Downtown Denver Economic Update

April 2014

Research Department • 511 16th Street, Suite 200, Denver, CO 80202 • 303-534-6161 • www.DowntownDenver.com

Downtown DenverPartnership, Inc.

Research Department

EXECUTIVE SUMMARY

The most recent economic data indicate that Downtown Denver’s economy is stable. Employment increased over-the-year in Downtown Denver for the 12th consecutive quarter. Downtown Denver’s office market improved, with lower vacancy rates and higher lease rates than the year before. However, retail sales decreased slightly and retail real estate market indicators were mixed. In addition, the residential real estate market slowed.

Employment increased over the year by 2.0% in Downtown Denver and 0.2% in the Business Improvement District (BID) in the third quarter 2013 (the most recent data available), representing the 12th consecutive quarter of em-ployment gains in Downtown Denver. The sector with the highest percent increase in employment was the Natural Resources and Construction sector, which increased by over 15%. Downtown’s largest sector, Professional and Business Services, reported a slight increase of 1.7%.

Retail sales tax collections were essentially flat in the fourth quarter 2013, with a 0.2% decrease in Downtown Denver and 0.3% increase in the BID compared to the previous year. In Downtown Denver’s largest category, restaurants, retail sales tax collections were up 4.4%. However, these gains were offset by decreases in smaller cat-egories such as Motor Vehicles & Auto Parts and Information Producers/Distributors. Hotel industry indicators were mixed at the end of 2013. Compared to the end of 2012, retail sales tax collections from hotels decreased slightly and Downtown Denver hotel occupancy rates were flat; however, the average room rate increased.

The residential real estate market was weaker in the fourth quarter 2013 compared to the fourth quarter 2012. The number of homes sold, the average price per square foot, and the average sales price decreased in both the BID and Downtown Denver markets. In the City Center Neighborhoods, there was a slight increase in the number of homes sold, but a decrease in the average sales price and average price per square foot. Residential development in Downtown Denver and the City Center Neighborhoods continues to thrive with 7,170 rental units and 173 for-sale units under construction or planned as of April 2014.

Commercial real estate indicators were positive in the first quarter of 2014. Lease rates increased and vacancy rates decreased in both the BID and Downtown Denver office markets. In the Downtown Denver office market, vacancy decreased to 10.4% and the average lease rate increased by $1.54/sf to $29.84/sf. Retail market indica-tors were mixed in the first quarter of 2014, however market fundamentals remain strong. Retail market lease rates decreased slightly in Downtown Denver, however vacancy rates also declined. In the BID, retail vacancy rates increased and lease rates decreased. Construction began or continued on a number of new office and hotel devel-opments through the first quarter 2014.

This report includes the most recent quarterly data available and covers economic conditions in three areas. The first and smallest area is the Downtown Denver Business Improvement District (BID). The second area – which aligns with the 2007 Downtown Area Plan – is referred to as “Downtown” and includes the BID and

several surrounding districts. The home sales section of the report also covers the City Center Neighborhoods, which include both Downtown and the BID in addition to other neighborhoods. Please see the last page of

the report for a detailed map of the three areas. Metro Denver in this report refers to the seven-county region comprised of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, and Jefferson Counties.

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ECONOMIC UPDATE, APRIL 2014Economic conditions throughout Downtown Denver had mixed records through the end of 2013. Employers continued to create jobs as unemployment progressed to lower levels. While consumer spending slightly slowed through the fourth quarter, consumer confidence reported positive expectations for the coming months. Real estate conditions weakened in the fourth quarter with declines in residential home sales, although there were improvements on the construction front.

Downtown Economic Highlights ♦ New York-based Signpost, a maker of marketing software, plans to hire as many as 70 new workers in Denver

in 2014. The staff additions will likely include sales representatives, account managers, and developers. The company opened its Denver office in 2013 in LoDo and currently has about 30 people. It is planning to move to Ballpark in February 2014 to accommodate the growth.

