DENVER | Main Development Thread #6

[bobg]

Originally Posted by bunt_q

Here are building permits pulled in 2014, from the Census Bureau, by county. The calculations are my addition:

Although the 32% for Denver is actually higher than I thought why is Weld County included? It just seems odd to me unless it's CSA at which point Boulder would probably need to be there as well, or is almost all of the growth in Weld in places more in Denver than Greeley (IE Dacano, Frederick etc.)?

[bunt_q]

Boulder County wasn't available for some reason. Also, Weld County is very much in the same market when it comes to residential development. We may not like it, but it's a big dang bedroom community now (hence its inclusion in the CSA). Or at least it's competition. I'd have added Boulder too if I had been able to quickly locate it. Probably wouldn't sway the number though, raw number growth is just very low in Boulder County.

[bobg]

Originally Posted by bunt_q

Boulder County wasn't available for some reason. Also, Weld County is very much in the same market when it comes to residential development. We may not like it, but it's a big dang bedroom community now (hence its inclusion in the CSA). Or at least it's competition. I'd have added Boulder too if I had been able to quickly locate it. Probably wouldn't sway the number though, raw number growth is just very low in Boulder County.

Okay that makes sense. Agree that parts of Weld like Erie, Frederick, Dacano are definitely part of the same market, although I would hesitate to include Greeley and places north. Just couldn't wrap my head around why Weld was on it and Boulder wasn't.

[bunt_q]

Originally Posted by DenverInfill

According to the Census, twenty years ago, in 1995, Denver County's total housing building permits equaled 4.5% of the metro total, using the same counties as above. It was 3.9% if you include Boulder County. If Denver's percentage is up in the 30% range now, that's almost an order of magnitude change in 20 years. How big does a change need to be before it can be considered as a paradigm shift? (serious question)

Let's say 1/3 through infill. I don't think we should count the GVR/Stapleton component as contributing to the paradigm shift - building ourselves an airport in western Timbuktu is sorta cheating.

I also think to see a true paradigm shift, I'd want to see the same split in people choosing for-sale multifamily housing, where urban areas have the über competitive advantage. Granted, that's not possible at the moment. But I will always view rental housing as temporary residents, I simply do not believe that there is some generational shift away from an ownership economy. (And we have no way to measure that in a local economy where ownership is no longer an option, unfortunately.)

[TakeFive]

Originally Posted by DenverInfill

According to the Census, twenty years ago, in 1995, Denver County's total housing building permits equaled 4.5% of the metro total, using the same counties as above. It was 3.9% if you include Boulder County. If Denver's percentage is up in the 30% range now, that's almost an order of magnitude change in 20 years. How big does a change need to be before it can be considered as a paradigm shift? (serious question)

(serious answer) You bet there's been a paradigm shift. No doubt about it. The better question though is what does this mean longer term?

The millennial-driven urban trend is happening all over the country. I mean if it is happening in Birmingham Alabama it can happen anywhere. But as bunt_q points out it has been predominantly a rental market trend. I would however include Stapleton but not GVR.

Not sure how many families are choosing to live in Denver instead of Cherry Creek School District, etc. although Stapleton does suggest some do (thinking of a growing area).

"Don't fight it; the trend is your friend." I wouldn't but I would suggest that going forward Denver is likely to see some erosion of share, a reversion but still capture a nice proportion of population growth. Also growing density outside of City/County of Denver should occur as well, be it in Lakewood, Arvada etc.

[TakeFive]

Oh oh - Big Bubble Trouble Ahead

.....
Thanks to alaska-in-pictures.com

So says thecherrycreeknews.com

"Denver’s Multi-unit development bubble?"
March 7, 2015

Population growth is projected at 1.7%, and with the rapid slowdown in oil exploration in the region (the economic rocket fuel recent growth has been predicated upon), development is outstripping population.

It’s a familiar tale— Denver has seen two development busts— the first in the eighties, when the region lost 60,000 construction jobs nearly overnight, and then again in the early nineties. Current policymakers seem to either not know, or not care about, those history lessons.

[balugajames]

Originally Posted by bunt_q

I simply do not believe that there is some generational shift away from an ownership economy. (And we have no way to measure that in a local economy where ownership is no longer an option, unfortunately.)

Who said this is what the shift was about? This is more of an unfortunate truth. The 'shifters' as I will call them, still want to own, they just want smaller units with less up keep more amenities located in a convenient location where a car is not the only option for travel.

What did developers do? Built apartments. Believe me, that is not anyone's dream. The shift is a about a users consumption which equates enormously to a cities format. It is not whether someone should own something or not. Your missing the point. This city desperately needs 20,000 more condos. Everyone wants to get out of apartment fare.

