Metro Denver EDC releases 2010 economic forecast

Metro Denver EDC releases 2010 economic forecast

The Metro Denver Economic Development Corporation (Metro Denver EDC) presented the 2010 Economic Forecast for Metro Denver at Vectra Bank's 17th Annual Economic Forecast Breakfast. Chief Economist Patty Silverstein discussed key economic activity in 2009 and gave her outlook on the economy for the coming year. The event was sponsored by the Metro Denver EDC and the Denver Metro Chamber of Commerce.

According to Silverstein, one of the longest and deepest economic contractions in the nation's history appears to have ended. The potential strength and length of the recovery, however, remains in question.

"The recession has left a swath of damage and challenges to be addressed in 2010," stated Silverstein. "Because consumers, businesses, and governments need time to rebalance their budgets and rebuild their resources, growth this year will be sluggish."

Metro Denver's economy, however, fared better than many regions through the early months of recession. While employers in the seven-county region cut jobs at certain points in early 2008, the region also added net new jobs through the first three quarters of 2008.

While the region's outlook for 2010 is far from rosy, positive rankings throughout 2009 suggest Metro Denver has maintained the solid fundamentals necessary to support growth once the nation's economy recovers including:

Denver ranks first among the nation's most desirable places to live, according to a 2008 poll by the Pew Research Center. A 2009 poll by Harris Interactive showed Denver ranks with San Francisco as the nation's second-favorite place to live.

Metro Denver won numerous accolades for its relatively stable housing markets in 2009. Forbes called Metro Denver one of 10 "Best Cities for a Housing Recovery" and the nation's best metropolitan area in which to buy a home. Real estate correspondents with NBC's "Today" show named Denver the U.S. city most ready for a housing rebound, and Builder magazine named Denver among five housing markets likely to recover quickly. BusinessWeek identified Boulder as the nation's strongest housing market in 2009.

Metro Denver cities are consistently recognized for their good quality of life, affordability, cultural facilities, and highly educated workforce. In 2009, Forbes named Boulder among the 10 "Best Cities for Recession Recovery," and nearby Louisville ranked first on Money magazine's "Best Places to Live" list. Also in 2009, Loveland ranked seventh on a list of 10 "Best Places to Live" by U.S. News & World Report.

Like Metro Denver's economy, Colorado's economic growth has frequently outpaced the national average, and the state's advantage appeared to hold early in the recession. In fact, the nation experienced eight full months of job loss before sustained Colorado losses began in September 2008. The state's employers then caught up quickly with their counterparts nationwide, and by the middle of 2009, job loss in Colorado matched - and subsequently exceeded - the pace of job loss reported nationwide.

Colorado's economy has distinct challenges ahead, particularly as state and local fiscal imbalances grow. The state's labor markets have also been impacted, and substantial job growth here is unlikely until the national economy stabilizes. Colorado's economy - like the nation's economy - will remain weak throughout 2010, but healthier growth should follow thanks to the state's many advantages for businesses and residents.

Read more:

• Summary in Metro Denver Economy section
• View photos from the event on Flickr

Thursday, January 14, 2010, 10:00pm MST | Modified: Thursday, January 14, 2010, 10:10pm

Commercial real estate: 2009 down from 2008

Denver Business Journal - by Paula Moore

(This is an expanded version of a report published in the Jan 15-21 print edition of the Denver Business Journal.)

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Commercial real estate sales and leasing were down in metro Denver for 2009 from 2008, with sales often driven by sellers’ need for cash to pay down debt.

Most selling prices for commercial properties last year were below replacement cost, or how much it would cost to replace the property, according to data from commercial real estate brokerage firm Cushman & Wakefield of Colorado Inc. in Denver.

Buyers, meanwhile, took advantage of the opportunity to get good-quality properties at bargain prices.

“The good news in Denver is that we’re a preferred market for investors, compared to markets we compete with like Phoenix and Las Vegas,” said Gene Pride, senior director and investment broker at C&W. “We don’t have too much [commercial real estate] supply … so it won’t take Denver as long to recover. We’re not doing well, but we’re doing better than most markets.”

Many lease transactions for office space in the metro area happened only because tenants faced expiring leases. But the industrial leasing market was buoyed by European and U.S. contractors of Vestas Wind Systems A/S that needed to be near the Danish wind-energy company’s Colorado operations.

Top ’09 property sales

The $134 million sale of downtown Denver’s 666,654-square-foot Seventeenth Street Plaza office high-rise was metro Denver’s largest commercial real estate deal of 2009. The skyscraper’s buyer was Newton, Mass.-based real estate investment trust HRPT Properties Trust (NYSE: HRP). REITs recently have been stockpiling cash for acquisitions.