♦ Northwestern Mutual plans to add 85 financial representatives and 135 financial representative interns in 2014 in offices in Metro Denver and Fort Collins. The expansion is part of the company’s nationwide effort to keep pace with growing demand for financial planning services. The company expects that many of the new hires will be professionals that are pursuing a career change.

♦ Google Inc. is granting Galvanize, the Denver tech coworking and startup center, $1 million and other assis-tance to increase female involvement in the technology community. The money is expected to raise the number of female entrepreneurs by 25 percent. Google stated that women-led tech companies attain 35 percent higher return on investment than male-owned tech companies. Galvanize is one of seven companies receiving funding from Google Inc.

♦ Denver-based InnovAge opened its newest senior services center in Denver. The 36,000-square-foot facility will employ 200 people and could service 1,000 seniors. The company currently operates five locations along the Front Range and offers health, dental, vision, psychiatric care, X-ray services, and physical therapy services.

♦ Denver was one of 10 cities chosen to be part of the Natural Resources Defense Council’s City Energy Project to boost energy efficiency in commercial buildings. The project is expected to cut 460,000 tons of carbon emis-sions from buildings each year in Denver, equivalent to 23,000 homes’ energy use per year. Other cities partic-ipating in the program include Atlanta, Boston, Chicago, Houston, Kansas City, Los Angeles, Orlando, Philadel-phia, and Salt Lake City.

♦ Denver-based Convercent announced it would cut its workforce by roughly half. Spokespeople for the 70-per-son company say the layoffs were to focus more on sales and emphasize different skills as the startup finds its niche.

♦ Denver-based Intrepid Potash Inc., a producer of potassium-related fertilizer products, announced it would cut its workforce by 7 percent. The company said it would eliminate positions at each of its facilities and offices. Major, multi-year capital projects will be mostly complete this year, removing the need for as large a workforce.

♦ Recent notable rankings for Denver and area businesses:

• Forbes released its ranking of the largest private companies in the U.S., including six from Colorado. Five of the companies are located in the Metro Denver area. TransMontaigne, the only business located in Downtown, was ranked 16th with revenue of $16 billion. Other companies throughout the Metro Den-ver area included: CH2M Hill of Englewood (57th), ProBuild Holdings (16th), Sports Authority (131st), and Leprino Foods (180th).

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• In a ranking by Forbes, Denver placed second as the best city to launch a start-up business out of the 50 most populated cities. The list considered the number of small businesses as a percentage of total businesses, percentage of small businesses that accept credit cards, percentage of small businesses in high growth industries, percentage of businesses with websites, and online reviews. San Diego, Calif. ranked first.

• Chief Executive magazine included two Metro Denver companies on its list of mid-market elite compa-nies. The magazine selected 100 companies with revenue between $10 million and $1 billion with attri-butes including superior growth, innovation, an exceptional corporate culture, charismatic leadership, and a compelling business model. Kodiak Oil and Gas of Denver and ShopAtHome.com in Greenwood Village were both on the list.

• Forbes ranked Smashburger sixth on its list of the most promising companies in America. The list looked at privately held, high-growth companies with compelling business models and strong management teams. Other Metro Denver companies on the list were Craftsy of Denver (19th) and Trueffect of West-minster (68th).

• According to WalletHub.com, Denver is among the best cities in the nation to find a job. A report ana-lyzing 60 U.S. cities ranks Denver in eighth based on job openings per capita, highest median starting salary, and the prevalence of employer-provided health benefits. WalletHub also states that Denver is in the top ten for best job market, ranking the city as having the fourth fastest-falling unemployment rate and the eighth highest median starting salary.

• A new study by NerdWallet ranked Denver as the fourth best city for job seekers in 2014. The rankings were calculated using four measurements: unemployment rate, population growth, median income, and monthly homeowner costs. The top city was Austin.

• NerdWallet ranked Denver as the seventh best city in America for female entrepreneurs. The factors in the ranking included a city’s entrepreneurial climate, the percentage of businesses owned by women, median earnings for female workers, the percentage of residents with a college degree, and the unem-ployment rate. According to NerdWallet, Denver has 11.5 businesses per 100 residents and 30 percent of those companies are run by women.

