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Page 14 — Office Properties Quarterly — March 2017
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C olorado, Denver and the
north metro area will enjoy a
strong 2017 with a booming
economy and more growth
than originally expected,
experts speaking at two Vectra Bank
annual economic forecast events
predicted.
At the Denver/Colorado event,
economic experts discussed growth,
doing business in a changing politi-
cal and economic climate, interest
rates and gross domestic product
growth. At a metro North-focused
economic event, experts provided
an overview of the economy and
shared thoughts on how a changing
workforce may affect personal and
business plans.
• Business expectations. The state’s
growth is anticipated to be “run-
ning on all cylinders this year,” said
economist Patricia Silverstein with
Development Research Partner.
With net migration at an all-time
high of 45,000 last year, Silverstein
said 2017 migration will be slightly
lower, at about 40,000.
Generation Y has not yet reached
its income potential, so Genera-
tion X is spending the most dollars
and driving the economic activity
today. As millennials come into
their income potential years, age 35
to 55, they will play a larger role in
strengthening the economy. Retail
trade activity will increase, but
expect inflation to take a bigger bite
out of our income this year, reach-
ing 3 percent, she said.
Colorado will be in the top 10
states for employment in 2017, and
while growth has been slow for
some areas in Colorado, like Grand
Junction, all areas
saw expansion in
2016.
“This was the
fourth year that
we’ve seen growth
in the state’s super
sectors,” said Sil-
verstein. “In fact,
all sectors have
enjoyed growth at
historic rates.”
Super sectors
include health
care and wellness,
information tech-
nology, aerospace,
telecom, fossil fuels, and banking
and finance.
While the rate of growth in the
country and state has slowed over-
all – down 0.2 percent from last
year to 1.7 percent in Colorado – the
state continues to grow twice as
fast as the rest of the country, state
demographer Elizabeth Garner told
the metro North conference attend-
ees.
For business, the challenge will
be attracting and retaining talent.
While Colorado is experiencing a
boom, many other states are as
well. Colorado’s high housing costs
– the 16th highest in the country
– and competition to attract top tal-
ent within the growing millennial
workforce population will require
businesses to closely watch staff-
ing needs and may need to increase
compensation and benefits to
attract new workers, Silverstein
said.
In-migration is on the younger
side, which means businesses will
be challenged to find older, experi-
enced workers – especially consid-
ering that the 65-plus population
will grow by 77 percent in the same
30 to 40 years it takes a person in
an entry-level position to reach full
potential.
In addition to a “growing and
slowing” economy over time, busi-
nesses must ensure they provide
goods and services to attract top
employees. By 2040, Hispanics and
other nonwhites are expected to
make up 45 percent of the state’s
population. “Those new nonwhite
workers are the new spender,” said
Garner. “To prepare, businesses
should think about diversity in both
worker and client.”
• Interest rates. At the 2016 confer-
ence, Burt White, managing director
of research and chief investment
officer for LPL Financial, predicted
a 70 percent chance of a recession
and potential negative interest
rates. One year later, his forecast is
for strong growth with no chance of
recession.
While it is a positive that the
country avoided a recession, the
low 2 percent growth in gross
domestic product has slowed our
post-recession recovery and dubbed
it “the worst recovery ever,” White
said.
While low interest rates may be
positive for borrowing, it also ham-
pers consumer’s ability to increase
savings, going as far as to call it
a “disservice to the economy and
growth,” he said. The average num-
ber of interest rate hikes following a
recession is 16 and the lowest num-
ber of increases was 10. However,
interest rate increases following
this recession equals only 2 percent.
With the average three increases
per year, the interest rate will take
nearly five years to get back to a
healthy GDP following this past
recession, White said.
“We receive two times more inter-
est in savings as when we pay
interest,” said White. This lack of
interest on savings hurts the people
who need it the most. White pre-
dicts 2.5 to 3 percent growth in 2017
and earnings in the mid-single-digit
or high-single-digit earnings and
return.
Contrary to what economists
thought would happen, when inter-
est rates were at the bottom, spend-
ing went down and people saved
more. In 1980, a person needed
$763,395 to have $100,000 in inter-
est income for retirement. By 2000,
a person needed $2 million. Today,
one needs $14 million to make
$100,000 from interest income on
savings. However, White assured
attendees that the country does not
need much growth to get back to a
healthy 3 percent GDP within a year
and a half.
• Economic growth. While the
pro-growth promise of the new
administration has potential for
the country, White cautioned that,
historically, it’s excesses that cause
recessions.
“It ain’t over until ‘overs’ are
everywhere … over borrow, over
hire, over spend, over leverage,”
said White. “We were over extended
and over in 2009. Today, we don’t
Financial Update
Kirk Monroe
Executive vice
president, director
of lending services,
Vectra Bank,
Denver