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Page 4 — Office Properties Quarterly — March 2020 www.crej.com Market Update I s our vision crystal clear or clouded by contradictory information in 2020? Slower growth in China and other key trading partners, tariffs and trade disputes, market disruptions due to COVID-19 and geopoliti- cal concerns throughout the globe mean a high degree of uncertainty in the national economic outlook. Still, current economic data sug- gests continued expansion at a slower pace as businesses and con- sumers wait for the outcome of the presidential election. n Employment. The seven-county metro Denver region is the home of about 62% of the state’s jobs. Employ- ment increased by nearly 34,000 jobs or by 2% in 2019, reaching 1.7 million jobs. Employment growth was limited by a tight labor market and the aver- age unemployment rate fell to a record low 2.7% for the year.The low unem- ployment rate put upward pressure on wages and metro Denver posted a rapid 5.1% increase in the average annual wage, a faster increase than both the state and nation. Employment growth is expected to slow to a 1.6% pace in 2020, representing the addition of nearly 28,000 jobs, and the unem- ployment rate will increase slightly to 2.9%.The continued tight labor market will temper job gains. Metro Denver posted employment increases in all 11 industry supersec- tors in 2019.Transportation and ware- housing was the region’s fastest-grow- ing supersector, although the most jobs were added in the professional and business services, government, and natural resources and construc- tion supersectors. Notably, professional and business services added nearly 32% of the jobs in the region over the past year and was bolstered by com- puter systems and design services, programming and software develop- ment, engineering, and other profes- sional and technical services. All supersectors are expected to add positions once again in 2020, the eighth consecutive year of such diverse employment growth. Transportation and warehousing employment will once again be the fastest-growing supersector in metro Denver as the record amount of indus- trial space completed in the region comes on line and companies ramp up employment. Professional and busi- ness services will add the most posi- tions, supported by continued demand for high-tech workers. n Commercial real estate. The office and industrial commercial real estate markets remain healthy with low vacancy rates and gener- ally rising lease rates. The office vacancy rate fell to 9% in the fourth quarter and the average lease rate increased 1.4% over the year. The industrial vacancy rate increased to 4.9% in 2019 as a record amount of new construction was completed, but strong positive absorption led to a 4.3% increase in the average lease rate. On the other hand, metro Denver’s retail market posted weaker conditions as the direct vacancy rate increased to 4.6% and the average lease rate declined 3.5%.The retail outlook beyond 2020 remains uncertain as the market continues to adjust to rapidly changing shopping preferences and slowing population growth. Commercial construction activ- ity peaked in metro Denver in 2018 as a record 11.6 million square feet was completed. Completions fell by 22% in 2019, falling to 9 million sf. The contraction was due to declin- ing office and retail completions, which offset a record level of new industrial space added. Although analysts have expressed concern for the outlook beyond 2020, comple- tions should surpass 10 million sf in 2020 as large, new buildings are delivered to the market. n Consumer activity. Consumer confidence for the Mountain Region, which includes Colorado, remained stable in 2019, with the confidence index increasing a slight 1%. As confident consumers tend to spend more and consumer spending is responsible for nearly 70% of total economic activity, the spending pat- terns of metro Denver’s 3.3 million people is critically important to the region’s economy. Retail sales activity in metro Den- ver has been decelerating since peaking at 8% annual growth in 2014. Retail sales are expected to increase by 3.4% in 2020, the slow- est rate since 2016, due in part to the slowing population growth. Indeed, net migration activity in metro Denver peaked at nearly 2020 vision: Economic forecast for metro Denver Patricia Silverstein President and chief economist, Development Research Partners Please see Silverstein, Page 21 Source: U.S. Bureau of Labor Statistics, Current Employment Statistics. 2019e=DRP estimate; 2020f=DRP forecast. ©2019JonesLangLaSalle IP, Inc.All rights reserved. *DealsecuredbyHollidayFenoglioFowlerLPorHollidayGPCorp. (“HFF”) prior tobeingacquiredbyJLLonJuly1,2019.HFF isnowpartofJLL. **BasedoncombinedJLLandHFFyear-to-dateU.S.CapitalMarkets transactionvolumeasofSeptember30,2019. in more than 540 U.S. office transactions year-to-date** How do we do it? Our advisors are the most strategic, creative and connected, with access to the global capital markets, on-the-ground experience and world-class research and data. Achieve your investment ambitions by partnering with us. jll.com/capitalmarkets 777 & 757 Grant* Denver, CO Office/Multi-housing 73,122 SF & 68 Units Financing CLOSED: SEPTEMBER 2019 Tuscany Village Center* Greenwood Village, CO Office 257,875 SF Sale & Financing CLOSED: NOVEMBER 2019 Central 64* Denver, CO Industrial 220,184 SF Equity Placement CLOSED: NOVEMBER 2019 4250 Broadway Denver, CO Industrial 82,980 SF Financing CLOSED: OCTOBER 2019 Clear Creek Office Park Wheat Ridge, CO Office 77,994 SF Sale IN CLOSING Gateway Centre Portfolio* Aurora, CO Office 299,614 SF Sale & Financing CLOSED AUGUST 2019 3500 Youngfield* Wheat Ridge, CO Retail 6,500 SF Sale MARKETING Conifer Town Center* Conifer, CO Retail 91,340 SF Sale MARKETING $29 B over Office Space Available at INOVADry Creek! UPROPERTIES.COM MINNEAPOLIS DENVER The name says it all. INOVA is all about innovation. Offering 18,000 SF of office space located in the heart of Centennial, INOVA supports all types of commuters with easy access to I-25 and the light rail. This Class A office building provides modern work and lifestyle amenities at an affordable price designed to attract today’s discerning talent. Contact United Properties today for more information, 720-898-8866.