Colorado Business Economic Outlook 2018

A general theme from all of the speakers including Mayor Hancock was that growth has outpaced our infrastructure and it’s critical for us to address this soon. He also seemed to be lobbying for a new tax bill that will be introduced in the future to help pay for it.

Many of the panelists felt like there were many signs pointing to a slowdown. Lack of housing supply was the #1 problem and the high cost of materials and lack of affordable housing for new labor force will continue limit supply in 2018. The number of new permits has just exceeded 2005 levels but is still 26% below the real boom of 2001. The high cost of average rents in the $1,346 range is going to continue to limit new labor force that Denver needs.

At $14 billion we are still in the top 10 for energy producing states. Crude oil and gas being Colorado’s #1 industry. 55% of Colorado’s energy is being produced from coal. We are one of the leading states for renewable energy with 30% of our energy being produced from wind and solar.

Many of the outside investors “Love” Colorado but think its time to be careful since its such a “Frothy” environment for investors. Some signs they saw were the start of financing deals being engineered for future returns because cap rates don’t make sense at the current prices. This sign of investor behavior at the peak of most cycles is when default problems begin to arise.

Some panelists also believe that the urban core will see the demise of parking lots and they think with future car share, uber, google cars, etc. parking garages will become obsolete. Many of them have seen 50%-60% declines in parking revenues in their portfolios over the last year. Denver has not adjusted to this yet and still require large amounts of parking to obtain building permits. They also believe the ripple effect of the auto cars will be felt by the gas and oil industry, health care, and other industries beyond parking. Boulder is already addressing this with their building permits but other cities are behind the times.

They believe that Denver is making smart growth choices by not overextending to attract new companies such as Amazon with incentives that will hurt the city in the long run. Many other cities are offering incentives to companies that will eventually bite them in the backend. Especially if the companies don’t commit to also move the HQ from their main financial NY and San Fran. If they want to pick up and leave then the city becomes a back office.

Traffic was a hot topic and one panelist said every realtor in the room should be saying “Thank God” when they are sitting in traffic every day. He definitely hit the nail on the head for our industry.

The MJ industry is expected to hit $1.5 billion in 2018 and they think our lifestyle will continue to attract people to Colorado even as more states legalize MJ. As one panelist put it he would much rather be stoned in Denver than in Los Angeles.

A few other interesting predictions were that health care costs will rise 32% in the next year, we need to get ready for the “Silver Tsunami” of housing needs for baby boomers. Most millennial’s don’t want to talk on the phone or listen to voicemail so if you want to communicate with them you better figure out text, chat, instagram, video or whatever is around the corner or you will become obsolete. Cities build strong internet infrastructure are thriving and this will be important for continued growth in the future.

Again and again the theme was that poor housing supply and infrastructure are the front range’s biggest threat to growth for the future.

But with all of that said the outlook for Denver in 2018 is excellent and Denver still a top tier city worldwide for investors.

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December 14, 2017

Contact Email: pr@8z.com

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