• TriNet, a cloud-based HR services company, analyzed the nation’s seven major tech hubs and ranked them based on the highest effective annual salary. The tech workers in the Denver-Boulder area ranked third, with an average effective annual salary of $98,000 (cost-of-living adjusted). Austin, Texas topped the list with an average annual salary of $105,000 and New York, N.Y. placed last with a $56,000 aver-age annual salary.

Employment Activity♦ Covered employment1 in Downtown Denver continued to increase through the third quarter of 2013 com-

pared with the prior year. The area reported a 2 percent employment increase over-the-year, adding 2,317 jobs overall. The over-the-year growth in employment is attributed to the 15.3 percent in the natural resourc-es and construction supersector, rising to 9,588 employees. Other sectors that reported significant increases compared with the prior year were wholesale and retail trade (9 percent) and transportation, warehousing,

1 Jobs covered by unemployment insurance as reported in the QCEW. These positions represent the vast majority of total employment, although the self-employed, some agricultural workers, some domestic workers, and several other categories of workers are excluded. This data series lags the CES series by about six months and is available for the nation, states, MSAs, and counties.

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and utilities (7 percent). The largest supersector by employment in Downtown is professional and business services (35,991 employees), which reported an increase of 1.7 percent over-the-year. The information supersector reported the most significant decline between the third quarters of 2012 and 2013, falling 9.1 percent and losing 419 positions. There were also declines reported in education and health services (-7.1 percent) and manufacturing (-3.1 percent).

Employment throughout the BID area, a smaller subset of Downtown, reported slower growth in the third quarter. The area gained just 206 jobs overall, raising employment levels by 0.2 percent compared with the prior year’s level. Similar to the Downtown trend, natural resources and construction recorded the largest increase in employment over-the-year, increasing 11.7 percent to 9,058 positions. Professional and business services, the largest supersector by employment, declined 2.3 percent during the same period and lost nearly 735 jobs. The largest percentage decline in the area was education and health services, falling 7.9 percent between the third quarters of 2012 and 2013. (Sources: Colorado Department of Labor and Employment, Quarterly Census of Employment and Wages (QCEW); Development Research Partners.)

COVERED EMPLOYMENT1

Industry

Business Units* (3Q13)

EmploymentBID Downtown

BID Downtown 3Q13 3Q12 % ch 3Q13 3Q12 % chPrivate Sector Natural Resources & Construction 337 365 9,058 8,106 11.7% 9,588 8,317 15.3% Manufacturing 22 39 112 108 4.3% 862 890 -3.1% Wholesale & Retail Trade 334 441 3,013 2,893 4.1% 4,058 3,721 9.0% Transp., Warehousing & Utilities 28 37 1,397 1,287 8.6% 1,490 1,389 7.2% Information 117 152 3,521 3,794 -7.2% 4,188 4,607 -9.1% Financial Activities 650 754 11,374 11,655 -2.4% 14,489 14,143 2.4% Professional & Business Services 1,701 2,029 31,530 32,265 -2.3% 35,991 35,403 1.7% Education & Health Services 123 187 1,556 1,690 -7.9% 2,695 2,902 -7.1% Leisure & Hospitality 303 437 12,822 12,740 0.6% 18,527 18,319 1.1% Other Services 223 282 2,244 2,194 2.3% 2,754 2,691 2.4%Government 69 94 21,105 20,793 1.5% 23,319 23,263 0.2%

Total 3,907 4,817 97,733 97,526 0.2% 117,961 115,644 2.0%

Note: Data covers only those businesses with an address listed in administrative records. Most, but not all, businesses meet this criterion. As a result, changes in the data series over time are not always due to changes in actual employment – some changes are due to differences in address reporting.*The count of business units is generally larger than the count of individual businesses because some businesses have multiple units.1Jobs covered by unemployment insurance as reported in the QCEW. These positions represent the vast majority of total employment,although the self-employed, some agricultural workers, some domestic workers, and several other categories of workers are excluded. This data series lags the CES series by about six months and is available for the nation, states, MSAs, and counties.

