CREJ - Journal

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Page 4B — COLORADO REAL ESTATE JOURNAL — July 1-July 14, 2015
D emand for income-pro-
ducing property comes
from both popula-
tion growth and employment
growth. Payroll employment
grew 2.6 percent in 2014,
which was 6.5 percent above
the prerecession peak, putting
Denver in the top 10 percent
of U.S. metro areas for employ-
ment growth. 2015 is forecast
to increase by 2.2 percent and
then improve to 3.1 percent in
2016. This strong employment
growth is boosting earnings,
putting Denver 17 percent
higher than the national aver-
age wage.
Tourism, the state’s No. 1
economic base industry, is sup-
porting much of the overall
job growth. Lower oil prices
have not had the impact they
did in the 1970s as the Denver
economy has diversified with
professional and business ser-
vices, leisure and hospitality,
and financial activities topping
the list of economic base indus-
tries. High-tech employment
also is 2 percent higher than
the U.S. average.
All this employment growth
also has driven the commercial
and residential markets into
the expansion phase of the
cycle. Occupancies and rents
drive the earnings of proper-
ties, and these follow the eco-
nomic cycle with a lag.
Office
occupancies
continue
their very
slow, but
steady, climb
from their
bottom in
the fourth
quarter of
2009 and are
expected to
peak in the
first quar-
ter of 2017.
Demand has
been more
moderate
than previ-
ous cycles as
tenants are
putting more
people into
less space
as they use
work shar-
ing, work-at-home, benching
(versus cubicles) and other
concepts to reduce space
needs. The historic 200 square
feet per employee usage has
dropped to 150 SFPE. Open
floor plates are needed for the
new workspace, but many old
buildings can be reconfigured.
Rent growth was over 5 per-
cent in 2014 and is expected
to be over 6 percent in 2015
before moderating back to
about 3 percent in 2017.
Industrial occupancies are
still rising and expected to
peak at over 97 percent in
the first quarter of 2016, then
moderate slightly over the next
two years. The demand from
marijuana growers has been
very strong and has absorbed
much of the old and outdated
stock in the market. Now it
appears that larger bulk space
may be in demand in the
future as growers do not have
to be connected to a specific
retail space; therefore this
new demand is not tied to
the Denver metro area, where
rents have grown substantially.
Industrial rents grew at just 3
percent in 2012 following three
years of small declines, but the
marijuana business legislation
demand in 2013 produced
over 11 percent rental growth
followed by over 14 percent in
2014. Rent growth is expected
to slow to just over 6 percent in
2015 and then drop back to a
moderate inflation level (2 per-
cent) growth in 2016.
Retail occupancies continue
to improve from their bottom
in third-quarter 2009 with a
peak of over 94 percent expect-
ed in the fourth quarter of
2016. Completions were high
in 2013 but moderated in 2014
and are expected to moder-
Glenn R.
Mueller,
Ph.D.
Professor, Franklin
L. Burns School
of Real Estate
& Construction
Management,
University of
Denver
Mueller is a real
estate investment
strategist at
Dividend Capital
in Denver.
E C ONOM I C F O R E C A S T
The graph shows the property-type occupancy cycles and their peak points going forward.
President
J. Jeffrey Riggs
President, Baron Properties/
Essex Financial Group
303-796-9006
President-Elect
Kevin Kelley
Vice President Development,
Colorado Office, United Properties
720-898-5872
Immediate Past President
Lea Ann Fowler
Partner, Brownstein Hyatt Farber
Schreck LLP
303-223-1100
Legislative Affairs Chair
Timothy Reilly
Fairfield & Woods, P.C., Esq.
303-894-4449
Membership Chair
Doris Rigoni
Vice President, Kirkpatrick Bank Denver
303-907-8740
Program Chair
Michael Strand
Associate, Snell & Wilmer LLP
303-634-2021
Director/At-large Officer
James Mansfield
Senior Managing Director,
Cushman & Wakefield of Colorado Inc.
303-813-6400
Director/Developing Leaders Chair
Ian Nichols
CPA/Controller, Gart Properties
303-270-0358
Director
Marshall Burton
Partner, Confluent Development
Services LLC
303-704-8148
Director
Jonathan Bush
Principal, Littleton Capital Partners
303-797-9119
Director
Alan Colussy
Principal, gkkworks
303-893-1990
Director
Sherri Goldstein
Assisant Vice President,
Land Title Guarantee Company
303-331-6226
Director
Randall Hertel
Senior Vice President,
Majestic Realty Co.
303-371-1400
Director
Christopher King
President, DPC Development Company
303-796-8288
Director
Thomas Kooiman
Director of Business Development-
Western Region, Brinkmann
Constructors
303-657-9700
Director
Paul Luber
Vice President, NorthMarq Capital Inc.
303-225-2117
Director
James Neenan
Senior Vice President,
Prime West Companies
303-741-0700
Director
Tim Swan
Executive Vice President & Managing
Director, CBRE Inc.
303-628-1766
Director
Celeste Tanner
Partner, Confluent Development
Services LLC
303-803-4697
Corporate Board Member
William Lawrence
Senior Vice President-Development
Services, Transwestern
303-639-3000
Corporate Board Member
James Mulligan
Partner, Snell & Wilmer LLP
303-634-2000
Honorary Lifetime Director
Robert Moody
Denver Energy Network
Honorary Lifetime Director
John O'Meara
Retired
303-877-6750
Ex Officio/2015 Rocky Mountain Real
Estate Challenge Chair
Tim Schlichting
Principal, Littleton Capital Partners
303-797-9119
Executive Director
Kathie Barstnar
NAIOP Colorado Chapter
303-782-0155
NAIOP – Colorado 2015 Board of Directors