 11th.

Bill Mosher, senior managing director for Trammell Crow in Denver, said the 4th place ranking is the highest for Denver in recent memory.

“I think it shows we have really matured as an urban place,” Mosher said.

By every metric, whether it is falling unemployment, job growth, or attracting Millennials, Denver is out-pacing the national average, he said.

The impact of Denver doing so well will be huge, he said.

“I think it is going help bring more diverse capital and more foreign capital to Denver,” Mosher said. “We are seeing that anyway and this is going to accelerate that trend.”

“The ULI/PwC report is an exceptional resource as it surveys more than 1,400 real estate professionals in varying rolls regarding investment trends nationwide,” from everything from private real estate investments and development to home building, said Ray White, a vice president at JLL’s Denver office.

“In short, the report explains in detail why these professionals invest where they do,” said White, an apartment broker.

“Denver has seen significant growth in this report over the last several years as it is has become the location of choice for the millennial generation as well as the technology and energy industries, he continued. Denver’s strong economy and quality of life are attractive to these groups, and this is attracting the interest of investors,” White added.

Travis Hodge, an associate at JLL, said investor’s are voting with their pocketbooks by choosing Denver.

“It’s amazing to see the amount of capital chasing real estate,” Hodge said. “You see pension funds increasing their allocation for real estate and Denver is seen as an affordable alternative to the traditional gateway markets.”

“All of this capital is feeding fuel to the fire, and while we are seeing lower cap rates these are still a bargain when compared to the coastal investment markets,” Hodge said.

“Denver joins Austin and San Francisco as markets popular with the millennial generation that appear in the top five of this year’s survey,” according to the 104-page report, which also drills into various real estate asset classes including apartments, offices, retail and industrial.

The report also described Denver as one of the cities with “higher exposure to lifestyle decisions made by millennials between ages 30 to 35.”

Denver was ranked second to Austin for urban growth. Overall, Denver received a score of 3.66. Houston, Austin and San Francisco had scores of 4.01, 3.85 and 3.82, respectively.

Emerging Trend singled out LoDo for concentrating the city’s “economic energy.”

“Denver’s discipline is better” than a number of other growth markets, according to a financial professional interviewed by ULI, “thus more capable of sustaining its upward trend.”

The report also said that “Denver’s industry exposure to the technology and energy industries has also attracted

investor interest.

A demographic snapshot of Baby Boomers and Millennials in Denver and other cities. Source: Emerging Trends.

A demographic snapshot of Baby Boomers and Millennials in Denver and other cities. Source: Emerging Trends.

Patty Silverstein, chief economist for the Metro Denver Economic Development Corp., wasn’t surprised that Denver ranked so highly.

“This is definitely the result of a lot of different issues,” said Silverstein, also principal of Littleton-based Development Research Partners.

“We are experiencing everything from lots of entrepreneurial activity to strong residential real estate activity to the whole idea of Millennials willing to choose Denver over other cities.

“That has been a real game changer,” Silverstein said.

While the report highlighted LoDo activity, she said that is only one of many neighborhoods experiencing a Renaissance.

“That’s happening in RiNo, too,” Silverstein said. “A lot of neighborhoods throughout Denver and the metro are area being repositioned and repurposed.”

When investors are looking to place their money anywhere in the U.S., increasingly Denver is at the top of their lists, she said.

 

A snapshot of urban population trends in Denver and other cities, according to the Emerging Trends report by the ULI.

A snapshot of urban population trends in Denver and other cities, according to the Emerging Trends report by the ULI.

“One of the real keys is FasTracks,” Silverstein said.

“They look at all of the mobility options and FasTracks presents a whole new opportunity for employment centers throughout the metro area, which will increasingly allow workers to get to one location from another.”

She said some are worried that when the majority of FasTracks projects are completed in 2016, that the area will suffer a downturn.

“But really, what that is going to do is present wonderful opportunities to step in where the public sector left off,” Silverstein said.

Meanwhile, in an interesting twist, Denver did not fare that well in individual asset classes, as its overall ranking in the Emerging Trends report woldl suggest.

“Denver is the first market in the top five that does not have a property sector that respondents consider the best for 2015,” the report noted.

For example, Denver’s retail market was No. 5, the office market No. 6 and hotel No. 7.

“The industrial sector has seen significant improvement in recent

quarters but is still ranked number 13,” according to the report.

Also, a number of those who responded to the survey and were interviewed, “have expressed some concern” that the Denver’s apartment market “may be due for a cooling off.”

In fact, the multifamily ranking was No. 18, the lowest of the various asset classes.

Homebuilding, by contrast, is where Denver scored the best.

“With a number-four ranking, the single-family housing sector is still expected to be strong in 2015,” according to the report.

Have a story idea or real estate tip? Contact John Rebchook at JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by Universal Lending, Land Title Guarantee Co. and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal. In 2012, ULI held its annual convention in Denver.

 

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John Rebchook

John Rebchook has more than 30 years of experience in writing and communications. As the Real Estate Editor for the Rocky Mountain News, he wrote about residential and commercial real estate for 26 years. He has won numerous awards for business stories and columns that he wrote, both as an individual and part of teams. In addition to real estate, he also covered economic development, banking and financing, the airlines, and cable TV for the Rocky. In addition, he was one of the original freelance writers for GlobeSt.com, covering commercial real estate for the Internet publication.

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