Closed in the second quarter, the Seventeenth Street Plaza sale also was one of the largest commercial real estate deals in the country for that period.

Several of the metro area’s largest sales, though, happened late in the year. Buyers and sellers traditionally try to close deals by year-end for bookkeeping and tax purposes.

In one of this region’s biggest industrial sales of ’09, Panattoni Development Co. sold its 410,000-square-foot warehouse at 20900 E. 36th St. in Aurora in December for $32.35 million to Union Investment Real Estate GmbH of Hamburg, Germany.

Another major December industrial deal involved Denver-based ProLogis’ (NYSE: PLD) selling a three-building portfolio including nearly 500,000 square feet for a total of $18.5 million. The buyer was Cobalt Capital Partners of Irving, Texas.

Metro Denver’s two largest apartment sales happened last month, as well.

Los Angeles-based CB Richard Ellis Investors LLC picked up The Metro, a 415-unit property in downtown Denver, for $55 million cash, in the highest-priced metro-area apartment sale of last year. The seller was RREEF Funds LLC of San Francisco, which took a loss on the deal but opted to sell at this time partly to get some cash, according to brokers.

Private investor Trilogy Real Estate Group LLC of Chicago purchased the 360-unit Summitt Ridge apartments in Denver from UBS Realty Investors LLC for $22.7 million.

“With apartments, we’re seeing two types of sales — the fire sale where debt is an issue, but also the conventional sale where a property is performing well,” said Mark Favro, a C&W apartment broker.

Other significant ’09 commercial real estate sales, according to C&W, include:

• FlatIron Crossing, Broomfield — GI Partners LLC of Menlo Park, Calif., acquired 75 percent of this 1.4 million-square-foot regional shopping center for $116 million, providing a cash infusion to mall owner The Macerich Co.

• The Market at Southpark, Littleton — ACF Property Management Inc. of Studio City, Calif., partnering with Denver investor Gary Dragul, bought this King Soopers-anchored shopping center for $22 million. ACF and Dragul also bought the Broomfield Marketplace for $13.1 million.

• 24210 E. 19th Ave., Aurora 80019 — O’Reilly Automotive Inc./Ozark Automotive Distributors of Springfield, Mo., bought this 360,000-square-foot warehouse for $19.3 million for its own use.

• Terrace Tower, Denver — Private investor Alliance Commercial Partners LLC of Lakewood bought this 12-story, 241,200-square-foot office building in the Denver Tech Center for $18.4 million.

Top commercial leases

Major office-space leases were few and far between in ’09, and the handful that occurred generally were lateral moves — renewals, expansions and consolidations — rather than new leases, according to C&W.

“Last year was very challenging for office leasing,” said Steve Billigmeier, C&W associate director and office leasing broker. “The first part of the year, leasing was nonexistent, but in the second half, you had leases expiring, so tenants had to do deals. The larger deals got done in the fourth quarter.”

Minneapolis-based medical therapy provider Medtronic USA Inc. cemented one of the metro area’s largest office leases of ’09 in the fourth quarter, taking 108,362 square feet at Coal Creek Corporate Center in Louisville. The deal was a renewal and expansion.

Also in that period, Denver-based Catholic Health Initiatives took 97,000 square feet at the 198 Inverness Drive West building in Englewood’s Inverness office park for its new headquarters, expecting to occupy the space in June 2010.

Alternative energy companies dominated industrial leasing last year, followed by automotive, health care and food companies.

SMA Solar Technology AG of Germany, a maker of solar-power components, leased 153,000 square feet at Enterprise Park in Denver’s Stapleton neighborhood. “The SMA deal was the most significant industrial lease last year … and they plan to expand in the next year,” said Kirk Vanino, C&W associate director and industrial leasing broker.

Abound Solar, a Loveland-based maker of low-cost photovoltaic modules, leased all of the 126,384-square-foot manufacturing building at 9586 East Interstate 25 Frontage Road in Longmont. Property owner First Industrial Realty Inc. sold the building in December for $10 million to W.W. Reynolds Cos. Inc. of Boulder, partly because of Abound’s long-term lease.

Companies doing business with Vestas did major metro-area industrial leases, as well, including: Creative Foam Corp. (70,000 square feet), Hexcel Corp. (100,000 square feet), PMC Technology A/S (43,350 square feet) and SGB USA Inc. (12,600 square feet).

The first phase of retail space — 10,000 square feet — at the new Hilton Garden Inn on South Colorado Boulevard near Cherry Creek North has been fully leased by restaurants and stores, according to the Crosbie Real Estate Group of Denver, which handled the leasing.

