DENVER | Main Development Thread #6

[CONative]

Originally Posted by wong21fr

Let's omit the shit out there, i.e. the housing stock that hasn't been updated in 50 years, and the neighborhoods where the schools produce the masses known affectionately as the "common man. If you do that, the price per sq/ft for Stapleton is a hell of a lot more attractive.

You want a decent school in Central Denver you're looking at Wash Park, Platte Park, Cherry Creek, etc (the Highlands isn't there yet, but it's coming as the gentrification wave's babies start hitting school age). That's pretty much the comparable that has to be made when looking at Stapleton.

Being a real estate analyst, I know these things. Zip Code 80206 (Cherry Creek) is pretty much right in line with Stapleton in terms of price per square foot (even updated). Plus, Stapleton has MUCH higher property taxes. So, in essence...Stapleton is often more expensive (depending on the builder) per square foot. Wash Park doesn't even really have the school quality that Stapleton does. Seems to me the schools and the overall family orientation are what attracted you...not that you were actually priced out. No?

[wong21fr]

Originally Posted by CONative

Being a real estate analyst, I know these things. Zip Code 80206 (Cherry Creek) is pretty much right in line with Stapleton in terms of price per square foot (even updated). Plus, Stapleton has MUCH higher property taxes. So, in essence...Stapleton is often more expensive (depending on the builder) per square foot. Wash Park doesn't even really have the school quality that Stapleton does. Seems to me the schools and the overall family orientation are what attracted you...not that you were actually priced out. No?

Admittedly the schools attracted my wife and I and were a major factor. But the price per sq/ft is disingenuous as the metric depends on the builder, as you mention. For the Wonderlands, KB's and David Weekly's it's offset by the Pacific Standard, New Town's and Infinity's. It also depends on what you were looking at in Central Denver. I was priced out at my point, which seems to be the bottom end in Central Denver, because I couldn't justify spending $500K on a bungalow with almost no updates.

[Denver Dweller]

http://www.bizjournals.com/denver/blog/r...mA+ElKTwGoSbqOBYu5F/O7W7Amf&t=1441147320

[TakeFive]

I count four hotels under construction north/west of Blake Street.

I n t e r e s t i n g

[Brainpathology]

Originally Posted by Denver Dweller

http://www.bizjournals.com/denver/blog/r...mA+ElKTwGoSbqOBYu5F/O7W7Amf&t=1441147320

Has streetblog posted "2401 homes for bicycle murderers" yet?

[RaspberryD]

A more or less "sequel" to the article about Denver being called unaffordable:

http://www.bizjournals.com/denver/news/2...rtment-rents-rising-three-times-the.html

As awesome as Colorado is as a place to live, I just can't imagine these rents being sustainable--particularly if one of the driving factors of growth is millennials. As a member of that demographic, I struggle seeing Denver continuing to be an attractive destination if prices get more out of hand (and wages don't). The business I work for is considering an office in downtown Denver, which would be a logical place for me to go. And I think that with even renting out my townhouse in Littleton, I'd still need a substantial raise to live in a one bedroom apartment downtown.

Then again... New York City continues to be an attractive spot for my age group. I guess it all depends on where the jobs are.

[mhays]

San Francisco is still growing, with double the prices. Seattle is still growing, with prices a bit higher than Denver's. Denver will keep growing (and might get more expensive, and stay there) because people like to live there and run businesses there. Being cheaper than San Francisco is a huge driver these days...it's the relative difference.

I love reading other cities' threads. Portland, Minneapolis, Denver, and so on. The parallels are fascinating. Every city has SSPers complaining about woodframes and thinking their city is the only one that gets them. Every group talks about their local failings and often understates those of other cities. Affordability is always a big topic, whether the city is relatively cheap, somewhere in the middle or upper middle (like Denver), or expensive.

Affordability is important. There's no easy answer for making new construction affordable. Speaking as a contractor, it never will be on a $/sf basis. Labor, land prices, global commodities, etc., aren't getting cheaper. Even in the boom times there's a constant flow of projects that are conceived but never happen because the numbers don't work.

You can address part of the low-income sector with public funding, often through nonprofit providers. And cities can streamline development processes to reduce cost and the risk of being turned down. Otherwise, if you're earning $40k (65% of household median in Denver iirc?), as the city gets bigger, the two options in the best locations will be (a) older and/or (b) smaller. The "older" option only works if plenty of new stuff is built. The "smaller" option isn't desirable for everyone obviously, but it can help a lot of people.