♦ Denver Metro reported a 0.8 percent increase in employment between the third and fourth quarters of 2013 and 3.2 percent growth compared with one year prior. Among the eleven supersectors, five of them reported quarter-ly declines. The largest over-the-quarter decline was leisure and hospitality, which was 3.6 percent lower in the fourth quarter than the third. Other declines in employment for the fourth quarter were reported by information

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(-1.8 percent), natural resources and construction (-1.3 percent), financial activities (-0.4 percent), and other services (-0.2 percent). The largest growth in employment was the government supersector, reporting a 6.1 per-cent increase over-the-quarter. Within the government sector, the state government had the largest increase in the fourth quarter (11.3 percent). All supersectors increased over-the-year, with natural resources and construc-tion reporting the largest percentage increase in employment over-the-year of 8.2 percent growth. The greatest number of jobs were added in professional and business services, with 10,100 jobs added.

Colorado employment was 0.7 percent higher in the fourth quarter compared with the prior quarter and 2.8 per-cent above the year-ago level. The U.S reported larger growth between the third and fourth quarter at a rate of 1.3 percent, while the year-ago growth rate was lower compared with Colorado, with employment growth at 1.8 percent higher in fourth quarter 2013. (Sources: Colorado Department of Labor and Employment, Labor Market Information, Current Employment Statistics (CES); U.S. Bureau of Labor Statistics.)

♦ The City and County of Denver reported a continued decline in unemployment during the fourth quarter, falling 0.6 percentage points over-the-quarter to 6.2 percent. The rate was also an improvement from fourth quarter 2012, declining 1.2 percentage points over-the-year.

The unemployment rate in Metro Denver dropped during the fourth quarter, falling 1 percentage point to 5.8 percent compared with the fourth quarter of 2012. Colorado reported a statewide unemployment rate of 6.1 percent for the fourth quarter, a reduction of 1 percentage point over-the-year. The U.S. unemployment rate is slowly improving, dropping 0.8 percentage points to 6.7 percent for the quarter. (Sources: Colorado Depart-ment of Labor and Employment, Labor Market Information; U.S. Bureau of Labor Statistics.)

♦ The Manpower Employment Outlook Survey expects second quarter hiring in the Denver-Aurora-Broomfield MSA to continue at a steady pace. There was an increase in the percentage of companies hiring to 20 percent in the second quarter, up from 18 percent in the previous quarter. Although there was growth from the previous quarter, the companies that were hiring fell 1 percentage point lower than the year-ago level. The percentage of companies cutting back employee levels increased to 5 percent from 3 percent in the previous quarter but re-mained 1 percentage point lower than second quarter 2013. Companies planning to maintain employment levels declined over-the-quarter by 6 percentage points to 72 percent, up 3 percentage points from the prior year.

U.S. hiring expectations continued to improve throughout the second quarter of 2014, with companies reporting the lowest rate of reductions in workforce levels in roughly four decades. The percentage of employers plan-ning to reduce staff levels decreased to 4 percent in the second quarter of 2014, a 3 percentage point decline from the previous quarter as well as 1 percentage point lower than the year-ago level. More companies plan to increase staffing levels, with 19 percent of companies planning to add employees, up from the previous quar-ter’s level of 17 percent. The majority of companies nationwide plan to maintain staff levels, with 73 percent of respondents planning to sustain current employment levels. (Source: Manpower Inc.)

Consumer Activity♦ First quarter consumer confidence reported positive expectations, increasing 8.1 percent to 80 for the U.S. index

compared with the third quarter. The Mountain Region Index, which includes Colorado, increased 13.8 percent to 86.8 between the third and fourth quarters. Compared with year-ago levels, both indexes recorded vast im-provements. The U.S. Consumer Confidence index grew 27.4 percent over-the-year, while the Mountain Region index grew 53 percent. (Source: The Conference Board.)

