DENVER | Main Development Thread #7

[laniroj]

Originally Posted by TakeFive

...I will buy the idea that Denver/metro isn't or won't be as overbuilt as many areas and that's a good thing as I'm not seeing much growth either.

As an owner of real estate, I'm rooting for a major downturn. My take is Denver, and many other cities, need a major overbuilding reset. Real estate of all shades has become unsustainably expensive and we need to bring the cost of all real estate down - the market generally does that when not overly regulated. Yes, it will hurt for some, but it will present opportunity for others, mainly millennials, who have not yet been able to benefit from downward market dynamics and are coming into their period of financial stability...gen z will have to wait a bit to get more steady on their feet. Gen X'ers should be all over it.

[wong21fr]

Formative has pivoted the old WTC site to different programming. Out with the office and in with residential. Look like ~800 units.

Formativ plans three buildings on ex-World Trade Center site in RiNo

In early 2020, Denver development firm Formativ, along with partners, was preparing to break ground on a major project in RiNo.


The World Trade Center Denver complex, right by the Regional Transportation District’s 38th and Blake rail station, was going to feature two buildings: a hotel and an office building, which would be partially leased to its namesake trade association.

Then the pandemic hit. The project stalled, then died. In March 2021, the World Trade Center association announced it would instead take space in another project.

Now, years later, Formativ CEO Sean Campbell has parted ways with his onetime partners on the project. And he has a new vision for the approximately 2.1-acre site, of three buildings. Office space is out and apartments are in. A hotel is still planned, although on a different part of the site.


Campbell hopes to break ground on one building by the end of 2024. The other two structures will follow by at least a year; Formativ just submitted concept plans to the city for them last week.

[wong21fr]

Interesting that the first substantial office to residential conversion will occur in the DTC rather than downtown. I wonder if this is mainly due to the ownership situation, financials of the building conversion, or the bureaucracy of Denver hamstringing downtown conversions due to some of the onerous development review hurdles we've heard about.

Office building near Denver Tech Center rezoned for affordable housing conversion
By Justyna Tomtas – Reporter, Denver Business Journal
Aug 14, 2024

A four-story office building off Interstate 25 in south Denver will be converted into affordable housing after the Denver City Council unanimously approved the rezoning of the property.

The council approved rezoning the almost 13-acre property, at 4340 S. Monaco St. in the Southmoor Park neighborhob after the Denver City Council unanimously approved the rezoning of the property.

The council approved rezoning the almost 13-acre property, at 4340 S. Monaco St. in the Southmoor Park neighborhood near the Denver Tech Center, on Monday, making it a planned unit development.

The vote clears the way for a developer's conversion proposal to transform the 124,000-square-foot office building, which has sat vacant for six years.

The adaptive reuse of the property will create 143 apartments — studios to four-bedroom units — for rent, said Peter Culshaw, with Shea Properties. It will target tenants that make between 30% and 70% of the area median income, according to previous reporting by the Denver Business Journal.

The California-based company submitted preliminary plans for the building conversion earlier this year.

[wong21fr]

Originally Posted by laniroj

As an owner of real estate, I'm rooting for a major downturn. My take is Denver, and many other cities, need a major overbuilding reset. Real estate of all shades has become unsustainably expensive and we need to bring the cost of all real estate down - the market generally does that when not overly regulated. Yes, it will hurt for some, but it will present opportunity for others, mainly millennials, who have not yet been able to benefit from downward market dynamics and are coming into their period of financial stability...gen z will have to wait a bit to get more steady on their feet. Gen X'ers should be all over it.

Well, we can also bring the cost of money down. The Fed needs to lower rates now and has been too cautious in the build-up to doing so.

A lower cost of capital along with $500M in public money, and a lower regulation cost, could go a long way towards penciling out a lot more office to residential conversions downtown.

[gopokes21]

Originally Posted by TakeFive

Stir the Dirt and Scatter

Just to prove there is new apartment construction happening - somewhere.

$81.23M Joint Venture Equity Arranged for Alexan Pena Station
April 1, 2024 -- Mile High CRE

This is a Trammell Crow Residential project carrying the "Alexan" brand but it's quite interesting how they have pivoted to offer "Workforce" housing with an average unit size of 976 square feet. Clearly they're taking advantage of the lower land costs and ease of development. They may even benefit from lower construction costs given the timing of the market.

