Metro Denver 2017 Economic Forecast January 2017 · 2017-01-23 · 2017 Economic Forecast for Metro...

Maintaining Equilibrium

Metro Denver2017 Economic ForecastJanuary 2017

2017 Economic Forecast for Metro Denver

Consumer Activity

IncomeWealthPricesInterest RatesConsumer

Confidence

Spend or Save?Retail Spending

What & Where?Housing OptionsRetirement

Planning


Metro Denver Annual Change in Population

-5,000

5,000

15,000

25,000

35,000

45,000

55,000

65,000

75,000

2000 2005 2010 2015 2020 2025 2030

2016 Population = 3.13 Million

Net Migration Natural Increase

Source: Colorado Division of Local Government, State Demography Office.


Millennials largest population group*(*end of Centennials not yet determined)

0

10,000

20,000

30,000

40,000

50,000

60,000

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90+

Metro Denver Population 2016 = 3.13 million

Millennials754,790

Gen X705,570

Baby Boomers678,580

Silent Gen197,170

Greatest Gen

22,490

Centennials775,230

Source: Colorado Division of Local Government, State Demography Office.


Can Consumers Continue the Pace?

• Additional 50,900 jobs per year (2014-2016)• Avg Annual Wage +2.1% per year (2014-2016)• DOW +13.4%; S&P 500 +9.5%• Total HH Debt: $12.3 Trillion (Q2 2016), +3.7%

• Savings rate 5.8%, up from 20-year avg of 5%

Trillions Q2 2016 Q2 2015 % ChangeMortgage $8.4 $8.1 3.0%Home Equity $0.5 $0.5 -4.2%Student Loans $1.3 $1.2 5.8%Auto Loans $1.1 $1.0 9.7%Credit Cards $0.7 $0.7 3.7%Other $0.4 $0.3 4.9%TOTAL $12.3 $11.9 3.7%


Millennials not yet at income potential

$400

$500

$600

$700

$800

$900

$1,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Median Weekly Earnings by Age Group

25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65 years and over

Source: U.S. Bureau of Labor Statistics, Current Population Survey.


Spending patterns differ by generational group (Top 3 categories = 70% Millennials; 62% Gen X & Boomers)

$0 $5,000 $10,000 $15,000 $20,000 $25,000

All Other

Education & reading

Apparel & services

Entertainment

Healthcare

Personal insurance & pensions

Food

Transportation

Housing

55 years+($49,260)

35-54 yrs($64,140)

< 35 yrs($44,510)

Source: U.S. Bureau of Labor Statistics, 2014 Consumer Expenditure Survey.

Consumer Spending by Category by Age

Age Group (Avg Ann Spending)


Metro Denver Real Retail Trade Sales Growth Rates

4.0% 4.3%

-4.7%

-10.6%

3.3% 3.1%

5.4%

2.4%

5.2%4.4%

2.2% 2.4%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f

Source: Colorado Department of Revenue.2016e = DRP estimate; 2017f = DRP forecast


Home sales begin to slip, though remain at a reasonable level

50,244 49,789 47,837

42,070

38,818 38,106

45,210

53,676 54,07356,062 55,634

53,965

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017f

Metro Denver Existing Home Sales Closed

Sources: Metrolist (2005-2010); Denver Metro Association of REALTORS (2011-2016).2017f = DRP forecast


Metro Denver ranked #16 and Boulder #7 for highest median home price in 3Q 2016

$222 $218$197

$172 $173 $166 $177$197 $209 $224 $234 $247

$250 $245$219 $220 $232 $231

$252$281

$310$354

$383$404

$366 $376 $360 $346 $358 $353$384 $372

$391

$454

$515$546

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

$550

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f

Median Home Prices (in thousands)

United States Metro Denver Boulder

Source: National Association of REALTORS.2016e = DRP estimate; 2017f = DRP forecast


Apartment Vacancy and Rental Rates

$800

$900

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

3%

5%

7%

9%

11%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e

Monthly Rental Rate

Vaca

ncy

Rate

Metro Denver Vacancy Rate Metro Denver Rental Rate

Source: Denver Metro Apartment Vacancy & Rent Survey.2016e = DRP estimate


Multi‐family represents 52% of new construction in 2016 (30+ year average = 28%)

0

5,000

10,000

15,000

20,000

25,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f

Metro Denver Building Permits*Multi-Family (5+ units)Single-Family Attached (2-4 units)Single-Family Detached (1 unit)

* The Census Bureau tracks building permits by the number of housing units in the structure.Source: U.S. Census Bureau, Building Permits.

