DENVER | Main Development Thread #7

[The Dirt]

Originally Posted by denverinfill

Thank you!

[TakeFive]

Allow me to add some context

Originally Posted by mhays

It's about cost.

Scarcity is about what's on the market, not what can theoretically be redeveloped. Land gets very expensive even if development is a small percentage of the theoretical supply. This can be an exponential effect.

Remediation is expensive and brings up all sorts of risks, particularly if you're on the hook for any future spread of pollutants. Just figuring out various parties' responsibility and funding sources can be a major hurdle. We "can" but tough sites can stay empty for decades for this reason.

According to Ken/DenverInfill between 2010 and the end of 2019 Denver added 14,000 residential units within 1.5 miles of the D&F Tower. At the end of 2019 there were 6,200 more units under construction and another 3,300 units being proposed and another 4,200 units in the pipeline (not yet formally submitted). That's nearly 25,000 additional units compared to the 14,000 units built between 2010 and 2019. Does that sound like scarcity to you? (BTW, Seattle is pumping out almost exactly 50% more apartment units as Denver)

The value of land is also directly impacted by its zoning. The higher the zoning allowance the higher the value of the land. And land owners could give two chits about affordability; it's not their job.

Remediation can run the gamut from not that much to prohibitive.

Some sites (like Gates) do indeed take a lot of time, like over a decade to remediate as necessary, master plan and entitle and then it still might not be available to the public if the intention is to develop the site by the existing owner. Even if a site might be parceled out and might accommodate say 12,000 new residents the opportunity for buying in might be limited.

Sun Valley and Empower at Mile High Stadium which are adjacent pieces of land are two examples of land for a whole lot of new development. Sun Valley though has started its initial development but there will also be some street improvement which are pending. But it's close to being "available". "Mile High Stadium" land is probably a couple of years away but that goes by fast in the development world.

[The Dirt]

It doesn't matter if we added 1 new unit or 1 million. What matters is the number of units compared to the number of people moving here. We've not been keeping up with growth. End of fucking story. Not only are we not keeping up, but we're falling further and further behind. What will it take to get you to to put those rose colored boomer glasses of yours?

[SirLucasTheGreat]

On the Sun Valley development and parking issue, I read that it is hard to finance projects without a decent amount of parking. Is that true and what can be done about that? It seems like most people here would like to see new development in the city contain less egregious amounts of car storage.

[TakeFive]

Originally Posted by The Dirt

It doesn't matter if we added 1 new unit or 1 million. What matters is the number of units compared to the number of people moving here. We've not been keeping up with growth. End of fucking story. Not only are we not keeping up, but we're falling further and further behind. What will it take to get you to to put those rose colored boomer glasses of yours?

At the risk of being snarky, does this mean that you are a clairvoyant and already now how many people will move to Denver and when.

You've got investors putting up hundreds of $millions at risk to build all these units at what are historically low rates of projected return. It wouldn't take much to throw these projects into a negative return. That's not why investors put up their money.

But back to simple math what has been the recent record of in-migration and how does that compare to the 25,000 projected units? That's at least a reasonable place to start?

Unless you think all these developers are boomers you're misguided. I would also remind you that I don't live there so I can't solve your problem.

Originally Posted by SirLucasTheGreat

On the Sun Valley development and parking issue, I read that it is hard to finance projects without a decent amount of parking. Is that true and what can be done about that? It seems like most people here would like to see new development in the city contain less egregious amounts of car storage.

Understand Sun Valley is a significant sized area and Steam on the Platte is a niche area piece of the area to be developed. Developing office space at this site, for example would be risky w/o parking and yes it's unlikely you get that funded w/o parking.

Much of Sun Valley and Mile High master plans are within walking distance of the Decatur-Federal Station as well as bus service in the area. That should be a very urbanized area - but I can't say how developers will approach parking.

[mhays]

You make things sooo much more complicated than necessary.

Scarcity plays a role in higher costs. This is shown by CURRENT prices for both land and housing.

[TakeFive]

We got some numbers

For the years 2017 and 2018 Denver County grew by 10,000 per year. This is down from 2015 and 2016 when the population grew by an average of 16,000 per year.

When it comes to the whole metro area apartment vacancy rates are ~5% so generally the whole metro area has little slack.

With respect to downtown Denver it's become a popular place to live. In many cases residents may not even work downtown but there's nothing wrong with a "build it and they will come" approach.

Given the number of units under construction and the fact that growth has moderated recently it will be interesting see how well the absorption rate holds over the next 18 months.

Originally Posted by mhays

You make things sooo much more complicated than necessary.