Alexan Pena Station


Courtesy Trammell Crow Residential

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Aurora Breaks Ground on Atria at Metro Center for Senior Affordable Housing
June 5, 2024 -- Naked Denver Staff


Atria at Metro Center
15025 E. Center Ave




Images courtesy Dominium

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JHL Begins Construction on The Sophia Apartments
April 30, 2024 -- Mile High CRE

The Sophia -- Englewood


Courtesy: Galloway



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Alliance Construction Solutions Breaks Ground at 38th and Tennyson
March 27, 2024 -- Mile High CRE



Rendering courtesy of Founding Architecture Studio

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ULC Breaks Ground on 102 Affordable Apartments on West Colfax
May 29, 2024 -- Mile High CRE


The Irving at Mile High Vista


Anybody spot Mayor Mike?


Images courtesy Urban Land Conservancy

That's a TON of affordable groundbreakings. I also think this project in Englewood, Trails at Lehow, must have opened recently. Very little press coverage so the only photos I can find are renderings or this:







This deal is located on Lehow Ave, one block off Broadway and Belleview. Very cool design by Davis Partnership Architects.

[wong21fr]

Originally Posted by gopokes21

That's a TON of affordable groundbreakings.

gopokes, how much do you think this affordable housing spike is being enabled by Prop 123? I believe that there has only been one round of funding granted so far, but I might be wrong.

[gopokes21]

That is correct. The ULC deal on West Colfax was one such recipient of Prop 123 funding, but otherwise, I don't believe we are seeing the impact of Prop 123 yet.

What we are seeing come online now are projects funded with ARPA funds as well as extra revenues that Denver put into its housing pipeline. Denver lends or grants an incredible amount of money (like $50-60 million a year) into these types of projects. The rest of the state does very little to be honest, but that is changing as many communities now have dedicated local funding coming online. We will see the impact of that in a year or two.

[TakeFive]

Brand New For You

Hanover RiNo
2950 Brighton Blvd

The 2nd photo shows a nice view of all the surrounding density.






Courtesy Hanover RiNo

8 Weeks Free on a 12+ month lease.

Beyond the Expected

Immerse yourself in Denver's hottest new community, Hanover RiNo. Nestled in the heart of the booming River North Arts District, our 390 meticulously-crafted apartments offer prime access to the city's energy.

[TakeFive]

Is this the bottom?
Or maybe the end of 2025, middle of 2026?

Colorado jobs data paints a pretty grim picture for Denver employment
Aug. 16, 2024 By Sarah Mulholland

Denver, Colorado’s biggest population center and a major driver of economic growth, has lost 9,600 jobs during the past year, the data show. It’s the only metropolitan area in the state that’s losing jobs. Boulder and Colorado Springs both added more than 6,000 jobs.

"I don’t think the data suggests that Denver’s imploding. I think that it’s kind of a wait-and-see," said Tim Wonhof, a program manager with Colorado’s Labor Market Information Team. "It does say a lot about what has happened during the pandemic and how we are coming out of it … Are people seeing Denver as the place to work? A lot of people come in and there's not many people downtown, and I think that is a factor that we're certainly dealing with.”

It’s useful to look at what kinds of jobs Denver is losing. Construction jobs are way down, a trend that started late last year. That could be due to the end of Denver’s multiyear apartment building boom, Wonhof said.

Denver’s also losing jobs in leisure and hospitality lately, even though the state as a whole is adding jobs in that industry. The overhaul of the 16th Street Mall likely isn’t helping hiring at restaurants in the area, according to Wonhoff.

I had avoided speculating but one had to wonder?

Previously, I found a moving site that suggested things weren't great; but it wasn't a net figure, only one-way move-outs. It was the year-over-year comparison that wasn't so good.

The state gained 4,800 jobs in July when compared to last year, according to preliminary information collected by the U.S. Bureau of Labor Statistics. Meanwhile, the unemployment rate, while up from post-pandemic lows, is still relatively low at 3.9 percent.

[Cirrus]

Please see this announcement regarding wong21fr being made a moderator. Thank you!

[TakeFive]

I changed my mind

Originally Posted by TakeFive

Previously, I found a moving site that suggested things weren't great; but it wasn't a net figure, only one-way move-outs. It was the year-over-year comparison that wasn't so good.

