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— Office Properties Quarterly — March 2016
Founded in 1953, Unico Properties LLC is a real estate investor and
full-service operator of office andmixed-use assets. Unico’s Colorado
portfolio consists of more than 2 million square feet of commercial
property in Denver and 1.4 million square feet in Boulder.
Local Commitment. Shared Goals. Superior Execution.
Austin Kane
VP, Regional Director
303.832.1660
C
olorado’s commercial con-
struction market is booming,
and all indications are that
the fundamentals will remain
strong throughout 2016. The
state’s construction sector is poised
this year to record the highest value
of construction since 2006, according
to the University of Colorado Boul-
der’s Leeds School of Business.
Our Denver office recorded nearly
$400 million in revenue in 2015 and
is on pace to exceed that revenue in
2016. We’re either under construc-
tion or about to start construction
on nearly $200 million of commer-
cial office work across the region in
2016, including the Colorado Center
office tower next door to our offices
at Interstate 25 and Colorado Boule-
vard.
But a strong economy comes with
its own challenges, including the
ongoing labor shortage, volatility in
materials costs, increasing sustain-
ability demands and inflationary
fears shaking business confidence.
In the construction market, the
war on talent that we expected is
now in full swing. Skilled workers
are becoming selective in the jobs
they’ll choose to work. The migra-
tion of displaced oil and gas workers
back to the construction industry
has yet to materialize, according to
Leeds’ 2016 Business Economic Out-
look.
We see high demand for cement
masons, carpenters, sheet metal
installers, electricians and other
skilled craftsmen. This means that
even though we’ve seen a drop in
steel prices thanks to the downturn
in China, wages for skilled laborers
continue to esca-
late. For example,
we’ve experienced
a significant
increase in the cost
of rebar installa-
tion over the last
18 months. Like us,
many of our trade
partners are start-
ing to pay higher
wages to keep good
people. As a result,
we are seeing an
uptick in fees.
In this environ-
ment, there is a real concern about
the temptation to use nonskilled
labor to backfill the shortage. Work
quality and productivity can suffer,
and it brings a need to increase the
focus on training and safety.
It is important for construction
companies to be vigilant about safe-
ty and promote a culture of safety
that is the result of attention to
detail, as well as thorough planning
and consistent enforcement. A risk
management and prequalification
process also helps ensure the health
and vitality of trade partners.
While these are practices we fol-
low, not everyone does. The Associ-
ated General Contractors in 2015
reported that 15 percent of construc-
tion firms have seen an increase in
the number of reportable injuries
and illnesses because of workforce
challenges. Thirteen percent report-
ed experiencing increases in jobsite
hazards identified in inspection
reports because of worker shortages.
There was a reported 11 percent
increase in worker compensation
claims that is attributed to a tight
labor market, according to the AGC.
Ensuring a safe work environment
is really a mindset. Over the same
period, we recorded a 25 percent
decrease in total recordable injury
rate and did not have a loss-time
injury across the region.
Many construction firms expect
that it will remain difficult, or get
even harder, to find qualified work-
ers because they have a low opinion
of the training pipeline.
With respect to materials pricing,
we’ve seen some ups and downs,
depending on the commodity. The
slowdown in China and weakness in
Europe and Japan created a drop in
steel prices and moderated prices in
copper, pipe and other products.
With fewer suppliers, however,
the cost of gypsum and glass has
increased about 10 percent. Gypsum
wallboard is a key component of
building construction, and architects
are using an increasing amount of
glass in their office designs. In addi-
tion, the cost of cement is up about
4 percent in the last year.
With respect to office design
trends, Colorado continues to grow
as a center of green construction,
so sustainability demands remain
strong. LEED Gold is now the de
facto standard, with a growing num-
ber of developers considering LEED
Platinum, and some owners express-
ing an interest to explore net-zero
energy standards. It’s not just an
environmental trend. Lux Research
reported that buildings with LEED
Gold certification outperformed their
peers in rental and occupancy rates.
Healthy, collaborative workspaces
also are growing in popularity, as
is evident in The Nichols Building,
completed in 2015, and PearlWest,
which is currently under construc-
tion in Boulder.
The Nichols Building, in the histor-
ic Platte River neighborhood down-
town, is an 85,000-square-foot urban
infill, mixed-use building. It’s an
innovative steel structure with con-
crete on metal deck for levels one
through four. The design includes
open floor plans, innovative work
areas, floor-to-ceiling windows, a
central atrium staircase and a large
skylight, providing tenants with lots
of natural daylight. The building
also features a bike barn, in-house
café, restaurant and event spaces,
all designed to promote community
and collaboration.
PearlWest, which is pursuing LEED
Platinum, is located in the former
Daily Camera site on the Pearl Street
Mall in Boulder. It includes retail,
restaurants and 135,000 sf of cre-
ative office space. It also features
floor-to-ceiling windows, a rooftop
terrace and an automated parking
garage.
These are 21st century offices, and
we expect these design trends to
continue.
So while we are enjoying Colora-
do’s commercial construction boom
and are bullish about 2016, econom-
ic prosperity has challenges as well.
In addition, we see some possible
bumps in the road after this year,
as we’re watching monetary policy,
global economies and election-year
politics. Time will tell how those
issues may affect the United States
and Colorado in 2017 and beyond.
s
Rodd Merchant
President, West
Region, JE Dunn
Construction,
Denver
Construction Spotlight
