Denver: A Rock Solid Place to Live and Work

Savills Studley Insights / 1June 2015

Denver: A Rock Solid Place to Live and Work

The Denver Metropolitan Statistical Area has a healthy mix of businesses supporting its economy, relieving it from dependence

on any one sector. Chart 1 highlights the blend of private sector employment. While certain areas such as natural resources

have seen a significant increase in employment on a percentage basis, we note that overall, the sector is still small as a fraction

of overall private sector employment. Table 1 shows oil and gas-related employment for both the Denver and Houston MSAs,

and suggests that the Denver economy is significantly less exposed to the sector than Houston, for example.

Not Just Oil: Denver’s Diversified Economy

Chart 1 April 2015 Private Sector Job Composition, Denver-Aurora-Lakewood, CO MSA

Table 1 Q4 2014 Average Oil-Related Private Sector Job Employment, Composition, Denver-Aurora-Lakewood, CO MSACategory (NAICS code) Denver MSA Houston MSA

Petroleum and Coal Products Manufacturing (324) 668 10,113

Heavy and Civil Engineering Construction* (237) 11,229 46,574

Oil and Gas Extraction (211) 7,671 54,301

Support Activities for Mining (213)** 4,476 52,461

Drilling Oil and Gas Wells (213111) 813 18,260

Support Activities for Oil and Gas Operations (213112) 3,528 Data Withheld

Mining and Oil and Gas Field Machinery Manufacturing (33313) 117 43,385

Pipeline Transportation of Natural Gas (4862) 757 5,995

Geophysical Surveying and Mapping Services (541360) 580 5,789

Total (excluding figures in italics) 25,498 218,619

Additional: Natural Gas Distribution (221210) Data Withheld 2,994

Additional: Pipeline Transportation (486) Data Withheld 10,326

Total (with above categories) 25,498 231,939

Total, All Private Sector 1,165,710 2,519,970

Trade, Transportation and Utilities, 21.4%

Education and Health Services, 14.9%

Leisure and Hospitality, 12.7%

Construction, 8.4%

Financial Activities , 8.3%

Manufacturing, 5.7%

Other Services, 4.7% Information, 3.6%

Professional and Business Services, 20.4%

Source: Bureau of Labor Statistics.

* Includes oil and gas pipeline construction.** Includes support activities for oil and gas operations (213112)Source: Bureau of Labor Statistics.

Oil/Gas-Related Jobs Relative to

Total Private Sector Jobs Are At Least

4xGreater in the

Houston MSA Than in Denver MSA



Growth As Technology Center

Denver is emerging as a technology start-up destination; a 2015 Kauffman Foundation study1 named Denver #5 out of 10 metro areas with the highest tech startup density—coming in ahead of San Francisco. Angel investors and private equity firms may not have as robust a presence as in Silicon Valley or Manhattan, for example, but that is beginning to change. Denver will be one of 20 cities that will be on Facebook’s 2015 “FbStart World Tour”2 and as of June 2015, Denver start-ups have access to a free co-working center via the Commons on Champa—a 20,000 sf space that will be used as a hub for expanding entrepreneurship in the city. In addition, new companies will benefit from a 4-year, $4 million gift from the Blackstone Charitable Foundation. The grant forms the basis of the “Blackstone Entrepreneurs Network,” an organization with a mission “to connect Colorado’s great serial entrepreneurs and scale-up experts with one another to collaborate to identify, promote, assist, and connect Colorado’s ‘Gazelles’ and ‘Unicorns’ – the State’s best high-growth, high-prospect private firms in the technology, health, aerospace, energy, and natural foods and products industries.”

Denver has also given rise to numerous start-ups that have developed out of the University of Colorado system. Over the last 20 years, 141 new technology businesses have been founded out of the university,3 with 89 companies in the biotech space alone. 80% of the start-ups are still operating, and importantly, almost 70% of the companies have remained in Colorado.

In addition to start-ups that have emerged from academia, other technology companies have been spawned by more traditional incubators.