♦ Downtown Denver retail sales tax collections were slightly lower in the fourth quarter, declining 0.2 percent over-the-year. Tax collections in 8 of the 17 industries grew in the fourth quarter compared with the prior year. The

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restaurant industry was the largest by tax collections through the fourth quarter and increased 4.4 percent from fourth quarter 2012. The largest over-the-year percentage increase was the business administration industry, rising 171.7 percent to $204,743 in tax collections. Furniture and home furnishings and electronics and appli-ance stores also reported strong increase during the same period, increasing 101.4 percent and 49.5 percent, respectively. The fourth quarter decline in tax collections was most notable in the general merchandise industry, declining 55.3 percent over-the-year to $5,265. Sporting goods, hobby, book, and music stores reported a 37.8 percent decrease in fourth quarter collections compared with the prior year.

♦ The BID area fared better in retail sales tax collection growth than Downtown Denver, recording a 0.3 percent increase between the fourth quarters of 2012 and 2013. Of the 17 industries, only 4 reported declines from the previous year. The BID area increase was supported by a 210 percent increase in furniture and home fur-nishings, growing from $16,893 to $52,420 over-the-year. Mirroring the trend in Downtown, the business ad-ministration industry increased 142 percent during the same period, ending the quarter with $107,823 in total collections. General merchandise and warehouse stores reported the largest over-the-year decline, falling 47.4 percent. (Source: City and County of Denver, Office of the Controller.)

RETAIL SALES TAX COLLECTIONS BY INDUSTRYBID Downtown

Industry 4Q13 4Q12 4Q13 4Q12Manufacturing $487,569 $452,698 $551,124 $534,349Retail TradeMotor Vehicles & Auto Parts $263,170 $260,233 $375,988 $451,251Furniture & Home Furnishings $52,420 $16,893 $86,778 $43,091Electronics & Appliance Stores $17,008 $9,160 $21,263 $14,219Bldg. Materials/Improvement/Nurseries $13,012 $9,719 $17,852 $16,537Food & Beverage Stores $102,253 $100,461 $161,126 $166,546Health/Personal Care Stores $120,878 $118,630 $133,076 $128,245Service Stations $0 $1,603 $6,446 $7,737Clothing/Accessory Stores $742,767 $819,756 $748,236 $825,859Sporting Goods/Hobby/Book/Music Stores $150,135 $169,198 $156,519 $251,737General Merchandise/Warehouse Stores $4,228 $8,034 $5,265 $11,779Miscellaneous Stores $276,459 $256,061 $466,200 $453,914

Information Producers/Distributors $351,110 $491,635 $354,248 $492,839Bus. Admin, Support, Waste/Remediation $107,823 $44,559 $204,743 $75,346Hotel & Other Accommodation Svcs. $1,530,241 $1,502,235 $1,645,901 $1,678,005Restaurants $3,832,323 $3,771,797 $4,733,892 $4,533,030Other Services $6,020 $3,734 $12,343 $13,089

Total Retail Sales Tax Collections $8,057,416 $8,036,406 $9,681,000 $9,697,573 Yr/Yr % Ch 0.3% -0.2%

Sources: City and County of Denver, Office of the Controller.

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♦ Metro Denver retail trade sales – a slightly different, but related measure of consumer activity – reported a 5.1 percent overall sales increase in the fourth quarter of 2013, growing from $12.9 billion in 2012 in fourth quarter 2012 to $13.5 billion in fourth quarter 2013. (Source: Colorado Department of Revenue.)

♦ The Downtown Denver hotel market for 2013 ended the year near the same levels as 2012. The hotel occupan-cy rate was 0.2 percentage points lower at 73.2 percent in 2013 compared with the 2012 level of 73.4 percent. The average room rate for 2013 was $158.64 per night, which was 3.4 percent higher than the 2012 level of $153.46 per night.

The Metro Denver hotel market reported improving market conditions in 2013 compared with 2012. The hotel occupancy rate was 2.8 percentage points higher in 2013, rising to 70.8 percent from the 2012 level of 68 percent. The average room rate rose to $115.09 per night, an increase of nearly 3 percent from $111.78 per night in 2012. (Source: Colorado Hotel and Lodging Association, Rocky Mountain Lodging Report.)