“Tenants with good, smart programs can expand,” said Scott Crosbie, owner of Crosbie Real Estate Group Inc.

Monday, January 11, 2010, 4:10pm MST

Pittman, Pathfinder team up on fund to buy distressed Colorado real estate

Denver Business Journal

Pittman Development Group Inc. of Denver has teamed with California’s Pathfinder Partners LLC to launch a new private equity fund for buying distressed real estate in Colorado.

The new fund, called Pittman Pathfinder Colorado Opportunity Fund, bought its first portfolio for undisclosed terms at the end of 2009, according to Pittman. The properties in the deal, whose loan value totaled $12.7 million, include 64 condominium and townhome units in metro Denver and Colorado Springs. The portfolio also includes 113 lots for single-family homes in those markets as well as Greeley, Pueblo and Milliken.

The properties were formerly owned by an undisclosed Colorado lender.

“We are starting to see some early signs of recovery in the local housing market, and felt this was an ideal opportunity to benefit from these improving conditions,” Ray Pittman, president of Pittman Development, said in a statement. “We’re making this investment in Colorado because we believe that both our economy, and the value of these assets, will bounce back.”

Pittman formerly was an executive at Catellus Development Corp., now part of Denver-based ProLogis (NYSE: PLD), and national commercial real estate brokerage firm CB Richard Ellis Inc.

Pittman Development’s current projects include High Point Omnicenter office/industrial project near Denver International Airport, whose initial phase includes 91,000 square feet in three buildings. The firm is also working with International Speedway Corp. of Daytona Beach, Fla., on developing a proposed, $400 million NASCAR raceway/stadium project at Interstate 70 and E-470.

The new fund is San Diego-based Pathfinder’s first fund focused exclusively on Colorado. It’s overseen by the Pittman Pathfinder Realty Ventures LLC joint venture recently formed by the two companies.

Pathfinder specializes in distressed property investment, and has acquired more than $150 million in defaulted commercial real estate loans and lender-owned properties since 2006.

Friday, January 8, 2010 | Modified: Sunday, January 10, 2010

Slow recovery forecast for Denver commercial real estate in 2010

Denver Business Journal - by Paula Moore

Grubb & Ellis Co. predicted Friday that the Denver area’s commercial real estate market will start a “slow recovery” in 2010, ahead of the national commercial market that’s expected to bounce back in 2011.

Based in Los Angeles, publicly traded Grubb & Ellis (NYSE: GBE) is one of the country’s — and metro Denver’s — largest commercial real estate brokerage firms.

While there will be leasing activity in the metro area this year, commercial property vacancy rates will likely stay flat because most tenants will move laterally to take advantage of attractive lease rates and landlord concessions, according to the G&E report.

The Denver-area real estate investment market is expected to remain generally flat in 2010, but buyers with cash are expected to purchase lower-priced properties, including distressed assets.

Metro Denver ranked 10th on G&E’s “Investment Opportunity Monitor” for 2010-2014, based on property, economic and demographic variables. Only Texas cities such as Houston and Austin; California markets like Los Angeles, San Francisco, San Diego and Orange County; Washington, D.C.; Portland, Ore.; and Raleigh-Durham, N.C., are expected to do better than the Denver area when it comes to commercial real estate investment.

“Leasing activity will certainly increase, and there will continue to be a large quantity of properties attractively priced for buyers with cash,” Mark Ballenger, executive vice president and managing director of G&E’s Denver operation, said in a statement.

Bob Back, G&E’s chief economist, thinks that while the national economy has started a “slow and cautious” recovery, the labor market won’t turn around until the second half of this year, since it often lags the broader economy.

“Because commercial real estate lags the labor market, [the national commercial real estate market] still has a ways to go before reaching its own low point,” Bach said in a statement.

Other high points of G&E’s Denver forecast:

• Most commercial properties sold this year will be “come in the form of note sales and other non-recorded transactions.”

• Highly leveraged, lender-held buildings will get new owners, removing a major impediment to the recovery of the real estate investment market.

• Many larger office-building tenants will try to capitalize on lower rents and concessions offered by landlords at Class A and B properties, causing Class C properties to struggle to keep tenants.

• Metro Denver’s industrial real estate market is expected to see “positive growth and activity in 2010” when it comes to leasing, with renewable energy companies likely being responsible for most of that activity.

• Retail leasing in the metro area could see a moderate increase in activity this year, with grocery-anchored shopping centers as well as urban sites staying “fairly stable.” Most of that activity will come from educational and professional service businesses, taking advantage of lower asking rents.

• Job growth will be key to improvement in the local apartment market. (Even though apartment properties include residences, they are considered commercial real estate because they’re largely owned by companies or investors who don’t live there.)