Page 18
— Multifamily Properties Quarterly — August 2016
P
eople and jobs are migrat-
ing to the Mile High City
at record pace, resulting
in an expanding skyline,
revived urban neighbor-
hoods, growth of knowledge-based
industries and skyrocketing housing
costs. It is clear the city is trans-
forming, but into what? And, is it
for the better?
I often hear people remark that
Denver is becoming more like a
coastal market. There most cer-
tainly is merit to this argument but,
in my view, it has a decidedly West
Coast feel. As a Colorado native
who spent nearly a decade living in
California – where I started a busi-
ness that ultimately relocated its
headquarters to Denver – I have an
appreciation for what it is like to
run a business and raise a family in
both places.
Denver has a live-and-let-live
attitude that is uniquely business
friendly but underpinned by pro-
gressive social policies. The “West
Coastalization” of Denver brings
the promise of expanded economic
opportunity by attracting top tal-
ent in growing industries but also
carries the risk of dismantling this
unique balance if we follow the
maternalistic-policy choices that
have resulted in extreme distortions
in many West Coast markets.
Denver’s culture shares the West
Coast optimism that anything is
possible – along with a beautiful
natural setting and quality of life –
and for those fleeing the high cost
of living and punitive business envi-
ronment of the West Coast, Denver
is a natural choice
because it offers
a great balance of
lifestyle and oppor-
tunity.
Denver’s dating
profile would read:
“College gradu-
ate, in great shape,
loves the outdoors,
employed in a
growing field and
420 friendly.” In the
competitive dating
game of attracting
highly educated
young talent this is
a sure swipe to the right.
Attracting top talent is the pri-
mary driver behind Denver’s prolif-
eration of knowledge-based indus-
try clusters that are driving the
economy forward, attracting capital
and creating demand for real estate
in all sectors. This has created an
enormous opportunity for investors
and developers who recognize the
structural shifts occurring and who
are building creative office space
and urban multifamily product
catering to the changing demo-
graphics.
This development boom is accel-
erating the maturation of Denver’s
urban neighborhoods, which are
developing commercial nodes of
their own, as they carve out unique
identities. From the San Francisco-
like hills of the Highlands, to the
SoMa-like warehouse district of
River North, to the Beverly Hills-like
streets of Cherry Creek, to the to
Portland-like mass transit network
that connects it all, Denver is bor-
rowing the best from many West
Coast locales and gentrifying into a
city of great neighborhoods.
What’s more is that the suburbs
are next. Urban nodes in the tech
center, Stapleton and Lowry are
reshaping the urban fabric to cater
to the lifestyle desires of the mil-
lennial generation, which is aging
into child-bearing years and look-
ing for suburban space with urban
amenities. However, millennials are
saddled with student debt and are
waiting longer to get married, sup-
pressing homeownership and push-
ing demand for apartments to new
heights.
The West Coast transplants are
bringing knowledge, capital and
energy – all of which is immensely
positive, but also they are bringing
a more maternalistic-policy mind-
set that risks the unintended con-
sequences of increasing the cost of
living and making it more difficult
for business and people to thrive –
the very problems from which many
are fleeing. Rapid growth is stressing
the city’s infrastructure and supply
has not been able to keep up with
demand, particularly in housing.
The rising cost of housing is the
single biggest threat to Denver’s
ability to remain prosperous, and
the only solution to the severe
housing shortage will be more
development, largely led by private
interests.
Critics lament that high-end
development dominates the market
and quality affordable housing –
both for-rent and for-sale – is lack-
ing, but policy decisions often lead
this more than economics do.
Not-in-my-backyard, also known
as NIMBYism, and myriad fees and
restrictions have increased costs
and amplified political risk, result-
ing in less housing – not more – and
at higher price points. The escalat-
ing housing cost in Denver is far in
excess of income growth and this
unsustainable dynamic is beginning
to threaten the very balance that
has made our city so successful.
The densification of the city is
changing historic neighborhoods
and not everyone sees the growth as
progress. While the anxiety of these
constituents is understandable, not
even the politicians to whom they
plea can stand in the way of the
demographic and structural shifts
underway. Denver is blessed with
leaders who have laid out visionary
plans for the growth of the city and
taxpayers who have invested in the
necessary infrastructure to support
it. Leaders at the community level
now must avoid following the policy
footsteps of San Francisco or we will
have a housing market to match.
Denver is undoubtedly chang-
ing for the positive by borrowing
the best of our West Coast neigh-
bors whose residents increasingly
call our city home. It’s imperative
we harness the positives of these
changes while avoiding one-size-
fits-all solutions that distort the
market and drive costs even higher.
Right now we have everything going
for us, let’s just not get in our own
way.
s
Eric Frank
Managing
principal,
Cardinal Group
Investments,
Denver
Denver Highlight
