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Denver Sees Jump in Technical Jobs and Office Rents

December 4, 2017

 

 

Denver Sees Jump in Technical Jobs and Office Rents

Denver edged up a spot on the annual Tech-30 Report, released Wednesday by commercial real estate broker CBRE. The city saw 8.3 percent growth in office lease rates and an 11.5 percent uptick in the number of tech jobs between 2015 to 2016. But ranked at 23rd out of 30, the city’s growth rates paled in comparison to the top 22 where cities like San Francisco saw a 39.4 percent jump in high-tech job growth during the same time, according to the annual report. Denver ranked 24th last year. Locally, the rising rents are affecting lease rates beyond the prime office market of Lower Downtown, where tech companies traditionally have favored. This year, three of the largest downtown office leases were in the nearby and cheaper Central Business District, where average lease rates are about 18 percent lower than LoDo, which hit $38.73 per square foot in the second quarter of 2017. Overall, Denver’s average asking rent is $26.15 a square foot, about a buck more than last year’s $25.23. Similarly, the price in downtown Boulder, where rents reached $41.74 per share foot, is causing prospective tech companies to look to east Boulder, where average rates are $30.60. (Denver Post)

 

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U.S. Economy Expanded at Brisk 3.3 Percent Pace in Third Quarter

Led by a rise in business investment, the U.S. economy grew at an annual pace of 3.3 percent from July through September, its fastest rate in three years. The Commerce Department estimated Wednesday that third-quarter growth exceeded the 3 percent annual expansion for the period that it had initially reported last month. The performance, achieved despite damage from two devastating hurricanes, marked the fastest expansion in gross domestic product — the broadest gauge of economic output — since a 5.2 percent annual spurt in the third quarter of 2014. The estimated growth for the July-September quarter marked an improvement on 3.1 annual growth in the second quarter and a 1.2 annual pace in the January-March quarter. “The news on the economy had previously been good, but it just got a little better,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. Baird noted that the holiday shopping season appears to be off to a strong start. Before the revised third-quarter numbers came out, the Federal Reserve Bank of Atlanta was forecasting that growth would rise to a 3.4 percent annual pace in the final three months of 2017. (Denver Post)

 

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Retail Leads CRE Sectors in Pricing Gains

A 0.1% contraction marked the seventh consecutive month of declines in commercial property pricing, Ten-X Commercial said Thursday. The firm’s latest Commercial Real Estate Nowcast is now up just 1.5% from a year ago. “The US presidential election is a year behind us, but the events of intervening months have done nothing to alleviate investors’ wariness,” says Peter Muoio, chief economist with Ten-X. “Instead, the Ten-X CRE Nowcast’s annual growth rate continues to reach new lows. Pessimism about fundamentals, a policy environment in a constant state of flux and impending interest rate hikes are all adversely affecting commercial real estate and the market’s outlook at this stage is wary.” That wariness was reflected in November pricing performance across all major sectors aside from retail, which not only led the way by actually posting monthly gains but also in terms of year-over-year increases. Pricing for retail properties grew 0.6% from October, representing the sixth consecutive monthly uptick in values for the sector. That translates into annual pricing growth of 5.8%, a better Y-O-Y result than any other major property type posted for November. Ten-X notes that this growth is surprising given the retail sector’s weakening fundamentals. Office also posted a monthly gain, albeit a shallower one at 0.5%, but its performance in recent months has been more variable than that of retail. Further, Ten-X says that the office sector is really a tale of two tiers, each with its own set of headaches. Struggling markets have continued to see limited growth, while the stronger ones are grappling with an influx of new supply. Conversely, the Ten-X Hotel Nowcast slipped 0.5% from October, its fifth decline over the past seven months. That’s the case even as the three pillars of hotel demand—domestic vacationers, business travel and foreign travel to the US—have gained strength recently. The Ten-X Industrial Nowcast marked its sixth pricing decline in seven months with a 1.1% drop in November, resulting in a Y-O-Y decline of 3.2%. The sector’s weak performance is especially striking given the rise of new demand drivers underpinning it, including e-commerce growth, cloud computing centers and cannabis legalization. Ten-X chalks up the slowdown in pricing to an investor view that values have gotten ahead of fundamentals. Multifamily saw its fifth consecutive monthly drop, with pricing down 0.2% from October. Apartment pricing is now up just 3.4% Y-O-Y. In the West, November’s decline brought pricing below its year-ago level. “Amid the overall market malaise, several sectors have defied projections, including the industrial sector’s sudden pricing reversal and a retail segment that has seen an unexpected boost in recent months,” says Muoio. “Across the market overall, the November data confirm that commercial real estate investors remain wary.” (GlobeSt.com)

 

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Warehouses Get Bigger, Taller and Faster as E-Commerce Takes Off

Those boxes piling up on your doorstep over the holidays don’t ship from Santa’s workshop. As Americans spend more money shopping online, real estate developers are sinking record amounts of money into new warehouse space, building bigger, taller structures to meet the needs of e-commerce — and the robots that help it along. Builders spent $2.7 billion on U.S. warehouse construction in October, the most since the census started keeping track in 1993. The size of the average warehouse completed this year was 188,000 square feet, according to a report published this week by CBRE Group Inc., more than double the size in 2001. Developers are also raising their roofs, with ceiling heights up 21 percent over that period. Warehouses are getting bigger for the same reason retailers and logistics firms are building more of them. “It’s the notion of the endless aisle,” said Joe Dunlap, a managing director at CBRE, where he leads the supply chain advisory practice. A retailer that stocks 30,000 items in its stores might offer 10 times as many items for sale online. More stock requires larger footprints. Higher ceilings accommodate mezzanine levels, letting operators cram more shelves into a building. Today’s industrial buildings also require thicker concrete floors to support heavy machinery used to automate the warehouse process, Dunlap said. While builders are pouring money into next-generation warehouses, venture capital firms are stoking competition in warehouse automation. Since Amazon.com Inc. acquired bot maker Kiva Systems for $775 million in 2012, a new batch of robot makers has burst on the scene, including Geek+, which has raised $22 million. 6 River Systems Inc., a robotics company founded by former Kiva employees, scored a $15 million round, while RightHand, which makes a robo-arm, added $8 million to its war chest. Meanwhile, warehouses are likely to keep getting bigger, and more expensive. “Long term, there has to be a landing point,” Dunlap said, “probably driven by finding the right collaboration” between robots and people. (Bloomberg)

 

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CURRENT

1 MONTH PRIOR

1 YEAR PRIOR

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1.25

1.25

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3 MONTH LIBOR

1.48

1.38

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4.25

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3.50

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