[bunt_q]

Originally Posted by mhays

Affordability is important. There's no easy answer for making new construction affordable. Speaking as a contractor, it never will be on a $/sf basis. Labor, land prices, global commodities, etc., aren't getting cheaper. Even in the boom times there's a constant flow of projects that are conceived but never happen because the numbers don't work.

You can address part of the low-income sector with public funding, often through nonprofit providers. And cities can streamline development processes to reduce cost and the risk of being turned down. Otherwise, if you're earning $40k (65% of household median in Denver iirc?), as the city gets bigger, the two options in the best locations will be (a) older and/or (b) smaller. The "older" option only works if plenty of new stuff is built. The "smaller" option isn't desirable for everyone obviously, but it can help a lot of people.

You're the point of our discussions; hearing partially what you want to hear. I do not think the price points on new construction are really what bothers us. It's the tripling in prices of the older garbage homes and apartments, resulting from the overall lack of construction, particularly, but not exclusively, in the for-sale segment. We are not talking point unaffordability in the most desirable neighborhoods, nor or we lamenting that we can't all afford to live on top of Union Station. It is the complete and wholesale appreciation of prices in every single neighborhood of the city, including the undesirable ones, that is a major problem. That's not the fault of developers - that's policy at fault.

Your options you laid out are correct. The bind is this. First, the older option doesn't work because enough new stuff has not been built. (And that ship has sailed.)

Secondly, smaller is also not an option because we've outlawed condos, which is where it might be desirable for some people, though as you say, not all. And smaller housing on the periphery, where land is cheap enough to do it, is neither profitable for developers (article on that in the DBJ yesterday), nor particularly desirable, so it is not being constructed at all.

The frustration is borne of not having either of these options available to us, and knowing that we have - through a policy decision made by rich white liberals - elected to just let the problem solve itself through price appreciation that will, eventually, drive out anybody who makes that 65% of household median income. We know it works - Boulder proved that 30 years ago through its policies - and there's nobody left there today who isn't rich, white and liberal - the Colorado ideal. It's only logical that Denver would follow in due time. But it doesn't make it any less frustrating.

I do not, however, think the market or developers are primarily at fault. I think they'd build for "all of the above" if that's what we wanted and permitted.

[TakeFive]

Originally Posted by mhays

San Francisco is still growing, with double the prices. Seattle is still growing, with prices a bit higher than Denver's.

I love reading other cities' threads. Portland, Minneapolis, Denver, and so on. The parallels are fascinating. Every city has SSPers complaining about woodframes and thinking their city is the only one that gets them. Every group talks about their local failings and often understates those of other cities. Affordability is always a big topic, whether the city is relatively cheap, somewhere in the middle or upper middle (like Denver), or expensive.

Good comments.

One quick correction: Global commodities have fallen to lows not seen since the early or mid part of the last decade. Those are "futures" prices so they may not have filtered down yet but as previous contracts expire they should.

I like to get around the Business Journals as well. Spent some time at the Puget Sound Business Journal over the weekend and there must be a dozen ~40 story residential towers in the works. I'm familiar enough to know the economic drivers and the difference to Denver is remarkable.

At the other end, Mike Sunnucks, Phoenix Business Journal ran a piece today headlined "Phoenix ties San Francisco for best high-tech job growth." This is based on a report by CBRE which looks at the last two years. The report compares Phoenix favorably to Austin, Silicon Valley, New York and Seattle etc.

If you're a Bay Area company wanting to expand why not go where office lease rates and employee costs are less? Seattle by contrast either has its own organic drivers or fits nicely as a left coast annex to the Bay Area.

As a "lifestyle" city Denver has benefited from a continual stream of new millennials. So far they've been absorbed into the job market. Going forward though I wonder about the underlying economic strength of good jobs compared to the Bay Area, Seattle or Austin by example. It will take some time to settle out but Millennials by nature can pack up and move on a dime. Current rents are more about the demand/supply curve and that will change.

[mhays]

Denver gets tech relocations due to a mix of being relatively affordable (vs. SF and others) and being desirable. Phoenix is more about being cheaper. Or those are my impressions. As for the dozen...more like 30, though it's typical for those jobs to struggle with their pro formas and many won't get built.