Scarcity plays a role in higher costs. This is shown by CURRENT prices for both land and housing.

...which has been trending higher; I understand that. I guess if you're using 'scarcity' as a relative term then fine. It's certainly true that land costs have been trending higher in the core part of the city. It's certainly true that construction costs continue to go higher. This is hardly unique in good times; it's typical.

[Stonemans_rowJ]

There have been lots of small 1 bedroom units and studios added, many probably vacant.

The average millennial is now, what, 32 or 33 years old, many are married or marrying, many are having children. This demographic is not looking for a 1 bedroom apartment in Sun Valley. They are looking in the neighborhoods. There is little if any new supply there and the boomers are staying in place.

[mhays]

Land costs tend to be FAR more sensitive than construction costs. In my area land has tripled since the last peak, and much of that is specific to a lack of developable capacity, even while we could technically boom like this for many years.

[TakeFive]

Originally Posted by mhays

Land costs tend to be FAR more sensitive than construction costs. In my area land has tripled since the last peak, and much of that is specific to a lack of developable capacity, even while we could technically boom like this for many years.

When it comes to shopping for land in Denver I have no clue.

What I do know is that Cypress (a Dallas based REIT) out of their Austin development office recently contracted for more land in RiNO. The site needs to be rezoned from industrial to residential. Golub and Co out of Chicago also bought a site nearby and they are currently doing a master plan for their site. Both these sites can accommodate multiple projects. There's also a few sites where plans have been announced and then you wait the year or however long it takes to get through P&Z and assuming they have the financial backing which in some cases is unknown.

Denver has the advantage in that RiNo is a sprawling area roughly 15 blocks by 6 blocks that will take a couple of decades to build out. It also has some cool industrial adaptive reuse. And yes there's several sites in the CBD looking to build as well. Several sites including high rise buyers from Chicago and Boston have recently purchased land but not yet announced their plans. Canadian developer Amacon is getting ready to break ground on two condo towers.

It's not like nothing is happening in Denver.

Meanwhile the Lakers have a six point lead over the Nuggets at the half.

[mhays]

Is that somehow relevant to my post?

[TakeFive]

Originally Posted by mhays

Is that somehow relevant to my post?

It's relevant to Denver and while I'm happy to be informed about land costs in Seattle it's not relevant to Denver and this is the Denver Development Thread.

Meanwhile Nuggets - Lakers are going to overtime.

[bulldurhamer]

Originally Posted by laniroj

The land logic isn't twisted. The point is this. The City has upzoned or placed beneficial zoning on VERY FEW parts of the City. What that means is there's not enough beneficial zoning to go around for all of the demand (both from people/businesses who want more space/houses and from the capacity of the development community who wants to build more). Case in point, my company could handle about 40% more dollar volume than we currently complete, but we can't find sites or buildings to build/preserve. So, what happens, is exactly what you hate. Folks come into places like Five Points, bulldoze the neighborhoods, and build slot homes on any parcel that has that beneficial zoning. This happens precisely because the City has largely provided beneficial zoning in lower income neighborhoods (when the zoning was enacted), not higher income neighborhoods. Essentially, the City has sacrificed those areas of beneficial zoning (lower income areas) and ALL OF THE GROWTH is concentrated in those very few areas. IF land was upzoned CITY-WIDE, the intense demand for a single neighborhood would diminish and that developer and housing demand would be more evenly spread across the entire City, not just concentrated in Five Points.

If you can't understand this, then I'd be happy to sit down with you and enjoy a tamale at Curtis Park Creamery so I can explain why I think this - supply side economics - but you have to smile the whole time.

As to mitigation, huh? I'm saying TONS of vacant ground is undevelopable (for residential) because most industrial ground has contamination of some sorts. The shit companies used to get away with is absurd - 100 years of blatant pollution. Sometimes it's minimal and it doesn't affect residential development, but many times it does. MOST times it does and there is a cost associated with remediation, if you can even convince a lender to give you money when your property has a giant X on it. Sometimes, remediation isn't possible either because the ground is TOO contaminated or because the cost of remediation it is not economically feasible (even if you got the land for free). Like Gates - you could drop a rock in those monitoring wells prior to demolition and it would float on top of the sludge. Industrial development and residential development have different thresholds for ground/water pollutants/contamination. Ground has to be much cleaner for residential and there's a big cost associated with cleaning it up.

If the entire city was upzoned, everyone would still want to live in the same places. If you’re not biking distance to anything you may as well be in Thornton in the eyes of those demanding the right to be as close to the “center” as possible, like cirrus. With that said, i agree upzoning responsibly should be happening. I dont believe looking at an arial photo without context should be where you do it though.
For example, Skyland seems ripe for a change. Mid century ranches close to the action on huge lots with huge single family scrapes may not be the answer.