Where Are People Moving to in 2024? Hint: There’s Been a Shift!
May 20, 2024 By Alex Keight

Note: This is but one source of data of which there are many so it's not the "be all end all" by any means. If your perspective is strictly Denver or Colorado you might want to skip this.

What I did like

is that there's an article which provides perspective and I always appreciate 'context' with raw data. That said this is not expert opinions it is merely one set of eyes.

Highlights:

It seems the dust is finally settling from the shake-up caused by the pandemic, and we’re beginning to see emerging moving patterns arise from economic and lifestyle factors rather than remote work or family obligations. The shine of the pandemic boom cities is wearing off, and many people are fleeing previously popular cities in favor of the next hot spot where the weather is mild, the cost of living is manageable, and the quality of life is satisfying. But where are people moving to in 2024 exactly?

Initial conversation is focused heavily on the SE part of the country. But they do branch out.

Where Are Companies Moving to in 2024?

Companies are flocking to southern sunbelt states like Texas, Georgia, Arizona, North Carolina, and Tennessee, according to global data center Iron Mountain. These cities offer lower operational costs, tax incentives, and better value for employees. Popular cities for company relocations include Austin, Atlanta, Phoenix, Raleigh, and Nashville.

Scrolling down quite a ways:

Where Are People Moving From? Cities With the Highest Move-Out Numbers

Cost of living continues to be a common denominating factor when it comes to cities experiencing the most move-outs. As we’ve seen in our data from previous years, expensive metro areas have put the squeeze on residents who are fleeing to cities and states with lower overall costs of living (and, often, better access to the outdoors).

This year, we noticed a bigger trend in what appears to be city-level move-outs, with some regions and states only seeing big moves out of specific cities. These cities include Denver, Hartford (CT), Baltimore, Chicago, Minneapolis, Austin, Portland (OR), and Miami.

Cities With the Highest Number of Move-Outs Ranked

5) Austin, TX (Not ranked in 2023)
12) Denver, CO (18th in 2023)
16) Portland, OR (Not ranked in 2023)

Again, given only the one source for data what I picked up on was the year-over-year changes.

With reference to new cites on this year's list:

Factors contributing to an exodus from the remaining newbie cities are likely driven primarily by safety concerns, as each of these cities struggles with high, above-average, and growing crime rates. On top of this, Portland (OR) struggles with an overwhelming population of unhoused residents, open use of hard drugs, and one of the highest tax rates in the country (despite having no sales tax). Similarly, crime levels in Minneapolis are compounded with soaring housing costs and high tax rates.

Denver is still much better off than many places but the trends are concerning.

[TakeFive]

Thanks for Posting

Originally Posted by gopokes21

That's a TON of affordable groundbreakings. I also think this project in Englewood, Trails at Lehow, must have opened recently. Very little press coverage so the only photos I can find are renderings or this:



This deal is located on Lehow Ave, one block off Broadway and Belleview. Very cool design by Davis Partnership Architects.

I agree that is a nice looking project. Can't visualize the area as it's too far South and West for my travels but that should be a good area for such a project.

There's been very little apartment construction along the So Broadway corridor south of Hampden (that I'm aware of). There was a Wood Partners 306-unit project built near Englewood Middle School at 3650 South Broadway, back in 2016 which went by their brand name of Alta Cherry Hills. They sold the project in 2017 in a strong market to "Bell Fund VI" who recently resold the property to AvalonBay so it's now called Avalon Cherry Hills.

The only other project that comes to mind was Vita Littleton, a 55+ active 159-unit senior community development by Zocalo at 2100 West Littleton Blvd.

[laniroj]

Originally Posted by wong21fr

Well, we can also bring the cost of money down. The Fed needs to lower rates now and has been too cautious in the build-up to doing so.

A lower cost of capital along with $500M in public money, and a lower regulation cost, could go a long way towards penciling out a lot more office to residential conversions downtown.

My goal wouldn't be to 'pencil out' new development - rather to bring down the cost of everything wholesale. I support the fed keeping rates higher for longer to ensure that happens and if they go too long and there's a significant correction, I'm all for it. We're not going to build our way out of this and I'd love for millennials and gen z to have more housing opportunity before it's too late for them to have kids - that's the real long term nation killer. Besides, there's far too much bureaucracy to build our way out of this so unless/until land use and zoning regulations are drastically reduced nationwide, our only tool for resetting real estate markets is the interest rate.

