DENVER | Main Development Thread #6

[denconyny]

Originally Posted by bunt_q

Nevermind. I'm apparently the only one who thinks it's a problem, spending half one's income on housing to live in a mediocre City with tons of buildable land and crazy growth, but no housing. We couldn't be doing anything wrong, we're Denver the amazing, we're the best.

I completely agree with you here.

But..... I would imagine the Real Estate Lobby in the vicinity does spread out a lot of campaign contributions.

And for the homeowner in the area, it does feel good to have something worth so much.

Who wants changes?

[seventwenty]

Originally Posted by denconyny

And for the homeowner in the area, it does feel good to have something worth so much.

Who wants changes?

There it is. The new Denver. Rich people only. The young and poor need not apply.

[DownhomeDenver]

So what are we asking for? More subsidized housing? OR are we just angry that our beloved capitalism is doing what it does best?

[mhays]

Rich? Woah there.

Most new Downtown Denver housing is far less than $2,600. If $2.50/sf is typical for new construction (??), you can get 700 sf for $1,750 in a new building. And maybe well under $1,500 in an older building even in today's market. Old buildings are cheaper in part because new construction reduces demand for them.

I'll guess that median household income for a single person is about $60,000 or $70,000. If it's the latter, 30% of gross totals...$1,750, and 30% of the smaller figure is $1,500. (This was not intentional on my part!) Consider couples and/or roommates and the number can go way higher.

But 30% is an increasingly inappropriate number in a densifying city. A lot of people don't have cars, as much as Denver SSPers downplay that potential. Others have them but don't use them. A better gauge might be 50% for housing+transportation (local). If transportation is nearly zero, housing can be a lot higher.

Yes we're talking about people at a certain stage of their lives, not the average mother of three, people with huge debts, and so on. But a ton of people can afford Downtown Denver.

And that's why these places are getting built and filling up...it works for a lot of the middle class.

[bcp]

Originally Posted by bunt_q

Nevermind. I'm apparently the only one who thinks it's a problem, spending half one's income on housing to live in a mediocre City with tons of buildable land and crazy growth, but no housing. We couldn't be doing anything wrong, we're Denver the amazing, we're the best.

Cmon man...you know how this works in adult life...cheap, good location, good quality...pick two, or earn more / get a roomie.

[Cirrus]

Originally Posted by DownhomeDenver

So what are we asking for? More subsidized housing? OR are we just angry that our beloved capitalism is doing what it does best?

Neither. We're upset that government regulations are too strict, and are making it impossible for the free market to add enough supply to meet demand. Not enough density is allowed. Condo's are effectively completely outlawed. Any building over 2 stories gets litigated by NIMBYs.

Our beloved capitalism is most certainly NOT doing what it does best. We're parceling out housing permits the way the Soviets parceled out bread.

[comoneymaker]

Heard a rumor. Doubt it is true or at least may be a long way off. Metro is trying to buy up more land on the South side of Colfax to build a stadium and start a football team.

[CherryCreek]

Originally Posted by Cirrus

Neither. We're upset that government regulations are too strict, and are making it impossible for the free market to add enough supply to meet demand. Not enough density is allowed. Condo's are effectively completely outlawed. Any building over 2 stories gets litigated by NIMBYs.

Our beloved capitalism is most certainly NOT doing what it does best. We're parceling out housing permits the way the Soviets parceled out bread.

I think there's a little too much blaming of government here. Yes, the condo construction issue is real. But in fact Denver is undergoing the most massive residential construction boom in its history, including many highrises. The City itself has had close to the population of Boulder added since 2010. Massive multi thousand unit development projects are now on the drawing boards for the suburbs.

I think the current situation in Denver comes from a "perfect storm" of events, including very tight money after the Great Recession, pent up demand from years of no building, and the failure of private industry to anticipate the huge uptick in demand after the great recession. Even in the best of circumstances, there's big lead times on major projects and I don't think the demand we are seeing was really anticipated and private industry shares in that lack of foresight.

The good news is the market corrects and that will happen over the next few years. Meanwhile, the high prices will likely slow the influx of people and young people in particular will look to more affordable options, such as Phoenix, Dallas, Houston, New Orleans, Salt Lake City, Cincinnati, Chicago, Omaha or other non-coastal cities where housing is more affordable than Denver.