1 http://www.kauffman.org/microsites/kauffman-index2 FbStart is a program that provides select app developers with free tools and services from more than 20 partners. 3 http://www.cu.edu/sites/default/files/cu-startups-infographics_11x17_0.pdf

Jake Jabs Center for

Entrepreneurship Startup Incubator

Denver Design Incubator

Skywalker

Colorado Institute for Drug, Device and Diagnostic

Development (CID4)

Energy Fellows Institute

Techstars

Open to early-stage Colorado companies

that have successfully competed in the

university’s Business Plan Competition

Facilitates design businesses from

concept to production in the fashion industry

Provides capital and mentorship to cannabis-focused startups that have an innovative idea,

product or service to bring to market

Funds and manages emerging life science

technologies

Offers experienced entrepreneurs and executives

an opportunity to accelerate their

transition into the cleantech and advanced

energy sectors

High-profile tech accelerator, which

boasts 89 local alumni companies

Meet-up groups such as the Denver Open Coffee Club and Denver Founders provide networking opportunities for start-ups, while Denver Startup Week, scheduled for September 28 - October 2 2015, will host a week of events “to make Denver an entrepreneurial center supported by a strong community of entrepreneurs, investors, government and education.” The Denver Metro Small Business Development Center also supports start-ups, with efforts such as their “Trout Tank” event— where entrepreneurs pitch their businesses to a “school” of 30 lenders and investors. Other opportunities for collaboration among new businesses likely occur at co-working spaces such as Uncubed and Thrive Workplace (which has two locations in Denver) as well as at Galvanize, which offers data science courses in addition to co-working space in Denver’s Golden Triangle and beyond.



Attractive for Workers

Many who live in Denver are fond of reminding visitors that their city gets as much sun as Miami4—just one of the many ways

in which Denver’s quality-of-life excels—and one reason that net migration has been so strong, particularly among millennials.

Denver ranked third among the top ten best cities for young college graduates according to Forbes,5 and despite healthy growth

in the population, still offers plentiful employment opportunities: Chart 2 shows that Denver’s unemployment rate is well below

the national rate of unemployment despite showing one of the country’s highest rates of population growth (Table 2).

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Chart 2 Unemployment Rate in %, United States and Denver Metropolitan Statistical Area

Source: Bureau of Labor Statistics.

Data are as of July 1st of each year.Source: American Community Survey, 1-year estimates.

4 http://www.currentresults.com/Weather-Extremes/US/sunniest-cities.php5 http://www.forbes.com/sites/susanadams/2015/04/02/the-best-cities-for-new-college-grads-in-2015/

Table 2 Population By City By Year

2010 2011 2012 2013 2014Annualized Compound

Growth: 2010-2014

Seattle 610,298 622,175 635,063 653,404 668,342 2.3%

Denver 603,365 619,390 633,868 648,401 663,862 2.4%

Washington, D.C. 605,210 620,427 635,040 649,111 658,893 2.1%

Boston 620,598 630,645 640,839 649,917 655,884 1.4%

Baltimore 621,317 620,889 622,950 623,404 622,793 0.1%

Portland 585,261 593,859 602,954 609,520 619,360 1.4%

Las Vegas 584,670 588,257 596,384 603,670 613,599 1.2%

United States 309,347,057 311,721,632 314,112,078 316,497,531 318,857,056 0.8%



Denver’s transportation infrastructure is improving too, which should add to the area’s desirability for workers. The region’s

FasTracks Program—a comprehensive transit expansion in excess of $5 billion that will ultimately result in 122 miles of new

commuter rail and light rail, 18 miles of bus rapid transit, 57 new transit stations and 21,000 new parking spaces at light rail and

bus stations—is already expanding commuting options for those workers who choose to live outside the city’s boundary.

Chart 3 FasTracks Progress Map, 2015

Source: http://www.rtd-fastracks.com/media/uploads/main/FT_Gen_Fact_Sheet_FINAL_2015.pdf

Updated 1/15/2015

One region. One mission.