[laniroj]

Originally Posted by wong21fr

gopokes, how much do you think this affordable housing spike is being enabled by Prop 123? I believe that there has only been one round of funding granted so far, but I might be wrong.

Purely speculation, but I believe annual affordable housing unit production is down from past years - at least under the CHFA tax credit umbrella. CHFA does an impact report but it doesn't look at YoY or anything like that to my knowledge. We're noticing the affordable stuff more because the market rate groundbreakings aren't drowning them out.

[TakeFive]

I like your style

Originally Posted by laniroj

My goal wouldn't be to 'pencil out' new development - rather to bring down the cost of everything wholesale. I support the fed keeping rates higher for longer to ensure that happens and if they go too long and there's a significant correction, I'm all for it.

At least I don't feel any 'panic' on the part of the Fed to lower rates dramatically, but they've sort of painted themselves into a corner for at least a quarter point in September.

What do you think about Mayor Mike's affordable housing tax? -- Denverite and/or 7News Denver

I can see potential for both Good and Bad happening. How long is the list of Greasy Palms in Denver? Oh my; that is a rather long list isn't it. Too much red tape or too little oversight?

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With respect to downtown's empty towers

Is it possible that what went out of fashion could become fashionable again?

The preponderance of evidence seems to be that for larger floor plate buildings that a wrecking ball is your answer.

https://www.bisnow.com/new-york/news...s-mount-125557

As Class-B and C offices empty out, owners are getting increasingly nervous.

“A pretty high percentage of those buildings won't have a future,” said Peter Bafitis, managing principal at architecture firm RKTB. “[Pre-World War II] buildings lend themselves better to residential, but you’re going to have quite a few of the massive floor plate buildings after World War II. What do you do with them?”

This will I suspect take time (in years) to sort out though.

[TakeFive]

If you want to run a race, the 1st step is to find the starting gate, No?

Denver City Council set to vote Tuesday on changes to already delayed sidewalk fee program
August 20, 2024 by Allie Jennerjahn -- 7Denver News

DENVER — Denver City Council is set to vote Tuesday to make changes to a voter-approved initiative aimed at improving the city's crumbling sidewalks — a program that has seen significant delays due to continuing implementation challenges along with legal questions as to how those repairs will eventually be billed to property owners.

Can't say I understand exactly... but I do sense they're getting close to the starting gate.

[TakeFive]

Southeast Denver urban/suburban

Edera Apartments -- Now Open!
6609 E Warren Dr, Denver






Courtesy Studio PBA/Edera

Fresh Urban Living

Planted in the heart of the action, Edera welcomes you to find your calm in the chaos. When you’re up for fun, modern community spaces offer the perfect place to gather with friends. Open courtyards and gardens bring you back to earth. The High Line gives you access to one of the longest continuous urban trails in the country, and miles of greenery to ride, run, or just be.

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Embrey to Build 283-Unit Apartment Community on Leetsdale Drive
March 15, 2023 -- Mile High CRE

AFAIK -- This site at 5231 Leetsdale Drive



is under construction to look like this:



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151 Affordable Units Break Ground on Former CDOT Site
March 8, 2023 -- Mile High CRE

Krisana
4343 E Arkansas Ave, Denver




Courtesy of Krisana - Lewis Himes Associates - ComCap

The Krisana Apartments will be available for residents who earn up to 60% of the Area Median Income (AMI)

“The Krisana Apartments are the perfect kick-off for the Master Plan redevelopment of the former CDOT property,” said Jimmy Balafas, Kentro Group principal and co-founder.

This project should complete withn 6 months.

[TakeFive]

Originally Posted by laniroj

... Besides, there's far too much bureaucracy to build our way out of this so unless/until land use and zoning regulations are drastically reduced nationwide, our only tool for resetting real estate markets is the interest rate.

'It’s Like A Mirage’: Investor Says Rate Cuts Won’t Be CRE’s Savior
August 20, 2024 by Ryan Wangman, Chicago Bisnow

While many in commercial real estate are waiting with bated breath for the Federal Reserve to lower interest rates... one investor thinks CRE is in for a rude awakening... "It's like a mirage,” said Adam David Lynd, president and CEO of Texas-based The Lynd Group...“They think... they're going to keep walking towards lower interest rates... [but] they're going to find out that that's not even the real culprit.”