For commodities, I'm referring to the more macro issues...other countries' growing middle classes, the US no longer being dominant economically. The softening of oil and China's growth boom have pulled things down in the relative short term. Denver's land prices and labor prices must be as high as ever, and moving upward. The overall effect is high development costs. Or comparing to the last peak, development costs and real estate prices are both basically recovered depending on where you are.

Bunt, apparently we agree that supply is important to keep the older units cheaper. The tough part of course is that the bottom-end pricing might never be anywhere near central Denver, and is rather migrating to the suburbs, often the hard-to-get-to ones.

I'm an optimist for smaller units in central Denver, including true micros similar to dorms and hotel rooms. Micros would at least help a lot of the 25-year-old (and 60-year-old) single crowd. But as I've argued in the past, that requires either very little parking or none. I think it would work; Denver forumers have suggested that the market demands parking. But that's part of the equation of being a diversified, dense big city. You can't build multi-level parking realistically on a small lot, and you can't use two acres for 250 affordable units when land is $200/sf ($72,000/unit plus financing/holding/taxes). The current improvements to transit and groceries are part of the solution. A larger focus on close-in transit vs. metro-focused transit would also help, but frankly one reason for micros is to live really close and avoid commuting altogether...it's partially a response to limited transit where I live.

[Brainpathology]

I don't understand how China's growth slowing and Oil prices going down has any effect on zero for sale construction. This entire discussion about how to make prices more affordable is getting to sound like what every discussion with a certain former poster here sounded like.

We HAVE to fix the construction defect law

Yeah but China is slowing down so that should help.

Nope we HAVE to fix the construction defect law

Yeah but you're still cheaper than San Francisco (Cancer patients are also not as dead as King Tut.. )

Nope.. the construction defect law

Older stock takes care of that

The defects law

Other cities are getting more expensive too

Defects law

The singularity will fix this.

It probably IS too late for Denver.... which will have to now live with the irony that following Boulder's laws are going to damage the life of the city more than following El Paso county's laws would have.

[Brainpathology]

I should admit to a 100% personal bias in this too. I want cheaper condos so I can buy one at a good price for a home for my mother and me to share. I see one extremely obvious thing that needs to be changed.

[EngiNerd]

Just wait until Boulder implements this too!

Boulder County weighs moving forward on sustainable housing plan
Goal of net zero homes by 2022 adds hundreds of thousands to construction costs

Boulder County is eyeing changes to its building code that will require all new homes to produce as much energy as they consume by 2022, a move that could add $100,000 to $200,000 to the home's cost.

The proposal is being reviewed as part of the county's annual update of its building code and comes under the county's sustainability plan, adopted in 2013.

The rules, right now, apply to homes 6,000 square feet or larger.

If the county agrees to adopt this latest version, in 2016 it will apply to homes at or above 4,000 square feet with the goal of having all new homes meet the standard by 2022.

....
http://www.dailycamera.com/top-stories/c...-moving-forward-sustainable-housing-plan

[Brainpathology]

That's what? 5% of the cost of a typical Boulder home? Might as well be at the vanguard of something. Though it would be nice if the code also said produce as much as your home and the 5 other homes that have to be built outside of Boulder to support the workers that make the city functional.

[EngiNerd]

This would apply to the entire county, not just the city.

[Brainpathology]

ah ok so it may actually double the price of one or two houses. ... or it's an actual effort to transform the entire county into the city by well meaning (or not even well meaning) rules that chase people out. I haven't been there for a while but it may be that having to actually work for your money (which would be degreed professionals that can maybe barely afford to live in the city) is becoming passe there. If you're not someone who has cashed out after an IPO or inheritance you should think about living down in the ghetto of Downtown Denver?

[TakeFive]

Originally Posted by bunt_q

It's the tripling in prices of the older garbage homes and apartments, resulting from the overall lack of construction, particularly, but not exclusively, in the for-sale segment. We are not talking point unaffordability in the most desirable neighborhoods, nor or we lamenting that we can't all afford to live on top of Union Station. It is the complete and wholesale appreciation of prices in every single neighborhood of the city, including the undesirable ones, that is a major problem. That's not the fault of developers - that's policy at fault.