That's probably a good thing.. Denver can't sustain the increases in prices its seen, so a slowing of demand and shifting of some of the migration to other cities is healthy in the long run. Meanwhile, there will continue to be short term pain until the many thousands of new apartments and houses under construction or planned come on line.

It wouldn't surprise me if Denver housing prices and rents in five years are not much higher than they are now - perhaps even lower.

[Stonemans_rowJ]

Originally Posted by wong21fr

Ajax Lofts?

Acme. I think we did pretty well. Less than $1.50/ft. It's a little dated but huge, and has a sweet kitchen with Thermador, Sub Zero, etc.

Market value is like $650-700k for this unit. Is it cheaper to rent or own in Denver? You can draw your own conclusions, but my wife and I are selling our condo to become lowly renters!

[Octavian]

Originally Posted by Cirrus

Neither. We're upset that government regulations are too strict, and are making it impossible for the free market to add enough supply to meet demand. Not enough density is allowed. Condo's are effectively completely outlawed. Any building over 2 stories gets litigated by NIMBYs.

Our beloved capitalism is most certainly NOT doing what it does best. We're parceling out housing permits the way the Soviets parceled out bread.

Agree with this. Not a problem with the market, problem with the government.

[bunt_q]

This article from Thursday is relevant:

Denver contractors, waiting for permits, struggle to start projects

http://www.denverpost.com/news/ci_285979...-waiting-permits-struggle-start-projects

[bunt_q]

Originally Posted by bcp

Cmon man...you know how this works in adult life...cheap, good location, good quality...pick two, or earn more / get a roomie.

The entirety of Denver east of Federal cannot be that "good location." That's unacceptable. If the entire central city is unaffordable, it's time to change the equation. And in adult life, you fix obvious problems, like an effective legal ban on for sale multi family housing. So don't anybody lecture me about being an adult - we (and particularly my fellow liberals) are an entire state of infantile whiners.

[bcp]

Serious for sale supply constraint....cirrus said it best, Denver has a density problem.

[Stonemans_rowJ]

Originally Posted by bunt_q

The entirety of Denver east of Federal cannot be that "good location." That's unacceptable. If the entire central city is unaffordable, it's time to change the equation. And in adult life, you fix obvious problems, like an effective legal ban on for sale multi family housing. So don't anybody lecture me about being an adult - we (and particularly my fellow liberals) are an entire state of infantile whiners.

Affordability is very subjective. Wouldn't the vacancy and absorption rates indicate that these rents are not "unaffordable" for a large portion of the population?

Also, consider the concessions being offered. $2500/month isn't really $2500/month if you get a month or two free.

[Cirrus]

Originally Posted by CherryCreek

I think there's a little too much blaming of government here.

I don't think so. Have you ever actually read the zoning code? We don't make it easy to build a lot of new supply.

Look, I'm a dyed-in-the-wool liberal, a card-carrying Democrat. I work for a municipal government. I'm as far from a blame-government-first type as you'll find. But on this issue, the government is absolutely making things worse.

And it's not just Denver. It's basically everywhere.

[TakeFive]

Originally Posted by Stonemans_rowJ

Acme. I think we did pretty well. Less than $1.50/ft. It's a little dated but huge, and has a sweet kitchen with Thermador, Sub Zero, etc.

Market value is like $650-700k for this unit. Is it cheaper to rent or own in Denver? You can draw your own conclusions, but my wife and I are selling our condo to become lowly renters!

I can only conclude that you're much smarter than you look. Ah, I know, it's your wife... you married up; very wise indeed.

Originally Posted by CherryCreek

I think there's a little too much blaming of government here. Yes, the condo construction issue is real. But in fact Denver is undergoing the most massive residential construction boom in its history, including many highrises. The City itself has had close to the population of Boulder added since 2010. Massive multi thousand unit development projects are now on the drawing boards for the suburbs.

Spectacular comment; I couldn't agree more.

The "perfect storm" has likely created a temporary bubble as you suggest. Development is a slow moving process until it gets up to speed. The question is a matter of time.


Let's peek in on Austin. Jan Buchholz, Austin Business Journal has the details.