This is a macro issue though as it permeates many cities and nations. In London people have started to ban together to pay a developer to build what they want. They call them building coops. This is due to the same issue we are seeing. Developers don't build what people want. Only what the monies allow at a current economic time. This does not lead to well thought out design or utilization. Money is just too short sighted.

Old article on co-ops: http://www.theguardian.com/money/2011/jul/29/housing-co-op-affordable-home

[bunt_q]

Completely agree. I was responding to what stoneman said. I think what you're saying is correct, although we could do a lot to help developers build what we want. The solution doesn't have to be entirely on the consumer side of the equation.

New York does co-ops. A good friend of mine here is inheriting a co-op unit in Brooklyn, which got me digging into them, since I was unfamiliar. I don't think they would be legal under Colorado law. I think we would need some legislative changes to make that work. Or at least to do them with the protection that I think consumers would want, and lenders would demand.

[Cirrus]

Originally Posted by bunt_q

But I will always view rental housing as temporary residents, I simply do not believe that there is some generational shift away from an ownership economy.

You're right, but you're also projecting onto the market at large your individual values as someone who grew up in the 90s and is now approaching middle age. There will always be 20somethings who want apartments, and more of them should be living in the city.

Yes, millenials living in downtown apartments will eventually want to own, and finding ways for them to do so without moving to the suburbs is definitely a problem. No disagreement here. But millenials are not the last generation in history. The next generation will want to spend 15 years in apartments too, so the rental market will always be there. It'll fluctuate like all markets do. But the fact that we're approaching a wave of millenials looking to buy will not destroy apartments forever.

Meanwhile, the kind of suburban apartment complexes that boomed as a luxury product in the 90s are absurd (a true worst-of-both-worlds situation), and have a much shorter half life than downtown apartments. If the apartment market suffers, these will suffer the most and will buffer downtown from falling too hard.

[DenverInfill]

Originally Posted by TakeFive

Oh oh - Big Bubble Trouble Ahead

So says thecherrycreeknews.com

"Denver’s Multi-unit development bubble?"
March 7, 2015

What a worthless article. The author (whoever that may be) pulled random numbers and then drew from those statistics conclusions that we're headed for a bubble burst.

"With a 10% increase in the number of available units it certainly seems like overbuilding is in the cards."

Why? What was the base on which the 10% increase was based? What if that base was 15% below where it should have been and a 10% increase isn't enough? The author pulled a random statistic and then draw a sweeping conclusion from it!

"Population growth is projected at 1.7%, and with the rapid slowdown in oil exploration in the region (the economic rocket fuel recent growth has been predicated upon), development is outstripping population."

Based on what evidence? What's the relationship between the 1.7% growth rate and the number of rental units? What if there was (and there was) a shortage of rental units and we're just trying to catch up? Again, the author pulled a random number and then made a sweeping conclusion from it with no supporting analysis whatsoever.

"Current policymakers seem to either not know, or not care about, those history lessons."

Says who? I talk to policymakers almost every day and people are watching things carefully. However, this is the free market at work. If a developer walks into the planning office to submit an application for a new rental project, the city can't say "Sorry, we are not going to process your application because our policymakers think there's too much housing being built."

"Jones Real Estate Services reports:" There is no Jones Real Estate Services that I could find in Denver. There is, however, James Real Estate Services, which provides timely reports on Denver's rental market.

Here's what I think is going on: This unattributed piece of crap article is meant to scare people into being anti-development. I suspect it was planted there by the anti-growth crowd in Cherry Creek (perhaps linked to Wayne New's campaign for Council District 10) and their ilk who have been writing these anti-growth editorials in the papers.

Certainly, Denver may be overbuilding on rental housing (not sure that's such a bad thing), but this article offered no evidence to prove that to be the case.

[bunt_q]

Originally Posted by Cirrus

You're right, but you're also projecting onto the market at large your individual values as someone who grew up in the 90s and is now approaching middle age. There will always be 20somethings who want apartments, and more of them should be living in the city.

Yes, millenials living in downtown apartments will eventually want to own, and finding ways for them to do so without moving to the suburbs is definitely a problem. No disagreement here. But millenials are not the last generation in history. The next generation will want to spend 15 years in apartments too, so the rental market will always be there. It'll fluctuate like all markets do. But the fact that we're approaching a wave of millenials looking to buy will not destroy apartments forever.