Residential Real Estate♦ Fourth quarter existing home sales in the BID reported market declines between 2012 and 2013. Home sales

in the area, comprised of only condominiums and townhomes, decreased 21.9 percent over-the-year and fell from 114 sales to 89. The average sale price in the fourth quarter of 2013 for condominiums and townhomes was $447,470, a decrease of 29.4 percent from the 2012 level ($676,298). During the fourth quarter of 2013, there was only one property that sold for at least $2 million and was part of the Four Seasons Luxury Resi-dences development. Comparatively, in fourth quarter 2012, 10 properties sold for more than $2 million in the development.

Home sales in Downtown followed a similar pattern as the BID in the fourth quarter, reporting decreases across the board. Downtown home sales also consisted of only condominium and townhomes and there was a 16 percent drop in sales over-the-year. The average sales price of condominiums and townhomes also decreased, falling nearly 18 percent from the prior year to $488,300. High-priced home sales in Downtown fared much better than in the BID during the fourth quarter. The Downtown market, which includes the BID area, reported 11 properties sold for more than $1 million and one of those properties sold for more than $2 million. The prior year reported 17 high priced properties sold for more than $1 million and 10 of the proper-ties sold for more than $2 million.

♦ The City Center Neighborhood recorded more homes sales between the fourth quarters of 2012 and 2013. Condominium and townhome sales increased nearly 3 percent over-the-year, adding 8 home sales from the prior year. Though there was a slight increase in sales, the average sales price of condominiums and townhomes fell to $357,302 in the fourth quarter, a decrease of 19.9 percent from the prior year’s level. Single-family homes sales rose 23.4 percent over-the-year while the average sales price rose 28 percent ($414,082). During the fourth quarter of 2013, there were 11 condominium and townhome properties sold for at least $1 million and 22 single-family properties sold for at least $500,000.

♦ Residential homes sales in Metro Denver recorded positive changes during the fourth quarter of 2013. The residential market reported an overall increase of 14.6 percent to 13,106 homes sold. The condominium market showed the largest increase in Metro Denver, rising 19.5 percent to 3,095 homes sold, although the average sale price ($196,573) declined 3.7 percent. Single-family detached home sales rose 13.2 percent to 10,011 homes, while the average sale price ($335,849) increased 6.3 percent. (Sources: Colorado Comps; Development Research Partners.)

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EXISTING HOME SALESBID Downtown City Center Neighborhoods Metro Denver

4Q13 4Q12 % Ch 4Q13 4Q12 % Ch 4Q13 4Q12 % Ch 4Q13 4Q12 % Ch

Condominiums/Townhomes

Sold During Quarter 89 114 -21.9% 137 163 -16.0% 288 280 2.9% 3,095 2,591 19.5%

Average Sales Price $477,470 $676,298 -29.4% $488,300 $595,012 -17.9% $357,302 $445,907 -19.9% $196,573 $204,051 -3.7%

Ave. Price per Sq. Ft.* $376 $422 -10.9% $366 $401 -8.6% $311 $341 -8.7% $164 $166 -0.6%

Detached Single-Family Homes

Sold During Quarter 0 0 - 0 0 - 95 77 23.4% 10,011 8,845 13.2%

Average Sales Price N/A N/A N/A N/A N/A N/A $414,082 $323,620 28.0% $335,849 $315,939 6.3%

Ave. Price per Sq. Ft.* N/A N/A N/A N/A N/A N/A $280 $229 22.1% $188 $174 8.3%

Total Home Sales 89 114 -21.9% 137 163 -16.0% 383 357 7.3% 13,106 11,436 14.6%

*Excludes homes where total square footage was not reported. Note: Data could include a small number of new home sales. Source: Colorado Comps.

♦ Foreclosure filings throughout the City and County of Denver reported an improved market for the fourth quarter. There was a 47.1 percent decline in filings compared with the prior year and 30.6 percent lower over-the-quarter. Filings fell from 448 to 311 between the third and fourth quarters. Year-to-date foreclo-sures for 2013 were 47.3 percent lower (1,616 fil-ings) compared with foreclosures for 2012 (3,064 filings).