Expect the depth and stability of the luxury downtown apartment market to be tested in the next few months.

New deliveries have pushed occupancy to 82 percent in the urban core, compared to 90 percent last quarter.

Consider this — in the past 12 months about 2,341 luxury units have delivered in a four-mile radius of downtown and more than double that are under construction in the same area.

"This begs the question, how will the impact of another 5,800 units affect this downtown area?" the report asks.

Although Austin has lots of good vibes and development, apparently it hasn't yet created the good urban vibes of Denver.

I also found this tidbit interesting.

"For now it seems the true demand is in the more affordably priced Class B and C units that are averaging around $1.23 per square foot," the report states.

[TakeFive]

Easy Like Sunday Morning

How goes the flow - overflow or undertow?

Recently (July 23rd) Justin/Denver Urban Review "sat down with senior managing director Spencer Stuart Jr. of Legacy Partners." Justin asked him for his thought on where Denver is in the current development cycle. His response was interesting and telling.

“Denver is a sports town so I will use a baseball analogy. “Denver is in the 8th inning of the game, but I think this game is going into extra innings. This thing might go to the 16th inning and ball could still be being played at 1 in the morning. Denver is a lifestyle market, so it is always going to be an attractive place to live,” stated Mr. Stuart.

Denver being a "lifestyle market" is certainly a significant part of the equation which has been driven by Denver's frequent mention as a "top city" for one reason or another. Our friend mhays point of "urbanism" feeding a continued desirability also has much merit. Still it's not immune to simple supply and demand or job opportunities.

Presently, the apartment occupancy is still tight over most of the metro area. Consider that beacon of trends (Old) North Aurora. Even here vacancy is nil and rents are rising.

Denver Apartments Face Overbuilding?
Jul 27, 2015 by Dees Stribling, Bisnow

There was some talk about the "O" word at Bisnow's 3rd annual Denver Multifamily event at the Sheraton Denver Downtown late last week—overbuilding. Could it happen to the Denver market?

Roughly 14,000 new units will come on the market this year, and 8,000 next year, while absorption is projected to be about 5,500 units this year and the same next year. If so, that would drive vacancies up and put a lid on rental rate increases. For some of our speakers, it's clear that overbuilding lies ahead.

Opinions varied among the panel and we've heard this threat before. It's yet to materialize. It's also been apparent in hindsight that the number of supposed units coming has taken more time than anticipated to complete. One particularly interesting observation:

CMBS and life companies are eager for Class-A acquisition deals, but there's been a pullback on construction lending among the lenders who do it; they want to see the new properties being absorbed. Affordable and workforce housing is the exception to that, with aggressive quotes on construction loans, since they're bound to be absorbed.

I suspect a year from now the conversation could be significantly different.... or not. Who has such eyes to foresee the future? I would guess that there will be a noticeable interest in new suburban apartments especially near TOD's. I would also guess that vacancy in central Denver will rise but whether it's enough to drop rents or discourage development? Maybe on rents but I can't see development completely drying up in Central Denver.

[Scottk]

Originally Posted by RyanD

You just REALLY helped me defend a blank wall, thank you.

From: [B]Upper Downtown: Hyatt Place/Hyatt House Hotel Update #6.

]

Cambria hotels are usually pretty short. Even the one in NYC is under 20 stories so I doubt any of that horrible blank wall will be covered

[Scottk]

Originally Posted by bunt_q

I was mostly being a smart a**. If I were Target, I'd be breaking my lease in Sheridan - what a debacle that store must be for them, although I do love having a Target all to myself - and looking hard for a central site.

Yeah wtf is up with that target? ALWAYS a ghost town, and yet the Costco right next door is always jam packed. So weird

[Scottk]

Originally Posted by Stonemans_rowJ

True.

I've said this before and I will say it again. I have lived in Lohi the past 4 years, and now about to move into Lodo and I don't NEED a Target. Sure, if there was one there, I'd probably go to it, but downtown people don't buy underwear from Target and King Sooper's is fine for Toilet Paper. I currently buy toilet paper from Vitamin Cottage and its not the soft kind.

Where do you go to get random cheap household supplies like chairs, blenders, etc? Target is my go to for most everything besides food and clothing