Monthly Economic IndicatorsMonthly Economic Indicators July 2019 Energetic Bodies. Energetic Minds....

Monthly Economic Indicators

July 2019

Energetic Bodies. Energetic Minds.

www.metrodenver.org

Research Sponsor

PINNIACOL ASSURANCE

www.pinnacol.com

Monthly analysis

of 18 key economic

indicators in

Metro Denver

Development Research Partners

www.developmentresearch.net

A CEO's Insights:Target Operating Model, July 2019

All business leaders want to maximize their company’s profit and efficiency. We develop strategic plans to guide our growth, market to attract customers, implement customer service strategies to retain existing customers, and do our best to staff to those needs.

But I expect that most leaders reading this article are focused beyond these basics. We’re trying to peer as far into the future as possible while recognizing that the pace of change will only keep accelerating. We’re thinking about how to disrupt, instead of being disrupted. We’re retooling our products and services to reflect the digitization of customer interactions and behaviors. We’re trying to move beyond one-off initiatives and siloed units. We’re trying to radically reimagine our customers’ experience. And, if we’re smart, we’re asking ourselves if the way we’ve configured our business enables us to do any of these things in a sustainable, transformative way.

That’s the genesis of work my company, and I suspect many of yours, has launched to define our “target operating model.” You’ve probably read about this in the business literature, and may have dismissed it as just the latest flavor of the month that large consulting firms are using to sell their services. But I find it to be an enormously helpful way to think about how to position my company for future success.

The target operating model construct is elegantly simple in conception yet fiendishly complex to execute. Simply put, it asks you to define what your business needs to be and do in order to thrive – to, as McKinsey puts it, “simultaneously disrupt existing processes, drive value, and improve customer experience while reducing costs to serve.” The hardest part comes next: how do you get there?

And that’s where the rubber meets the road. Does technology or people constitute the primary “axis of change”? What capabilities do you need? How much do you build versus buy, hire versus outsource? How do you configure your teams to maximize their ability to deliver unparalleled customer experience with new digital tools? How do you transform customer journeys by successfully balancing the need for automation with the need for exceptional human touch? How do you help your current employees develop the skills they need to thrive in an environment of new value creation? How do you create teams that are agile in every sense of the word? And, understanding that transformative change doesn’t happen all at once but via a series of initiatives, how do you prepare your people for rolling waves of change?

As CEOs, it is up to us to evangelize for and lead this kind of transformation, and surround ourselves with other leaders who not only share our vision but can excite their teams to achieve it. The stakes are high. Companies that don’t think in this way risk irrelevance and replacement, as new technologies smash previous barriers to entry in virtually all industries. My own company has been around for more than 100 years, and I know that another 100 depend on my and my team’s willingness to listen to customers and then think differently – ignoring old assumptions – about how best to meet their needs.

Phil Kalin joined Pinnacol Assurance as CEO in 2013. He has served as the chief executive of both public and privately-backed companies, including large

hospital systems, as well as organizations focused on health care data, technology and education. He has been active nationally on health care topics related

to insurance, data analytics, technology innovation, cost improvement and risk mitigation. Phil is providing an informed opinion on what we see in the Monthly

Economic Indicators.

Metro Denver Economic Development Corporation | July 2, 2019 | Page 1

The Monthly Economic Indicators is a comprehensive analysis of economic conditions in the seven‐county Metro Denver area, or the region comprised of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, and Jefferson Counties. There are two metropolitan statistical areas (MSAs) located within the Metro Denver region: the Boulder MSA (Boulder County) and the Denver‐Aurora‐Lakewood MSA (the Denver MSA) (Adams, Arapahoe, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson, and Park Counties). This report presents recent data and long‐term trends for the seven‐county region, MSAs, or counties, depending on availability. The analysis includes four main data sections: labor force and employment, the consumer sector, residential real estate, and commercial real estate.

Notable Rankings

According to the new 2019‐20 rankings from U.S. News & World Report, Children’s Hospital Colorado is one of the bestchildren’s hospitals in the nation. Children’s ranked No. 6 for Gastroenterology and GI Surgery, No. 7 for Diabetes andEndocrinology, and No. 7 for Pulmonology, with top 20 rankings in seven other specialties. The rankings are based onannual surveys and clinical data around the country. Methodology factors include patient volume, outcomes, andcompliance.

Solar installations in Colorado increased 19 percent so far this year, maintaining the No. 12 ranking among states withthe most solar projects according to Wood Mackenzie Power & Renewables. Colorado currently has the eighth‐largestworkforce in the solar sector, totaling 6,847 jobs with a total of 1,227 megawatts installed. At the end of 2015, thestate only had 544 megawatts installed.

