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Page 8 — Office Properties Quarterly — June 2017
Market Analysis
A Different Approach to Denver Commercial
Real Estate Solutions and Services
In a partnership focused on your strategic business objectives, Avison Young
delivers intelligent commercial real estate solutions that add value and build
competitive advantage for your enterprise.
Our office offers a full range of real estate solutions:
Learn how our approach might help you at:
For further information please contact:
AlecWynne, Principal, Managing Director
720.508.8112
• Project and construction management
• Lease administration
• Leasing and sales brokerage
• Property management
Partnership. Performance.
E conomic diversity could be
one of the defining factors in
commercial real estate and
apartment construction cycles
in Colorado. Economic diver-
sity measures how financial activity
is spread across different industries.
When employment is spread across
all sectors, it is considered economi-
cally diverse.The more dependent a
local economy is on a few sectors, the
more sensitive it becomes to economic
shocks.The question is whether the
volatility in Colorado’s commercial
real estate and apartment construc-
tion cycles have been reduced as the
Colorado economy has become more
diversified.
Like most states, the composition
of Colorado’s employment base has
changed dramatically over the past five
decades.The state’s employment base
grew from about 1 million jobs in 1969
to nearly 3.6 million jobs in 2015. Dur-
ing this period, the state’s economic
base shifted from about 25 percent of
total jobs in goods-
producing sectors
to about 14 percent.
While the goods-
producing industries
have accounted for
260,000 additional
jobs over this period,
the services sectors
accounted for about
2.3 million new
employment.
In 1969, the top
five industry sectors
in Colorado account-
ed for nearly 60 per-
cent of the jobs. Government positions
led the economic base with nearly 23
percent. By 2015, the top-five industries
accounted for less than 50 percent of
total employment in Colorado, with
government jobs falling to just 13.4 per-
cent of the total. In addition, the retail
trade industry was replaced by health
care in the top-five employment sec-
tors.
One way to mea-
sure economic
diversity is through
the Herfindahl-
Hirschman Index,
commonly referred
to as HHI, a mea-
surement that col-
lapses the percent
of employment in
each industry sector
to a single number.
A lower HHI score
is evidence of more
diversity, whereas
a higher score indi-
cates less economic diversification.The
accompanying chart provides the HHI
annually for Colorado for the 20 major
industry sectors reported by the U.S.
Census Bureau over the 1969 through
2015 period.
Between 1969 and 2015, the Colorado
economy became substantially more
diverse.The HHI was 1,033 in 1969 and,
by 2015, the HHI decreased to 722.The
HHI chart separates
this timeframe into
10-year periods
starting in 1969 in
order to gain some
insight into the rate
of change in eco-
nomic diversification
over time. By con-
necting these points,
we can indicate a
noticeable change in
the slope of the line
as each period con-
tinued.The majority
of state’s economic
diversification occurred during the
early part of this period, from 1969
to 1979. Since the turn of the century
there has not been much change in
economic diversity
So, what does all of this mean for the
income-producing property construc-
tion cycle?The growth in jobs that
require bricks and mortar certainly
have benefited the commercial real
Toby Kropp
Undergraduate
student, Leeds
School of Business,
University of
Colorado Boulder
Brian
Lewandowski
Associate director,
Business Research
Division, University
of Colorado Boulder
Thomas
Thibodeau
Academic director,
Real Estate Center,
University of
Colorado Boulder
The employment concentrations in the top-five employment sectors in 1969 and in 2015. The employment base has changed dramatically in the last five decades.
1969 Top 5 Sectors
Government 22.9%
Manufacturing 11.9%
Retail Trade 11.9%
Other Services (Except
Public Administration)
6.6%
Accommodation and Food
Services
5.7%
TOTAL 59%
2015 Top 5 Sectors
Government 13.4%
Retail Trade 9.3%
Health Care and Social Assistance 9.1%
Professional, Scientific, and
Technical Services
8.9
Accommodation and Food
Services
7.9%
TOTAL 48.6%