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Page 28 — Office Properties Quarterly — March 2017
Bach
the demand necessary for a healthy
business sector.
Nevertheless, business capital
expenditure plays a big role in the
economy, specifically its impact on
productivity, as companies invest in
products and services to make their
employees more efficient. Higher
productivity growth delivers a higher
standard of living, as businesses can
pay their employees higher wages
without triggering a spike in infla-
tion.
Labor productivity – the output
of goods and services produced per
hour of labor – has lagged in recent
years, growing at an annualized rate
of 1.1 percent in the current econom-
ic cycle, compared with 2.7 percent in
the previous cycle from 2001 to 2007.
Similarly, real (inflation-adjusted)
business capital expenditure has
grown by 1.6 percent in the current
cycle, well below the 2.9 percent rate
in the 2001-2007 period. Economists
cite other causes of low productivity,
including substandard schools and
job training programs, and the inac-
curate measurement of output in a
technology-driven economy.
There are several reasons to expect
business capital expenditure to accel-
erate in the next couple of years,
which would provide a tailwind for
the economy:
•Consumer spending, which
includes spending on goods and
services, remains solid eight years
into the expansion, rising by 2.7 per-
cent in 2016 and by 2.5 percent at an
annualized rate in the fourth quarter,
according to the Bureau of Economic
Analysis. Retail sales, a subset of con-
sumer spending that excludes servic-
es, is up a healthy 5.6 percent from a
year ago and 0.4 percent in January,
as reported by the Census Bureau.
•Corporate profits are showing
signs of improvement. Profits fell in
all four quarters of 2015 and again in
the second-quarter 2016, according
to Bureau of Economic Analysis data.
Third-quarter profits increased by 5.8
percent, the strongest performance
in more than two years. Although the
Bureau of Economic Analysis has not
yet reported fourth-quarter profits,
FactSet, a private data provider that
tracks the S&P 500, reported fourth-
quarter earnings rose 5 percent.
•Several economic proposals of the
Trump administration, if Congress
goes along with them, would sup-
port business capital expenditure,
including lower corporate taxes,
provisions to encourage the repatria-
tion of an estimated $2.6 trillion in
offshore profits – an amount cited
by Congress’s Joint Committee on
Taxation – and an easing of business
regulations.
Political infighting in Washington
could derail this process if it creates
enough uncertainty among busi-
nesses and consumers. A hopeful
sign is that Brexit, the departure of
Britain from the European Union,
so far has had little impact on the
British economy. It may be that
businesses and consumers across
the globe are willing to look beyond
moderate levels of political dysfunc-
tion so long as economies continue
to grow. s
Hodge
is seeing variability in office vacancy
rates as businesses look for options
outside of the central business dis-
trict. Reliable communications infra-
structure is a key factor in site selec-
tion in today’s competitive business
climate. It also will allow for effec-
tive teleworking and open the door
to improvements in telemedicine.
With Business Insider Magazine pro-
jecting that there will be 34 billion
devices connected to the internet in
2020, the fiber capacity is crucial, as
it is the most reliable infrastructure
available.
Energy-efficient measures such as
fiber-enabled LED lighting on street-
lights provide not only a “smart”
lighting solution, but also security
benefits by enabling the ability to
brighten or dim lights as needed or
help a family locate a child or fam-
ily member, provided they opt in to
the system. The residences, some of
which are under construction, are all
expected to have home-automation
systems that will help residents
manage and control their heating
and cooling, lighting, internet and
entertainment systems. Homes
also will have separate metering for
indoor and outdoor water.
Smart cities can attract businesses
looking for new geographic locations
to grow their operations and can be
a selling tool for economic develop-
ment corporations. These smart cities
provide a smart infrastructure to help
businesses improve operations, out-
reach and reputation through better
connectivity to related community
stakeholders, including health care
facility operators, schools, retail and
the services those living and working
in these area demand.
These are some of the local
examples of the advantages of inte-
grating infrastructure, connectivity
in transportation and information,
water, energy and power as part of
an overall building and development
solution at present. The smart city
concept is becoming reality in Colo-
rado! s
McCory James
The Panasonic Enterprise Solutions Co. Operations and Technology Center is part of
Peña Station NEXT, a smart-city development, located adjacent to the 61st Avenue and
Peña Boulevard rail stop on the University of Colorado A-Line.
Kuehl
• Johnstown. Across the interstate
from Loveland and within sight of the
Centerra development, Scheels broke
ground on its 260,000-sf, $55 million
sporting goods store in Johnstown.
The development, previously known
as 2534, was rebranded as Johnstown
Plaza. Steve Scheel promised his
groundbreaking crowd that the Dis-
neyland of sporting goods stores will
be open in September. Approximately
200,000 sf of speculative retail space is
under construction at Johnstone Plaza
as well with more to follow as lease-up
progresses.
• Greeley. A new $31 million Double-
tree by Hilton is under construction
in downtown Greeley. A public-private
partnership came together to trans-
form a city block near Lincoln Park into
this 147-room hotel, with 14,000 sf of
conference space and 12,000 sf of ball-
room space.
On the west side of Greeley,
UCHealth purchased ground for the
UCHealth Greeley Hospital, which will
be a four-story, 153,000-sf, 53-bed facil-
ity. Adjacent to the hospital will be the
UCHealth Greeley Health Center. This
$135 million project will begin con-
struction in 2017 with the anticipated
opening in late 2018.
It is an exciting time in Northern
Colorado with over $1 billion in new
construction planned and much of it
expected to be completed within the
next 12 months. Time will tell whether
all the announced new retail will come
to fruition as the competition will be
fierce in the I-25 and U.S. 34 corridor.
It is doubtful that there is a current
market for all of the announced retail.
The winners will be those who wake
up every day focused on their project,
offer experiential retail with new con-
cepts and restaurants, and can navi-
gate possible headwinds, including:
•J.C. Penny, Sears, Macy’s, Foot Locker
and CVS, combined, announced over
500 store closings, and Kohl’s is plan-
ning to reduce the size of 300 stores,
offering the excess space for lease.
•Interest rates will increase; in Janu-
ary, the Consumer Price Index was up
0.6 percent, suggesting inflation may be
ready to return to our vocabulary.
•The labor force is only adding 2,000
to 3,000 workers per year, which could
lead to a shortage of workers in the
region.
•Approximately 20 percent of the
workforce is getting ready to retire
and this population will dramatically
change the housing market, looking for
smaller homes and adding its larger
home to the available inventory. s
Realtec Commercial