I do not, however, think the market or developers are primarily at fault. I think they'd build for "all of the above" if that's what we wanted and permitted.

Well stated.

I don't really see it as "policy decisions" problem though. This is happening all over the country; it's just been magnified in Denver from significant in-migration especially of Millennials. There are many culprits. I know there's the construction defects issue which might not be solved until after the 2016 election but it won't take long at that point.

RaspberryD's comment was good and indicative of the current challenge. The linked rental report mentions that rents are highest in Cherry Creek. No surprise and there's ongoing new residential construction.

Downtown there's the completing Joule apartments plus Eviva Cherokee, SkyHouse Denver, The Confluence and the Pivot. Who knows with Shea Properties on 17th Street but that's quite a lot of upper end apartment product yet to come.

Construction as an economic driver will likely continue; it may move to TOD and new suburban sprawl. There are many larger projects (like transit and DIA) that will be wrapping up over the next year and not sure what might replace those? Couple of new office towers that have a couple of years to go but that may be it for awhile. 2/3 more years in DUS and that will be the majority of that build out.

I suspect we'll see new starter home construction pretty soon but it won't be where you'd want to live presumably but it will provide some balance and relief.

[TakeFive]

Originally Posted by mhays

Denver gets tech relocations due to a mix of being relatively affordable (vs. SF and others) and being desirable. Phoenix is more about being cheaper. Or those are my impressions.

"Phoenix is more about being cheaper." Exactly! A good number of companies expanding from the Bay Area like the lower costs. Why would that surprise?

OTOH, it is also true that a couple/few companies with higher paying jobs passed on Phoenix b/c of the politics which includes poor reputation for supporting K-12 schools. That will vary depending... An Ohio software company just grabbed the top (12th) floor in a mid-town tower with a first right of refusal for the next two floors. "Among Facility Source’s clients are Starbucks, Walgreens, The Home Depot, The Limited, OfficeMax, Target and others."

While Denver can be a good spot for "higher paying" jobs those are more likely to land in Austin, Dallas, Seattle, The Triad etc. more than Denver it appears.

All industrial commodities except Palladium/Platinum which hasn't fallen as much are waaay down. Lumber is more domestic and while down is not down nearly as much as global commodities. Land and labor are not commodities.

Originally Posted by Brainpathology

We HAVE to fix the construction defect law.

That's not nearly the cure-all that you are imagining. Aside from Miami which is totally different most of the country is not building many condos and even in Miami and other places the condos are not affordable.

Getting the construction defects law fixed will help at the margin and in new TOD and sprawl development. It will help to provide a better mix over time but Denver has been building what the market has demanded - mostly.
.

[Brainpathology]

YEah no.. sorry but before the law lots of condos... so many that they nearly ruined the Golden Triangle for being built all the time.. so many in fact that the law was passed because they were being built too fast and too shitily. After the law none. And still... townhomes EVERYWHERE... so many that we are willing to rob private citizens of their retirement plans just so we can keep more from being built. What's the difference? They aren't subject to the law.

We can wax poetic and do mental gymnastics forever.. and apparently we are going to. And I'll grant that the ONLY problem isn't the law. But it's sure beating what's coming in second. You and everyone else can go on and on and on and on and on about the nuances of why everything won't be perfect after/if the law is fixed (and assume I'm making the wildly idiotic statement that things WILL be perfect if it's fixed) and I'll be impressed because boy howdy does that look 'telligent to me just a big dumb guy in the south who doesn't understand how big boys think about things in real cities.

But yeah.. the defects law. Even though it's probably too late to make a big difference to most.. it's still there.. at least lets have it gone so that in 2050 after a couple more crashes and possibly the middle class or upper middle class COULD otherwise afford a condo there may be the slightest possibility that some can get built for them.

[corey]

I would love to see the lots on both side of Market St between 18th and 19th Sts be filled with high density, small for sale condos with even some micro units. And have a low parking space ratio. No one has even built apartments there in the middle of this huge apartment construction boom that has been going on for several years now. It would provide a large amount of low end condos in a downtown location close to good transit. I think the city could get involved in this and make it a reality, but I don't really know how that works. One problem with entry level homes and condos is that people with extra money buy them as investment properties to rent out, which brings us back to the same problem of a lack of affordable for sale housing.