DENVER | Main Development Thread #6

[DenverPoke]

Originally Posted by RaspberryD

Hey guys -

Denver Business Journal just ran a brief article on the unemployment rate:

http://www.bizjournals.com/denver/blog/finance_etc/2015/11/colorado-unemployment.html

The interesting thing about this article is really the several year look back and steady decrease in unemployment... despite the oil and gas issues. It seems to me that we're getting closer and closer to the unemployment percentage really just reflecting frictional unemployment (I have nothing really to back that up, just a gut feeling).

It's exciting to consider the effect our more diversified, growing economy will continue to have on the development in Denver and the greater metro area.

Pretty nifty, though I'm sure we could all look into the underemployment stats to dampen the spirits a little.

Pretty amesome considering the loss of O&G jobs, as you mention. The difference in the Denver economy today vs late 1980s is rather amazing.

Hopefully DT can keep pulling more HQs and office construction keeps going. I have complete confidence residential will continue, especially if the condo-defect laws are amended (and the economy as a whole doesn't collapse).

[Denver Dweller]

http://www.bizjournals.com/denver/mornin...BElKTwGoSbqOBYu5F%2FO7W7Amf&t=1448092156

[mhays]

Originally Posted by Cirrus

I'm OK with income restricted housing if it's a mechanism to get more sum housing built. If the zoning says you can build 100 units, but you can build 110 if those extra 10 are affordable, I'm on board with that. Of course, I'd rather the zoning just allow 200 (or 300 or 500), but I'll take the 110 over the 100 if that's my choice.

No developer would take that. The extra 10 would be a liability, not a benefit. The liability would require an outside subsidy and generally also higher rents on the 100.

If you want to roughly equal the balance sheet vs. the base 100, you'd better offer more, like another 30 of which 10 would be affordable, plus tax credits on the 10, or something like that. Of course everything is wildly different depending on the "affordability" level, the types of units, whether parking is involved, etc.

Further, equalling the original 100 balance sheet isn't enough. To get participation there needs to be an actual benefit to the developer other than a warm hearted feeling. So maybe you offer another 50 of which 10 need to be affordable. (In that scenario the 140 do more for local affordability than the 10.)

[Robert.hampton]

Fences up at 16th and Pennsylvania, ostensibly for the 5280 Senior Residences.
That project has been about 5 years in the making it seems. Also havent seen a revised rendering in about 5 years.

With this, Tavern Uptown site, Alexan Uptown, and Colorado Health Foundation at 17th and Penn I think all of the half block or larger parking lots have been eradicated. Still plenty of smaller lots ready to go though.

[enjo13]

Originally Posted by Robert.hampton

Fences up at 16th and Pennsylvania, ostensibly for the 5280 Senior Residences.
That project has been about 5 years in the making it seems. Also havent seen a revised rendering in about 5 years.

With this, Tavern Uptown site, Alexan Uptown, and Colorado Health Foundation at 17th and Penn I think all of the half block or larger parking lots have been eradicated. Still plenty of smaller lots ready to go though.

Hopefully that development begins to bleed over into Cap Hill & 5 points...

[comoneymaker]

Plans for National Jewish

http://davispartnership.com/projects/nat...nter-conceptual-study-campus-master-plan

[TakeFive]

Easy Like Sunday Morning

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Image provided by the Denver Metro Convention and Visitors Bureau via Denver Public Schools

POPULATION INFLUX WILL SUSTAIN DENVER GROWTH
Nov 19, 2015 by Dees Stribling, Bisnow National

Downtown and other parts of Denver are hardly recognizable compared with even 10 years ago, but growth isn't over by a long shot, according to the speakers at Bisnow's second annual Denver New Construction & Development event

There's some reason for caution, however, especially in the potential to overbuild Class-A residential in parts of the city. Demand is high, but not unlimited. The speakers pointed out that there's still opportunity in workforce and affordable housing. That's because there's a huge need for it...

Class-B, Suburban Class-A Apartment Properties Gain Momentum
Oct 27, 2015 Bendix Anderson, National Real Estate Investor

In urban downtowns, where developers have built many new apartment buildings, the vacancy rate for class-A properties is sometimes significantly higher than at class-B buildings.

For example, 5.5 percent of the class-A apartments are vacant in the urban core of Austin, Texas. That’s more than twice the 2.4 percent vacancy rate for class-B properties, according to Axiometrics. Class-A properties also suffer from higher average vacancy rates compared to class-B building in the urban cores of Denver, Seattle and Houston.

When you consider the numerous apartments under construction and that it often takes longer than originally anticipated to get them across the finish line, most, especially the nicer projects, won't finish until 2017 and 999 17th Street won't deliver until 2018. That provides a pretty long runway before vacancy can be that much of a concern.

In suburban areas, class-A properties are performing much better. “Suburban class-A is performing phenomenally well and we are bullish on the outlook too,” says MPF’s Parsons.

That’s because relatively few developers are building in the suburbs, where resistance to development and restrictive zoning laws keep many builders away. The inventory of apartments has grown more quickly in central business districts than in the suburbs since 2007

It does seem as though it has taken Denver a little longer to build up a good head of steam with new downtown (apartment) development projects but is catching up fast now. It's also why I expect to see more (apartment) construction popping up in the suburbs starting in 2016.

[bunt_q]

Nice that now we are starting to address the condo problem, the Fed is going to start raising rates, making things even less affordable to average joes and suppressing demand just as soon as we start seeing supply. Makes you wonder if that was part of Democrats' strategy in keeping condos out of the market as long as they did - keep people poor at all costs.

[Stonemans_rowJ]

Originally Posted by bunt_q

Nice that now we are starting to address the condo problem, the Fed is going to start raising rates, making things even less affordable to average joes and suppressing demand just as soon as we start seeing supply. Makes you wonder if that was part of Democrats' strategy in keeping condos out of the market as long as they did - keep people poor at all costs.

