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Originally Posted by mhays
That makes sense. What do you think about these factors in relation to Denver:
--If certain cities and project types will do better than others, will Denver do better than most?
--The stock market has done well. Will investors shift significant money to commercial real estate as a hedge/diversification, particularly with a rise in distressed sales, if that means reasonable cap rates based on post-WFH expectations? I mean players outside CRE that aren't weighed down by existing properties.
As for traditional players, it sounds like they're burdened for a long time, during and well after it all hits the fan.
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Who knows of Denver. Population growth solves a lot of ills so if that growth remains robust, Denver will do fine in the medium term. That's a big question mark to me at the moment. The cost of living in Denver is a serious issue. All of the midwesterners, Texans, and Arizonans fueling some of that regional growth are likely to slow down their moves to CO due to our high costs now - they've made up the lions share of net in-migration pretty much forever so that slowing up may be be significant.
Short term development of office, multifamily, retail, are not screwed but probably not significant or robust - well located projects will move forward, but most will not. Once that residential engine slows down, retail almost instantly shuts off and office is....well....screwed. I don't see multifamily starts seeing significant growth over the next 2 years. Single family will keep chugging along - that's largely funded with cash, not debt, from home builders who are enjoying all time highs in stock price and profitability, but as we've seen over the past 15 years, they've not yet ramped up production like they did pre-great Recession. Seems they are all still scared from the 2007/8 crash (can't say I blame them).
Investors are only half the equation. Large scale multi/office/retail/industrial has at least a 50% debt component. Debt markets aren't broken, but that major liquidity problem is real and if 7/10 projects used to get fully funded, maybe 2/10 get funded now...maybe. Yeah, there will always be equity for good projects, but the risk adjusted return right now is maybe 8-9% return on cost - nothing is getting to that number because costs/rates are too high. So...everyone is sitting, waiting for costs and rates to come down and the market isn't really adjusting on a large scale...yet.
I kind of think hotels might still do well in Denver/Mtn Resorts but they're debt reliant as well so maybe they're stuck in the mud. We shall see. Denver sorely needs some more resort style hotels - not on the scale of Gaylord, moreso Great Wolf. Seems like an opportunity at the right location. Maybe a redo of OMNI Interlocken or Inverness or even a HOTEL PRIME in Boulder!