- CBRE released 2015 outlook report.
- Denver facing more normal growth this year.
- CBRE notes Millennials love Denver and apartments are benefitting.
The new normal for the Denver-area economy may be the return to “normal” growth this year, according to an outlook report released on Wednesday by CBRE, a commercial real estate firm.
“Looking ahead, the U.S.’s overall expansion is poised to accelerate in 2015 aided by cheaper fuel costs and a consequential boost to consumer activity,” according to the 71-page “Outlook” report by CBRE
“Denver will also benefit from heightened consumer activity, but may see negative impacts related to production pullback from oil and gas firms and job losses due to layoffs or mergers and acquisitions,” according to CBRE.
“The net effect will be a normalization of Denver’s recent above-average pace of economic growth so far this cycle to more of an average pace in 2015,” CBRE reported.
The report looked at a number of commercial real estate sectors including multifamily (apartments), office, industrial, retail and hotels.
CBRE noted that Colorado was the sixth fastest growing state in 2013, with a 3.8 percent increase in GDP. And the 6 percent growth rate in the Denver-Aurora- Lakewood metropolitan statistical area ranked it as the 18th best MSA in the country. Greeley ranked second in the U.S. with a 10.1 percent expansion that was heavily influenced by oil and gas activity related to the Niobrara shale play.
“Denver’s economy has outperformed peer markets in the U.S. for the past two years, due to robust employment growth and in-migration, and consequently commercial real estate sectors have recorded notable strengthening,” according to CBRE.
“Considering the current stage of this economic expansion and the recent collapse in oil prices, many are questioning whether 2015 will bring a slower pace of market expansion or if the region will continue to outperform as other non-energy sectors hit their stride,” CBRE continued.
CBRE noted that last year Colorado was the fourth fastest growing state for the second year in a row with a 1.6 percent population increase of nearly 84,000 people.
Also, Denver was only second to Washington, D.C., for the in-migration of Millennials, those aged 25-34.
“The “Millennial Factor” has boosted demand in Denver as the U.S. homeowner hip falls to a post-recession low of 64.0 percent – both of which contributed to upward rental rate pressure in 2014,” according to CBRE.
“Millennials moved to Denver because of job availability and for the high quality of life, and bolstered both suburban and urban demand for multifamily,” CBRE noted.
Much of the apartment construction has occurred in and around downtown Denver.
“A demographic shift to the urban core is occurring at different rates across the U.S., but Denver’s share of Millennial population downtown grew at a faster rate than in the suburbs from 2010 to 2012,” according to CBRE.
Denver also ranked fifth for in-migration of Baby Boomers .
“The demographic influx has boosted apartment absorption in recent years to near-record levels and supported significant multifamily construction; however, the single family sector has seen only moderate activity in terms of sales and new construction,” according to CBRE.
“Because resale and new construction supply has been limited, home prices are on the rise,” CBRE continued.
The average existing home price in Denver appreciated nearly 10 percent year-to-date in both Boulder and Denver, in the third quarter, CBRE reported.
One reason so many apartments have been built and are under construction is because of Colorado’s construction defect laws, which makes it easy to sue condo developers.
“Demand for apartments may soften in the next 12-18 months if Colorado’s rigid construction defect law is revised to encourage condominium construction and single-family home builders ramp up construction,” CBRE said.
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