DENVER | Main Development Thread #6 - Page 37

TakeFive · #**721** Posted **Jul 24, 2014, 4:34 AM**

Quote:

Originally Posted by enjo13

Fun anecdote:

Indeed it was.
It's always fun to get the impressions of visitors and outsiders.

It is quite amazing how much the image of Denver has changed. From (just) being the state capitol and the city you go through on the way to the mountains
Denver is now more of a destination with its own appeal.

TakeFive · #**722** Posted **Jul 24, 2014, 5:08 AM**

Quote:

Originally Posted by RyanD

^ Totally true. Developers can go sub $2/sf and be fine. They charge it because they can, and I've heard it straight from them. Simple supply and demand. No supply? High demand? Yep. Young people and affordability? Rich parents, or you better like roommates!

I don't doubt that in the slightest. The more interesting question is what rental rate do they need? What rate and occupancy level is needed to justify additional construction?

Looking at the "Residential Update" that you posted yesterday 3,656 rental units have come online since January 2012. There is currently 3,764 units under construction so we'll double the new units (since 2012) when all those are finished. Anybody have any doubts but that will impact rent rates?

There's over 5,000 proposed units. Any guesses how many more ground breakings we'll have? And which project will be next?

mhays · #**723** Posted **Jul 24, 2014, 6:14 AM**

The developer didn't mean there was massive profit margin. If that was the case, you'd see a much larger and longer-lasting flood of projects. Land prices would also rise. If rents softened even a little, there would be some delay (at best) of a lot of planned projects. The same is true in my area where $3/sf is a rough baseline, and the market is divided (as it has been for a few years) between optimistic developers and pessimistic ones, and a lot of projects are on the sidelines even as others go forward.

What he meant, presumably, was that you can build really crappy housing for lower prices, but the market wants more. I mean cheap labor at every level of the supply chain, less sound proofing, laminate, cheaper paint, more non-prime suburban locations, and down the line. Designs can be mostly off-the-shelf, particularly in cities with quick and easy entitlements.

Brainpathology · #**724** Posted **Jul 24, 2014, 12:13 PM**

It would be interesting to see if any REIT's (or some other similar scheme) have properties in various stages of development in downtown Denver and if so what kind of performance they are having. Especially if there were a prospectus somewhere bragging that the market allows relatively cheap construction and high rents, helped along by no new condos on the horizon because of the legal environment etc etc.

I can't find anything like that with a quick search but the light from "qualified to find that sort of information" takes a few days to reach me.

If there aren't any such things maybe we should start one. The Skyscraperpage REIT hahaha... we should, theoretically know a little about the market. Except we can't let Wizended manage it.. he hates everything :-P.

bunt_q · #**725** Posted **Jul 24, 2014, 1:46 PM**

Wizened doesn't hate everything, he would just run it as a charity to support and train the beleaguered American worker. And possibly to host free Hindi and Mandarin lessons.

Mhays-as an aside, I don't think that's what the developers were saying at all. Ryan is savvy enough to know what he's asking and what answer he's getting. And all of those indicators you'd expect see if that were true, we have them.

Brainpathology · #**726** Posted **Jul 24, 2014, 2:42 PM**

Quote:

Originally Posted by bunt_q

Wizened doesn't hate everything, he would just run it as a charity to support and train the beleaguered American worker. And possibly to host free Hindi and Mandarin lessons.

Mhays-as an aside, I don't think that's what the developers were saying at all. Ryan is savvy enough to know what he's asking and what answer he's getting. And all of those indicators you'd expect see if that were true, we have them.

Yeah I meant profit based things... so yeah. Hate was probably the wrong word

mhays · #**727** Posted **Jul 24, 2014, 4:00 PM**

bunt_q, it sounds like you're saying there's a scarcity premium, above what development cost alone would justify. Makes sense to me. According to James Real Estate Services, the metro vacancy was 5.1% at the end of Q1. Where I live that would be equilibrium. But James alludes to Denver's equilibrium being more like 6-7%.

Brainpathology, that type of market analysis sounds like the sort of thing normally kept under lock and key. Fiddling with spreadsheets is one of the defining skillsets and preoccupations of a developer....the best guessers (on everything from rent, vacancy, and financing trends to the future value of dining nooks) are the ones that succeed.

RyanD · #**728** Posted **Jul 24, 2014, 4:09 PM**

Quote:

Originally Posted by mhays

bunt_q, it sounds like you're saying there's a scarcity premium, above what development cost alone would justify. Makes sense to me.

This is exactly what's going on. Here's a great example: it should not cost this much to live in these buildings. They were built over 50 years ago and have hardly any amenities including no parking.

Wizened Variations · #**729** Posted **Jul 24, 2014, 4:12 PM**

Quote:

Originally Posted by bunt_q

Wizened doesn't hate everything, he would just run it as a charity to support and train the beleaguered American worker. And possibly to host free Hindi and Mandarin lessons.

Mhays-as an aside, I don't think that's what the developers were saying at all. Ryan is savvy enough to know what he's asking and what answer he's getting. And all of those indicators you'd expect see if that were true, we have them.

You just gave me a great idea. How about getting a publically owned transportation system, and, making the entity a charity with précises the aims you defined?

First, the "charity" would not have to owned by the "state."

Second, the "charity" can be managed by the best (idealists) in private business, who are both accountable for their business decisions and can be fired through a board of directors.