2016e = DRP estimate; 2017f = DRP forecast


Business Activity

Sales Expectations

Materials CostsWage LevelsTax PolicyRegulatory

IssuesInterest RatesHealthcare CostsPolitical Climate

StaffingProduction

LevelsEquipment

InvestmentCommercial Real

Estate


Employment growth varies across the state

0.6%

1.1%

2.2%

2.4%

3.1%

3.5%

2.8%

1.8%

0.0% 1.0% 2.0% 3.0% 4.0%

Grand Junction

Greeley

Pueblo

Colorado Springs

Metro Denver

Fort Collins

Colorado

U.S.

Nonfarm Job Growth Rates by Metro Area, through 3Q 2016

Source: U.S. Bureau of Labor Statistics, Current Employment Statistics.


Nonfarm Job Growth Rates

1.6% 1.9% 2.1%1.7% 1.6%

3.6% 3.7% 3.5%2.9%

2.4%

-6%

-4%

-2%

0%

2%

4%

6%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f

United States Metro Denver

Metro Denver 2016 Employment = 1.6 million2013-2015: 53K jobs added per year; 2016: 45K; 2017: 39K

Source: U.S. Bureau of Labor Statistics.2016e = DRP estimate; 2017f = DRP forecast


Proprietors Are Another Significant Component Of Employment

Source: U.S. Bureau of Economic Analysis.

Proprietors Employment25% of Colorado’s Total Employment (US avg = 22%)

708,914

769,237 776,680797,054 796,997

820,310 825,917849,189

869,464 893,366

500,000

600,000

700,000

800,000

900,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015


Key Metro Denver and Northern Colorado Industry Clusters

• Aerospace• Aviation• Beverage Production• Bioscience

• Medical Devices & Diagnostics

• Pharmaceuticals & Biotechnology

• Broadcasting & Telecommunications

• Energy• Fossil Energy• Cleantech

• Financial Services• Banking & Finance• Investments• Insurance

• Healthcare & Wellness• IT/Software


Metro Denver and Northern Colorado Industry Clusters, 2015‐2016

Source: Development Research Partners.


Metro Denver Commercial Real Estate

Vacancy Rate (direct) Lease Rate4Q 2016 4Q 2015 4Q 2016 4Q 2015

Office 9.3% 9.6% $25.36 $24.65

Industrial 3.8% 3.1% $7.41 $7.03

Retail 4.5% 5.0% $16.55 $16.00

Source: CoStar Group, Inc.

Construction Activity (YTD through 4Q 2016)• Office: 1.4 MSF completed; 5.9 MSF under construction• Industrial: 4.5 MSF completed: 2.3 MSF under construction• Retail: 1.3 MSF completed; 1.2 MSF under construction


Maintaining Equilibrium….

Challenges• Global economic

uncertainty• Rising interest rates• Rising inflation rate• Seeking clarity on

taxes, healthcare• Infrastructure needs

> funding options• Affordable housing

Opportunities• More confident

consumer• Changes in who is

buying what & where• Strong job growth

continues• Active commercial

real estate market• Technology driving

major changes


Questions?

Development Research Partners10184 West Belleview Avenue, Suite 100

Littleton, Colorado 80127(303) 991-0070

www.DevelopmentResearch.net

Patricia Silverstein, [email protected]

Metro Denver 2017 Economic Forecast January 2017 · 2017-01-23 · 2017 Economic Forecast for Metro...

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