The real culprit... in the multifamily sector, is that rents are flattening or declining in many markets while operating expenses are skyrocketing, Lynd said. When expenses like insurance rates and taxes rise, they rarely reverse course... With billions of dollars in loans set to mature and some multifamily properties selling for cents on the dollar, Lynd said he thinks the next major distress cycle is right around the corner.

BTW, the The Lynd Group and Kairoi Residential are the result of splitting the the original family business that Dad built.

Just My Opinion

Other than 'designated' affordable apartments you're not likely to see much, if any new projects break ground closer to the city center. BUT, there are still a lot of units still under construction. Nine months from now most of these will likely be finished.

While new projects are hard to pencil, I wouldn't be surprised to see some new construction in parts of the suburbs or in Boulder County for example.

[laniroj]

Originally Posted by TakeFive

I like your style


At least I don't feel any 'panic' on the part of the Fed to lower rates dramatically, but they've sort of painted themselves into a corner for at least a quarter point in September.

What do you think about Mayor Mike's affordable housing tax? -- Denverite and/or 7News Denver

I can see potential for both Good and Bad happening. How long is the list of Greasy Palms in Denver? Oh my; that is a rather long list isn't it. Too much red tape or too little oversight?...

It's a bandaid (money) for a knife wound (zoning) to the femoral artery. Will it generate units? Yes, a drop in the budket at the margins. Those units will take forever, push the cost of housing up because of all the strings attached to that money (and the less inefficient developers who will utilize it), and do nothing but make politicians feel good for 'helping the cause' while giving them a tlaking point in the next election. There is AMPLE evidence here in our State and in big blue cities nationwide who spend A LOT of money on affordable housing that this is purely a strategy to affect the tiny margins. We need COVID era (2022-2024) housing starts and deliveries of all sorts for the next decade+ just to catch up on the MILLIONS of homes we are behind from the last 40 years of terrible zoning policy and a couple massive recessions.

Not to bring in politics to this conversation, but I find it deplorable if someone calls themselves progressive and then is resistant to major upzonings for residential density in MOST areas of central core cities - not just TODs and 1/4 mile from high frequency bus routes (that's only 2 blocks people!!!). Maybe it's my becoming more bitter as I age (I'm still young) but I'm downright sick of the gas-lighting. Cities (and this country in general) need strong leaders to transform zoning and roll back regulations if they want to remain thriving places in a generation or two. I think throwing money at this problem is merely gas lighting and I'm sick of it!!! Leaders take bold chances and history judges them accordingly. Right now all of our leaders cow tow to the current thinking/opinion - idk but maybe we have a generational self esteem problem. People used to do bold things...we are so far from that now it's beyond laughable...just sad.

[laniroj]

Originally Posted by TakeFive

...I can see potential for both Good and Bad happening. How long is the list of Greasy Palms in Denver? Oh my; that is a rather long list isn't it. Too much red tape or too little oversight?...

If the City said we're going to grease the hands of developers in the next 6 months to the tune of $100 million, maybe $20 million of that would be 'corrupt' money, but it would likely get the job done a decade faster and generate 5x the number of units the City was initially aiming for. Ultimately, the amount of time the City takes to administer the process would see inflation erase the 'corrupt' $20 million and then the City would generate less units in the end. If the goal is more units, I'll take greasy hands over pride any day. People do not understand the time value of money and that is unfortunate.

Not to be arrogant, but this is so easy it makes my stomach curl. It would be SO EASY to generate units in these downtown office buildings.

Example - owner comes to City saying they want $5 million to buyout remaining tenant leases so they can sell building for conversion. City says, here's the money but we're retaining a purchase option and ROFR at fair market value (which is almost nothing at this point) and you have 12 months to get the property sold before we can exercise the option. Building gets emptied in 6 months and a developer is simultaneously working on redevelopment because the City agreed to waive all their excessive and unneeded development reviews. 24 months after initial policy we have thousands of units delivering in the core. Private enterprise could easily execute this plan. Government cannot because....power. This plan involves them not having power; over vision, over process, over outcome. Rant over.