Attractive for Employers

Denver offers employers access to an appealing workforce. Millenials, in particular, have been responsible for a large portion

of Denver’s growth. As shown in Table 3, Denver has had one of the highest changes in the fraction of the young population,

which bodes well for employers looking for tech-savvy workers. Moreover, the workforce is well-educated; a larger proportion of

Denver’s working-age population has college degrees than in Seattle or Portland, Oregon for example (Chart 4). Colorado itself

has one of the highest per capita concentrations of science, research and engineering facilities in the nation, with 24 federally-

funded research labs, including the National Renewable Energy Laboratory (NREL) in Golden and the U.S. Geological Survey

(USGS) in Lakewood.

Table 3 Fraction of Population by Age, 2008 and 2013

2008 Ages 15-29

2013 Ages 20-34* Change

Denver 18.7% 28.7% 10.0%

Boston 27.5% 34.2% 6.7%

Washington, D.C. 26.3% 31.7% 5.4%

Seattle 22.3% 30.6% 8.3%

Baltimore 23.2% 26.5% 3.3%

Portland 18.9% 26.4% 7.5%

Las Vegas 18.7% 20.7% 2.0%

United States 21.0% 20.7% -0.3%

Chart 4 Percentage of the Population Aged 25+ With a Bachelor’s Degree or Higher, by Metro Area

* Residents aged 15-29 in 2008 would be aged 20-34 five years later. Source: American Community Survey, 1-year estimates.

Source: American Community Survey, 2009-2013.

Las Vegas

United States

Houston Los Angeles

Dallas Portland, OR

San Diego

Baltimore Seattle Denver Austin Boston San Francisco

50%

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0%

Denver

18.7%2008 Ages 15-29

28.7%2013 Ages 20-34

10Percentage Points



Office space in Denver is among some of the least expensive in the country, as shown in Chart 5, making the area financially attractive for employers looking to expand or relocate their business. Moreover, new construction should prove appealing to area firms. A new 40-story office tower is underway near Larimer Square and the 16th Street Mall. With 10-foot ceilings and glass walls, tech-savvy tenants should find the 656,000 sf of office space attractive, particularly given a lack of newer-space options for larger users. In a somewhat atypical move, the developer has broken ground without an anchor tenant in place, suggesting confidence in the outlook for the local market over the next few years—whether from the emergence of new companies or the expansion of existing firms.

Other new office projects include a 210,000 sf office space expansion at Colorado Center, as well as several projects underway in LoDo, including the Z Block building anchored by Prologis, as well as the Triangle Building anchored by Liberty Global.

Companies like DataLogix, Gyro and OpenTable have all expanded their presence with larger leases; even local company EBags recently opted to move its customer service back to Denver after five years of using a staffing firm out of state. Tech companies are finding Denver attractive, too: Optiv, the $1.5B merger of Accuvant and FishNet Security, announced that Denver will be the location for their new headquarters, while Fathom Entertainment, a joint venture of theaters AMC Entertainment, Cinemark Holdings and Regal Entertainment Group has already expanded its presence by upsizing its leased space twice since the start of the year to nearly 17,000 sf. Other newcomers to the area are shown below.

We see the region’s favorable workforce demographics and attractive commercial real estate options as just two reasons that an increasing number of start-ups will choose to base their company out of Denver in the months ahead.

Savills Studley is the leading commercial real estate services firm specializing in tenant representation. Founded in 1954, the firm pioneered the conflict-free business model of representing only tenants in their commercial real estate transactions. Today, supported by high quality market research and in-depth analysis, Savills Studley provides strategic real estate solutions to organizations across all industries. The firm’s comprehensive commercial real estate platform includes brokerage, project management, capital markets, consulting and corporate services. With 26 offices in the U.S. and a heritage of innovation, Savills Studley is well known for tenacious client advocacy and exceptional service.

The firm is part of London-headquartered Savills plc, the premier global real estate service provider with over 27,000 professionals and over 600 locations around the world. Savills plc is listed on the London Stock Exchange (SVS.L).

For more information, please visit www.savills-studley.com and follow us on Twitter @SavillsStudley and LinkedIn.

Heidi LearnerChief Economist

[email protected]

Chart 5 Overall Asking Rents, Q2 2015

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Source: Savills Studley and CoStar.

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Denver: A Rock Solid Place to Live and Work

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