Meanwhile, the kind of suburban apartment complexes that boomed as a luxury product in the 90s are absurd (a true worst-of-both-worlds situation), and have a much shorter half life than downtown apartments. If the apartment market suffers, these will suffer the most and will buffer downtown from falling too hard.

Agreed, all around. I am just speaking to it as a paradigm shift, and as a permanent 20-30% fixture in the built product, which I do not think it is. We're building for a surge in a population segment that wants that product. But that'll necessarily decrease. The key is to make sure we can capture where that population bulge goes next in ten years.

Originally Posted by DenverInfill

Here's what I think is going on: This unattributed piece of crap article is meant to scare people into being anti-development. I suspect it was planted there by the anti-growth crowd in Cherry Creek (perhaps linked to Wayne New's campaign for Council District 10) and their ilk who have been writing these anti-growth editorials in the papers.

Certainly, Denver may be overbuilding on rental housing (not sure that's such a bad thing), but this article offered no evidence to prove that to be the case.

Well put. There is no bubble, period. It makes no logical sense to have articles describing about record high rental rates and near-record low vacancy rates, while at the same time spouting about a bubble. Particularly while that population is both growing and captive, with their only choice between urban rental living or far-flung single family living. If we are overbuilding, there's a lot of room for prices to come down before anybody really starts losing any money. So while I think it's completely bogus, I also say, bring it.

[Stonemans_rowJ]

Originally Posted by DenverInfill

What a worthless article.

That's exactly what I thought, but its not surprising coming from that publication.

That is their way of getting a dig in at Zocalo and the other people building "monstrosities" in Cherry Creek, and the "parking shortages," "traffic," and other plagues that are supposedly ruining this neighborhood.

[EngiNerd]

Look at that oversupply bubble right there!


http://insiderealestatenews.com/2015/03/06/highs-and-lows-of-denver-home-market/

[PLANSIT]

Might as well post population graph. (City of Denver only).

[DenverInfill]

Sometime this month the Census Bureau will be coming out with their July 1, 2014 estimates by County. Those numbers from the State Demographer for 2011-2013 are very consistent with the Census numbers. I'm guessing the Census will show another 10-15k increase for Denver.

[rds70]

Originally Posted by DenverInfill

Sometime this month the Census Bureau will be coming out with their July 1, 2014 estimates by County. Those numbers from the State Demographer for 2011-2013 are very consistent with the Census numbers. I'm guessing the Census will show another 10-15k increase for Denver.

March 26th to be exact.

BTW, good analysis of the Cherry Creek News "article."

[bunt_q]

The month end listings vs. homes sold graphic is sort of terrifying. Not from a developer's standpoint, of course, but from the view of a buyer.

[PLANSIT]

Originally Posted by DenverInfill

Sometime this month the Census Bureau will be coming out with their July 1, 2014 estimates by County. Those numbers from the State Demographer for 2011-2013 are very consistent with the Census numbers. I'm guessing the Census will show another 10-15k increase for Denver.

Yup. Based on already released 2014 State numbers, Denver looks to be very close to 15k.

[PLANSIT]

Originally Posted by bunt_q

The month end listings vs. homes sold graphic is sort of terrifying. Not from a developer's standpoint, of course, but from the view of a buyer.

It's beyond terrifying. Nearly every house/condo in our price range is put on the market and sold within a week. Cash rules. Realtors/Sellers are now setting deadlines for offer submittal (usually 2-5 days after listing). Highest/Best offer wins (usually much higher than asking price).

[seventwenty]

A further segueway into the 'burbs with Punch Bowl Suburbs.

For years, rumors have circulated about what could be done to re-purpose the iconic [Stapleton Airport] tower, from turning it into a luxe condo or a museum. Today, Denver City Council president Christopher Herndon helped announce the winning plan: Punch Bowl Social will open an eatery in the dilapidated building.

There’s a lot of cleaning up to do, as the interior has deteriorated in the time the building sat vacant. Robert Thompson, Punch Bowl Social founder and CEO, says that the decor will combine mid-century and art deco elements inspired by the existing structure. The space is currently about 15,000 square feet, but will expand to roughly 22,000 square feet, including an outdoor patio space. The bottom two floors will be devoted to food and entertainment (think: bowling, darts, and ping-pong), while the third floor will house Punch Bowl Social’s corporate headquarters (in addition to the South Broadway location, the company has outposts in Texas, Oregon, and Michigan and is expanding to two more markets this year). Thompson says he hopes to open in Stapleton next spring.

As for the tower? Thompson doesn’t know if you’ll be able to access it yet. The building’s elevator doesn’t reach the top, meaning that there are serious concerns about making the space ADA compliant for all customers.