Metro Denver reported a 55.5 percent decline in foreclosure filings between the fourth quarters of 2012 and 2013. Filings also decreased over-the-quarter, falling 30.2 percent from the third quarter to 1,306 total filings. Year-to-date totals reported a nearly 50 percent decline in filings in 2013 (7,522 filings) compared with the prior year (15,018 fil-ings). (Source: Colorado Division of Housing.)

Commercial Real Estate Note: lease rates for industrial, flex, and retail property are triple-net. Office rates are full-service♦ Office markets in the BID and Downtown reported a healthy start to the beginning of 2014, with both areas

recording lower vacancy rates and higher average lease rates. The BID area vacancy rate declined 1.1 per-centage points to 10.9 percent in the first quarter compared with the prior year’s level of 12 percent. The av-erage lease rate grew 4.6 percent over-the-year, ending the quarter with $29.71 per square foot. The Down-town office market reported a 1.3 percentage point decrease in vacancy rates to 10.4 percent between the first quarters of 2012 and 2013. The average lease rate rose to $29.38 per square foot, 5.5 percent increase from the prior year’s level ($27.84 per square foot). The Metro Denver office market continued to improve through the first quarter, though at a slower rate than

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the BID and Downtown. The vacancy rate declined 0.9 percentage points to 10.8 percent compared with the first quarter of 2013. The average lease rate grew 4.5 percent over-the-year to $22.01 per square foot. (Source: CoStar Realty Information, Inc.)

♦ The Downtown industrial marked reported no change in vacancy rates (1.8 percent) during the first quarter of 2014 compared with the prior year’s level. While the vacancy rate was constant, the average lease rate Downtown declined 16.7 percent over-the-year to $10 per square foot. The vacancy rate in the BID area remained unchanged at 68.1 percent between the first quarters of 2014 and 2013. The high vacancy rate in the BID area was attributed to a reclassification of industrial space, which led to a decline from 3 to 2 buildings, and one of those buildings was vacant.

The Metro Denver industrial market reported continued improvements through the first quarter of the year. The vacancy rate fell nearly 2 percentage points to 3.5 per-cent compared with the prior year’s level (5.4 percent). Accompanying falling vacancy rates, the average lease rate rose 11.7 percent to $5.26 per square foot com-pared with the first quarter of 2013 ($4.71 per square foot). (Source: CoStar Realty Information, Inc.)

♦ The retail space market in the BID area reported declining market conditions for the first quarter of the year while Downtown had mixed reports. The BID area recorded a 1.5 percentage point increase in vacancy rates, rising to 6.3 percent from the prior year’s level of 4.8 percent. The average lease rate in the BID declined over-the-year, falling 1.7 percent to $22.47 per square foot. Vacancy rates in the Downtown area fell to 4.1 percent, a decrease of 0.3 percentage points compared with the first quarter of 2013. However. the average lease rate Downtown fell nearly 4 percent to $20.61 per square foot compared with the 2013 level of $21.45 per square foot.

The Metro Denver retail market recorded continued progress in vacancy rates and average lease rates. The vacancy rate in the area decreased 0.8 percentage points between the first quarters of 2013 and 2014. The average lease rate increased in response to declining vacancy rates, pushing the average lease rate 1.8 percent higher to $15.34 per square foot in the first quarter of 2014 compared with the prior year. (Source: CoStar Realty Information, Inc.)

Development ActivityDowntown Denver nonresidential development activity maintained a steady pace through April. The area antic-ipates the addition of over 1,600 new hotel rooms in 8 separate projects to be completed in 2014 and 2015. In addition, Downtown Denver has nearly 250,000 square feet of planned or under construction public space, with three of the four projects expecting completion this year. Further, there is about 2.7 million square feet of office

COMMERCIAL VACANCY AND LEASE RATES BY PROPERTY TYPE, FIRST QUARTER 2014

Vacancy Rates

Average Lease Rate

1Q14 1Q13 1Q14 1Q13Office

BID 10.9% 12.0% $29.71 $28.41 Downtown 10.4% 11.7% $29.38 $27.84 Metro Denver 10.8% 11.7% $22.01 $21.07