Your point about mitigation is going to fall on deaf ears though. Im watching north Cole get developed and it seems the money is there to do it. Cue the tiny violin for the millionaire developers.

[mhays]

I don't live or work in Denver, so used an example I know. But the point is the same -- land costs are much more sensitive (fluctuate far more) than construction costs.

You can introduce all sorts of anecdotes and speculations to confuse things, but the basic points are the same.

[TakeFive]

Originally Posted by mhays

I don't live or work in Denver, so used an example I know. But the point is the same -- land costs are much more sensitive (fluctuate far more) than construction costs.

You can introduce all sorts of anecdotes and speculations to confuse things, but the basic points are the same.

I think I understand your viewpoint.

But a lot of land and lots of sites have been bought over the last couple of years including recently. Scarcity or not, land is being bought and developed and being rezoned - planned for much more development. That was my point. What does it matter the specific price for a specific piece of land if it's all being bought for development anyway.

F**k the Lakers; they won.

[TakeFive]

Originally Posted by bulldurhamer

If the entire city was upzoned, everyone would still want to live in the same places. If you’re not biking distance to anything you may as well be in Thornton in the eyes of those demanding the right to be as close to the “center” as possible, like cirrus. With that said, i agree upzoning responsibly should be happening. I dont believe looking at an arial photo without context should be where you do it though.
For example, Skyland seems ripe for a change. Mid century ranches close to the action on huge lots with huge single family scrapes may not be the answer.

You're the man! Your point about Skyland is well taken.

Originally Posted by bulldurhamer

Your point about mitigation is going to fall on deaf ears though. Im watching north Cole get developed and it seems the money is there to do it. Cue the tiny violin for the millionaire developers.

The way that laniroj talks is also what makes people very nervous about developers. He wants his cake and to eat it too - not that it is unreasonable from a developers perspective.

The City and the powers-that-be need to continue to define the rules and everybody that wants to live and work in Denver will find their way and a place to live.

[TakeFive]

Originally Posted by DenverInfill

First, I would encourage everyone to always view these types of articles with a critical eye.

I finally got a chance to go through this at a pace that my brain could follow along. That's some amazing analysis.

To me it made no sense on its face. For one thing, knowing that new home construction was at a subdued pace for years following the recession or 2010 and that it skewed towards the well-qualified end of the market combined with apartment construction on steroids couldn't possibly add up to what she claimed. But perhaps it closer than I would have thought?

Here's my guess

The data used (in your yellow shaded section) shows that 67,466 new owner occupied homes were completed but only 45,391 rental units were completed. Something's wrong. The latter half of that period between 2010 and 2018 was a time of accelerating apartment construction. It's entirely possible that there were say 15,000 apartment units under construction (throughout the metro area) and many in some stage of completion including renting units.

My guess is that when it comes to data collection there's a significant lag time in accounting for new apartment units while new home sales are highly standardized. Additionally there's not good data on non-owner occupied homes that are rented.

Speaking of apartments

https://www.marketwatch.com/story/ri...wsviewer_click

Rising rents drive consumer prices higher in January

The numbers: The cost of staples such as rent, medical care and prepared food rose in January to push consumer prices higher, but inflation more broadly was still relatively tame.

What happened: The cost of shelter, mainly rent, accounted for most of the increase in consumer prices in January. Rents rose 0.4%.

This is a national figure but Welcome to your Wall Street driven apartment life.

[RyanD]

We might as well dedicate this whole thread to TakeFive since the posting ratio is like 4:1.

Btw, the Economy Suites at Belleview Station is almost completely demolished. Saw it on the train this morning.

[TakeFive]

Originally Posted by RyanD

We might as well dedicate this whole thread to TakeFive since the posting ratio is like 4:1.

Btw, the Economy Suites at Belleview Station is almost completely demolished. Saw it on the train this morning.

I know. We need to get off of these crazy topics; I've posted a number of development news comments but nobody seems to care about those.

The Good News is that all the baseball players for Spring Training are now in town. Starting tomorrow (in fact) and for the next 3 months it's 'high season' in the desert. I don't anticipate having the time or interest to spend posting during that time. Gotta make hay while the sun is shining.

[SirLucasTheGreat]

Thanks, Ryan! Now it is freaking time for Shelby's to finally be demolished. Curious what is taking so long. Maybe it might relate to that horrid condo bill currently being floated around the State legislature.