The "charity" can be dedicated to anything (but from the future of a US kid about 16 right now), the idea of teaching free Hindi and Chinese lessons is brilliant! Teach more of our young to be able to catch our competition when they are up to dirty business tricks. Take them to their own court and defend our interests in the language out in the open?

Of course, the charity would be an attempt to make employees liable for the mistakes and hire the best for power positions. Tax laws would be great too.

Sometimes you knock me against the wall, not with your wit, but slickers of that creative mind that lurks beneath.

Thanks for the defense, sir.

enjo13 · #**730** Posted **Jul 24, 2014, 4:15 PM**

Quote:

Originally Posted by RyanD

This is exactly what's going on. Here's a great example: it should not cost this much to live in these buildings. They were built over 50 years ago and have hardly any amenities including no parking.

Says who? All of those buildings are located in one of the most popular neighborhoods in the city. Yet they are still something like less than 50% of a similar place in a bad neighborhood in San Francisco, Washington DC, Boston, or of course Manhattan. I believe those prices are more or less inline with Portland and Austin (who are really our cohort).

Cirrus · #**731** Posted **Jul 24, 2014, 4:19 PM**

Quote:

Originally Posted by RyanD

it should not cost this much to live in these buildings.

Less than $900/month to live 3 blocks from the state capitol? I realize that's expensive compared to what Denver used to be, but damn. From where I sit that's astonishingly cheap.

RyanD · #**732** Posted **Jul 24, 2014, 4:21 PM**

If you want to pay 900 a month for 435 square feet (better yet $850 for 325 square feet) in an old war-era building with no amenities be my guest. I'm not buying that this is normal pricing for those.

EDIT: Remember... I've heard it right from the horse's mouth saying that prices all around are much higher because of the high demand. A... 'because we can, and make a lot more money right now' price hike. I've toured a lot of apartments lately for the blog and have had many conversations with multiple developers.

Cirrus · #**733** Posted **Jul 24, 2014, 4:28 PM**

That does not sound unreasonable. That's how big cities work.

RyanD · #**734** Posted **Jul 24, 2014, 4:40 PM**

Nevermind

mr1138 · #**735** Posted **Jul 24, 2014, 7:18 PM**

Yeah, honestly I'm not that surprised at those prices either. Compared to Boulder prices those are downright cheap. Those same $850 units would be going for ~1000 in most of Boulder. Even compared to Westminster prices (where I am now living), they aren't terrible. Fewer amenities, sure, but they're in a much better location and have far more character.

I think what is happening here is that the part of our metro area that is considered "most desirable" is inverting from what it used to be. From the 60s until very recently, the old urban core was considered yesterday's news and an inexpensive place to live... All the "high end" communities were in the suburbs; gated communities and garden-style apartments and whatnot. That is now changing as the city is becoming "cool" again, and aging suburban locations are becoming "affordable."

This is an unfortunate development if you want to live like a 90s urban hipster; I personally am a bit disappointed that I'm too young to have lived in an era when city-center living was among the most affordable options out there, and I will likely have to wait until I get a higher paying job to live in the city. But I don't think this is a negative development for urbanism generally. It means that urban living is in hot demand, and that is a good thing for its continued growth and development. 10 years ago we all would have been jumping for joy to see downtown be this hot of a real-estate market. Guess the grass is always greener in the period of history you aren't currently living in.

DenverPoke · #**736** Posted **Jul 24, 2014, 7:29 PM**

I would be much more inclined to pay those prices than $1500 for 600 ft in The Douglas or any of the other stick-built new developments with all the amenities...unless said amenities included whiskey and lap dances.

wong21fr · #**737** Posted **Jul 24, 2014, 7:34 PM**

Quote:

Originally Posted by DenverPoke

I would be much more inclined to pay those prices than $1500 for 600 ft in The Douglas or any of the other stick-built new developments with all the amenities...unless said amenities included whiskey and lap dances.

They do, you just have to talk to Bridgett for Arizona State down the hall. She gives out both on Friday nights.

DenverPoke · #**738** Posted **Jul 24, 2014, 7:37 PM**

Quote:

Originally Posted by wong21fr

They do, you just have to talk to Bridgett for Arizona State down the hall. She gives out both on Friday nights.

Ha ha. Go Sun Devils! I just put in my application at The Douglas.

RyanD · #**739** Posted **Jul 24, 2014, 7:42 PM**

I don't even know why I'm complaining. I don't live downtown anymore, and living on an outer ring neighborhood with close rail access is actually pretty awesome. Sure, I miss the core neighborhoods sometimes, and definitely miss not having to worry about how to get home on foot, but that's a sacrifice you have to make to save a ton of money.

Moving to an outer ring is the same trend with about everyone I knew living in Capitol Hill when I did back in 2010.

It all comes down to picking your poison. Do you want to spend all of your money living downtown for the walkability / amenities of it all, or would you rather live 3-6 miles outside of it, and have money to actually go do things such as events and concerts, being able to afford gas to drive to the mountains, etc, etc.

Disclaimer: This is coming from me, a single-income in the $30k's. New Downtown Denver is DEFINITELY not for my income bracket!

mhays · #**740** Posted **Jul 24, 2014, 7:45 PM**

All market-rate buildings charge what the market will bear, and a period of rising rents obviously means high demand. Nothing controversial there.

Those prices sound pretty reasonable, particularly if the buildings and neighborhoods have more character than flaws.

Back to another theme, they're also proof that Denver can support housing without parking, at rents high enough to justify new construction. The only question is the depth of the market.

Small units can be worth more per square foot. For example some of that $800 is people paying a little extra to avoid having a roommate.