Page 16B—
COLORADO REAL ESTATE JOURNAL
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September 2-September 15, 2015
an all-in cost of $160,000 to
$170,000 per unit. The same
developments, in our current
construction environment,
cost from $200,000 to $210,000
per unit, which dramatically
changes developers’ proformas.
While skyrocketing rents
in prime metro Denver
submarkets easily will justify the
increased cost and subsequent
development, many will stall
before shovels are put in the
ground.
However, the increased
timelines and costs have
not discouraged seasoned
developers. In many cases,
developers are charging forward
but resigning to the fact that
timelines and budgets are
simply outside of their control.
“Construction costs and
timelines have increased
significantly,” said Andy
Mutz, senior vice president
at AMLI. “We are working to
address these concerns for
our developments, but the
marketplace is driving the ship
right now.”
Undoubtedly, the most critical
influence to Denver’s apartment
pipeline is the flow of equity
investment that allows proposed
developments to go vertical. It is
an open spigot, but will quickly
run dry if Denver’s record-
breaking absorption statistics
slow. Big money is begging to
be spent in Denver, but many
investors are holding their
breath in anticipation of the
next quarterly market report to
validate continued investment.
Well-planned developments
still make sense in the metro
area. The unmet demand for
apartments has yet to be satiated
due to Colorado’s in-migration
and absorption. Slower
timelines and financial hurdles
for development mean Denver’s
vacancy rate will remain
manageable. If the current
construction pipeline progresses
as we expect, and absorption
slowly tapers, vacancy could end
up at about 6 percent in 2018.
Of course, there is always
construction defect reform
that could impact Denver’s
apartment market, but that is a
topic for another day.
replaced by hours on market.
With such demand, the supply
of finished lots has reached
historic lows. So one would
think there are several new
residential developments under
construction or being planned.
However, that is not the case.
Many new projects are on
hold due to the price of water.
Traditionally, municipalities
require 3 acre-feet of water
for each acre of land. When
raw water was $10,000 per
acre-foot this was doable. But
at over $50,000 per acre-foot,
the numbers barely work for a
$400,000 house and definitely
don’t work for a starter home.
Entry-level homes of $250,000
are history. There are few home
sites remaining for less than
$60,000 in Northern Colorado.
Affordability is gaining much
attention in both Larimer and
Weld counties.
Apartments.
In 2009, less
than 50 units were permitted
in the Fort Collins metro area.
But over the next three years,
an average of 525 units were
permitted. Then in 2013, nearly
1,000 units were permitted with
an additional 925 units in final
planning. Student housing
for CSU has been the major
focus. Newly completed projects
adjacent to the university
added over 1,900 beds with an
additional 2,100 beds nearing
completion. Currently, four
planned projects could add
another 1,400 beds. Pricing for
land ranges from $12,000 to
$15,000 per unit for the larger
projects having densities of
fewer than 20 units per acre.
Retail.
Demand is strong for
the “100 percent” locations. In
these projects, land prices for
1-acre sites are approaching $20
per sf. Following are examples of
retail anchors at “100 percent”
shopping center locations.
• A 250,000-sf Scheels at
Interstate 25 and U.S. Highway
34 in Loveland;
• Target, Safeway and Kohl’s at
Centerplace of Greeley in west
Greeley;
• Discount Tire, Kum & Go,
general retail and restaurants
at St. Michael’s Town Square in
west Greeley; and
• Walmart and Costco at I-25
and Harmony Road in Timnath
near Fort Collins.
Outside of these
developments, there has been
little new retail. Asking prices for
commercial sites have escalated
but there have been few actual
sales.
Industrial.
In 2013 and 2014,
oil and gas businesses servicing
the exploration and production
of the Niobrara shale formation
were desperate for industrial
properties, especially in or
near the Highway 85 corridor.
Building rents quickly rose from
$5 per sf to $15 or more per sf
and the few developed industrial
lots were quickly absorbed. But
for the most part, price increases
were muted, rising from the
$2.50 to $3.50 per sf range.
Water.
Prices have quadrupled
over the last three years driven
by the heightened post-recession
growth in the Northern Front
Range plus the expansion of
the oil and gas industry. With
limited new water storage
facilities coming on line in the
near term, prices will continue
to rise. Right now the most
important issue is water – for all
of Colorado.
Colorado likely will add 1
million-plus people over the
next 20 years with most locating
in the Front Range. In terms
of the demand for land, the
prospects are nothing short of
excellent, long term. There will
be more booms and more busts
but the trend line is strongly
positive.
incorporates trail connections
and opportunities for recreation,
as well as a health and wellness
education plan that must be kept
current.
Imperative No. 10, resilient
community connections,
includes strategies that foster
resiliency through infrastructure,
planning and communication. It
states that a secure shelter must
be provided for 100 percent of
the residents to congregate in
an emergency situation. Backup
generators must be provided for
all facilities, in addition to single-
family residences, and sensitive
infrastructure must be kept out
of the flood plain. Community
safety is cultivated through the
use of a neighborhood watch
program, and disaster response
plans must be disseminated
with trained and assigned block
captains.
The marriage between
community and resiliency
is key to enabling the built
environment to rebound
effortlessly, as nature does, and
the LCC will make great strides
in building this connection.
Staying true to the
commitment of sharing
knowledge, IFLI provided
pattern language tools, which
are meant to serve as a starting
point for project teams, and
invited others to submit their
own patterns to share. The two
that are available now are “San
Francisco Living Community
Patterns,” developed by the San
Francisco Planning Department
and ILFI, and “Child-Centered
Planning: A New Specialized
Pattern Language Tool,”
developed by Jason McClellan. A
few examples of these patterns
include urban rewilding and
blue green streets, which
marry vegetation and water
treatment, grower/maker spaces
and unstructured play where
children can interact with the
environment like they would
in nature, encouraging a sense
of exploration and need for
tactile investigation. The guides
also provide valuable real-world
case studies that showcase the
patterns in use.
The Living Community
Challenge is not for the faint of
heart or those content with the
status quo. It is for visionaries
– those who see the potential
of what could be and those
who decide to do today what
could be put off until tomorrow.
In Jason McClellan’s article
“Cities Are Now,” published in
the winter 2015 issue of Yes!
Magazine, he stated, “Human
behavior is shaped in large
part by our ability to pursue
what we can imagine.” The
Living Community Challenge
provides a vision. Luckily, ILFI
also provides research, resources
and current pilot cases, which
demonstrate that this is not just a
pipe dream.
land use and water planners in
the next few years.
It is clearly just the beginning
of the land use and water
planning conversation. The
Keystone Policy Center
also is trying to move the
conversation along through
its Colorado water and growth
dialogue program. Since
early 2014, the dialogue has
convened meetings of 25
individuals from the land and
water planning fields as well
as economic development
organizations. The purpose is
to identify land use patterns
and incentives that will save
water and still deliver housing
products that consumers
find attractive, said Matthew
Mulica of the Keystone Center,
who is leading the effort.
Having actual, comparable
data about growth and its
water use implications could
help overcome some of the
disconnect between water
providers and planning
departments.
Mulica points to the central
reality that Colorado has a
zero-sum water game. “We
are going to have to set some
priorities and make some
choices, and do it in smart,
strategic ways,” said Mulica.
For more information, visit
the Colorado Foundation for
Water Education website and
Headwaters magazine at www.
yourwatercolorado.org.
Denver’s current construction pipeline graph and prediction for the next few years