It's the artificially low rates that have driven up asset prices like real estate for the average joes.

Rising rates is a good thing for the middle class I would think.

[comoneymaker]

Originally Posted by bunt_q

Nice that now we are starting to address the condo problem, the Fed is going to start raising rates, making things even less affordable to average joes and suppressing demand just as soon as we start seeing supply. Makes you wonder if that was part of Democrats' strategy in keeping condos out of the market as long as they did - keep people poor at all costs.

I don't even know where to begin with how many things are wrong with what you just said.

[TakeFive]

comoneymaker... First you'd have to figure out which parts he was serious about and not.

My Turn...

Agreeing with bcp that the FOMC overnight rates don't control mortgage rates but it will influence them. Rates have drifted up some in anticipation but over time there are indeed many other factors.

While it's not the Fed's responsibility, it is worth noting that rates do impact other rates around the globe and higher rates support a higher dollar although again, it's only an influence.

BTW, rates can "go negative" which has happened over the last few years especially with the German Bund. If you buy a zero coupon bond, for example, then your transactions costs will result in a negative return.

Some believe that although rates will creep up that we'll remain in a low interest rate environment for years.

Asset prices as in Denver RE have been driven mostly by supply and demand. Rising rates could dampen activity but not much I'd think.

[TakeFive]

Originally Posted by bcp

Well he is right on vote-buying and creating more govt dependence,and the left is much more guilty there...not sure if either party is smart enough to do it through manipulating condo supply /demand

But this real estate run up is real...and it has far outstripped salaries. I can't say that's the fault of employers (see SF for an insane example). Corrections are coming, even in Denver.

The Feds charge is to control inflation - but they ignore the real estate inflation that would be tamped with REAL interest rates - which would bring prices more in line with pay. A decade ago or so ago, fighting unemployment was added to the fed charter - huge mistake to mix this with monetary policy (bad move by the right).

"Vote buying" That's right out of the talking points playbook. Indeed there is a correlation but interestingly (too) many of those folks don't vote. Those who enjoy Medicare and SS tend to vote red. You might recall that GWB and friends created the Pharmacy Bill which I think was a good idea. Just sayin'. Vets are also a big component and only a few would vote blue, if they vote at all.

BTW, the real estate that is a significant part of the inflation index (CPI) is called "owners equivalent rent" or OER and is indeed the rent rate equivalent.

[Cirrus]

Originally Posted by mhays

No developer would take that. The extra 10 would be a liability, not a benefit. The liability would require an outside subsidy and generally also higher rents on the 100.

10% was just an easy-math example. We do exactly this in the jurisdiction where I work, but yes, you get more than 10% extra density. We have a weird process (only possible due to a low-NIMBY situation) in which by-right density is pretty low, but if you go through a special exception process and negotiate community benefits (affordable housing, infrastructure, etc) we'll give you like three times the by-right density.

[Stonemans_rowJ]

There's different figures out there, but if the median household income in Denver is around $70,000 and the median price for a detached single family home is over $400,000, and over 60% of the city is detached single family homes, those numbers suggest over valuation.

[mhays]

Originally Posted by Cirrus

10% was just an easy-math example. We do exactly this in the jurisdiction where I work, but yes, you get more than 10% extra density. We have a weird process (only possible due to a low-NIMBY situation) in which by-right density is pretty low, but if you go through a special exception process and negotiate community benefits (affordable housing, infrastructure, etc) we'll give you like three times the by-right density.

My point is that those "bonus" affordable units need to be a lot fewer than the bonus market-rate units that subsidize them.

[bunt_q]

Originally Posted by Tboo

I think this article does a good job explaining why communities are essential to planning rather than just a group of planning students or professional planners. I think it also illustrates some points that are in line with why there is some growing animosity among long-time Denver residents who don't feel included in the future of their neighborhoods or city. When rental costs are increasing by 12% a year we have a crisis that is unsustainable without a middle ground on affordable housing. I understand that more development is the answer, that supply and demand are real things, but my original point was that the planning process should include the people and help to meet the needs of the people rather than pushing them out. I just think it's unconscionable to drop a plan on a neighborhood without consulting those people.

I think this article explains best why empowering communities in dangerous, and sometimes neighborhood groups need to be stopped. Perhaps with a billy club.

http://www.northdenvertribune.com/2015/1...-hostility-towards-emmaus-redevelopment/

For the record, this is the project these neighbors are opposing. A two story medical office building... for an f'ing church! Seriously, it is quite possibly the most benign land use you could imagine if you were trying. This is sort of the poster child for why ANY involvement of neighborhood groups is a scary proposition. Not only do they not add value to the process, it's not exaggeration to say many of these neighborhood organization leaders actually belong behind bars for their antics.





http://www.denverrealestatewatch.com/2015/08/20/planning-board-approves-emmaus-rezoning/

[EngiNerd]

So they just want it to be left as weeds and abandoned space? Turned into single family homes? What does the RNO actually want?

[TakeFive]

Yes homes or low density residential as I recall.

Make you want to punch somebody in the nose.

[TakeFive]

Image of the Day

You'll have to click on.

It's a piece of why I speculate that investors and developers might want to build more projects even with an elevated risk of more potential vacancy, at least for the near term.

[enjo13]

Originally Posted by bunt_q

For the record, this is the project these neighbors are opposing. A two story medical office building... for an f'ing church!

Is it ok to oppose it because it's such a bad use of prime real-estate?

But seriously, that section of town is completely out of control with NIMBYism. The West Highlands (at least the very vocal association) wants so badly to be Highlands Ranch they can't stand it.