Industrial BID* 68.1% 68.1% - - Downtown 1.8% 1.8% $10.00 $12.00 Metro Denver 3.5% 5.4% $5.26 $4.71

Retail BID 6.3% 4.8% $22.47 $22.87 Downtown 4.1% 4.4% $20.61 $21.45 Metro Denver 5.7% 6.5% $15.34 $15.07Note: Vacancy and average lease rates are for direct space only (sub-

let space excluded). Retail and industrial lease rates are triple-net.*The BID contains a total of two industrial properties with a combined 24,800 square feet of space. Only one of the two buildings was occu-

pied, contributing to a higher-than-average vacancy rate.Source: CoStar Realty Information, Inc.

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and retail space planned or under construction in 16 projects. Recent highlights for a couple of these projects include:

♦ Opus is developing a 73,000-square-foot building called The Lab. The facility is located at 17th and Platte and will be four stories tall. Building completion is expected in 2015.

♦ The Children’s Museum in Denver announced a $16 million expansion consisting of 42,000 square feet. The project is expected to be completed in 2015.

Residential development activity throughout the Downtown Denver neighborhoods showed continued improvement into April. As of April 2014, there were 19 developments complet-ed between 2012 and 2014 for a total of nearly 1,700 resi-dential units. The most recent completion was the 292-unit One City Block Apartments by RedPeak Properties, located between 18th and 19th avenues and Logan and Pennsyl-vania Streets. The development, which is seeking LEED Silver certification, includes studios, one-, and two-bedroom apartments. There are 45 additional projects completing the planning process or currently under construction, which will add 7,170 rental residential units and 1,173 for-sale units to the market. Of these projects, the Denver Union Station/Central Platte Valley area has the most projects planned at 11 with 9 of them containing over 200 units each. The Golden Triangle neighborhood also has impressive plans with four projects (three already started and one to begin this year) expected to produce 730 additional units.

Recent highlights regarding some of the current residential projects include:

• Trammell Crow Residential will build the Alexan Uptown apartment complex located at 19th Avenue and Lo-gan Street. The 12-story building will include 372 residential units and 440 parking spaces spread between a single underground level and four above ground levels. The project is scheduled to begin in 2014.

• A two-building, 332-unit luxury apartment complex is under construction at the intersection of Speer Bou-levard and Alcott Street. The 2785 Speer development is located on 4.5 acres and is expected to cost $80 million. The units will range from 600 square feet to 1,200 square feet when completed and monthly rental rates between $1,100 and $2,300. Some of the apartment’s amenities include a swimming pool, two-story, glass-enclosed exercise area, and a bocce ball court. In addition to residential space, the community will include 10,800 square feet of retail space on the ground floor.

• RedPeak Properties LLC announced that the three building apartment and retail development located in West Highland would no longer be built. The $32 million building plan was canceled due to a years-long legal battle, which prevented the developer from building. The building would have included 150 apartments and 10,000 square feet of retail.

RESIDENTIAL DEVELOPMENTS PLANNED OR UNDERWAY AS OF APRIL 2014

Downtown Neighborhoods

For-Sale Units

Rental Units

Number of Projects

Auraria - - -Ballpark - 553 4 Capitol Hill - 334 3 Central Business District - 422 2 Central Platte Valley/ Denver Union Station

- 2,792 11

Curtis Park/Five Points 44 371 6 Golden Triangle 17 713 4 Highland 36 536 7 Jefferson Park 76 332 5 La Alma/Lincoln Park - 745 2 Lower Downtown - - - Uptown - 372 1 Total 173 7,170 45

Source: Downtown Denver Partnership

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Written in April 2014 by:Development Research Partners, Inc.

10184 West Belleview Ave, Ste.100 • Littleton, CO 80127303-991-0070 • www.developmentresearch.net

Cover photos by: Katie Steinharter, Ken Schroeppel/DenverInfill Blog, Susan Fry

Business Improvement District (purple), Downtown Denver (purple and yellow), and City Center Neighborhoods (purple, yellow, and blue)

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