Wallethub ranked Colorado No. 5 for “2019’s Best States to Live in”. The report used five criteria – affordability,economy, education and health, quality of life, and safety – broken into 51 different metrics. Colorado ranked 25th inaffordability, fourth in economy, eighth in education and health, 12th for quality of life, and 29th for safety. NewJersey, New Hampshire, Minnesota, and Massachusetts were the only states ahead of Colorado in the rankings.

According to the “2019 America’s Best Cities” report from Resonance Consultancy, Denver ranked among the bestlarge cities in the United States. The rankings were based on six categories: place, product, programming, people,prosperity, and promotion. Denver ranked No. 12 in Product, accounting for things like airline connectivity, attractions,cultural institutions, and higher education; No. 13 in People, accounting for diversity of population and educationalattainment; and No. 15 in Prosperity, including economy, number of Global 500 corporate headquarters, and standardof living.

According to the “Renter Migration Report” by ApartmentList.com, Denver ranked second in the number of renterscoming to the city from other places, with 55 percent of people searching for homes in Denver coming from otherareas outside of the state. Tampa, Florida took first, with 63 percent of people entering the city from outside the metroarea. New York City had the highest share of inbound searches to Denver, accounting for 4.7 percent of the peopleleaving other cities to move to Denver.

National Economic Overview

Gross Domestic Product

The U.S. Bureau of Economic Analysis (BEA) released thethird estimate of real gross domestic product (GDP) forthe first quarter of 2019. The estimate showed that GDPincreased at an annual rate of 3.1 percent through thefirst quarter, which was 0.9 percentage points above thefourth quarter rate of 2.2 percent.


The U.S. GDP was consistent with the second estimate released in May. Upward revisions to nonresidential andresidential fixed investment, exports, and government spending were offset by downward revisions to personalconsumption and inventory investments.

Interest Rates

The Federal Open Market Committee (FOMC) of the Federal Reserve decided to hold interest rates steady, currentlyholding its benchmark funds rate in a range of 2.25 percent to 2.5 percent.

Committee members cited overall inflation and inflation for items other than food and energy as having declined andare running below 2 percent, the target rate. The Committee continues to uphold its mandate to foster maximumemployment and price stability by maintaining strong labor market conditions and inflation near the 2 percentobjective.

The next FOMC meeting is July 30‐31, 2019.

Policy Watch

National & International

President Trump and Chinese President Xi Jinping settled for a truce in the trade war between the U.S. and Chinaduring the G20 summit at the end of June. As part of the ceasefire, Mr. Trump put off the $300 billion in planned tariffson imported Chinese goods that were expected to be instituted. While no formal agreements have been made, it willallow a reprieve while leaders find a compromise for both sides. Uncertainty from the trade war has decreasedconsumer confidence and slowed manufacturing activity while global economic growth has slowed. Stock marketsresponded positively on July 1 to the truce; however, economists are skeptical that it will last, sighting that thecontinued uncertainty of the trade war is still harming confidence and spending.

Economic Indexes & Notable Data Releases

National & International

The U.S. goods and services trade deficit was $50.8 billion in April, down from $51.9 billion in March, revised. Aprilexports were $206.8 billion, $4.6 billion less than March exports. April imports were $257.6 billion, $5.7 billion lessthan March imports. Much of the decrease in U.S. imports came from capital goods except automotive, falling by about$1.7 billion.

The U.S. economic expansion became the longest in history since at least 1854, hitting its 121st consecutive month ofexpansion. While there is concern regarding unresolved trade policy, slower employment growth rates, and worriesthat the Fed will need to cut interest rates over the next 12 months to ensure growth remains on track, currenteconomic indicators still reflect continued, broad‐based economic expansion. The Conference Board Leading EconomicIndex (LEI) was unchanged in May, remaining at 111.8. This comes after three consecutive increases, with a 0.1 percentincrease in April and a 0.3 percent increase in March. Financial conditions and consumer outlook were offset by theweak manufacturing sector and stock prices. The Conference Board expects slower growth of the economy at about 2percent by the year end as economic expansion now enters its eleventh year.

According to 2018 U.S. Census Bureau estimates, non‐Hispanic white residents now make up less than half (49.9percent) of the nation’s under age 15 population for the first time. This report highlights the increasing diversity inyounger generations as the white population ages. Fourteen states plus the District of Columbia have a minority whiteunder age 15 population. These states are generally the coastal states around the southern borders, extending into thesoutheast states and up the northeast coast.


Local

The University of Colorado Boulder Leeds School of Business released its third quarter 2019 Leeds Business Confidence

Index. The overall index fell 2.2 points to 50.5, coinciding with the Fed signaling potential cuts in the interest rate,

increased trade tensions, weaker job growth, and growing tensions in the Middle East. Four of the six individual

components of the LBCI remained above 50, but the national economy recorded the lowest confidence of the index for

Q3 2019 and Q4 2019 at 43.1, which is considered negative territory. The state economy component was also in

negative territory at 49.6. The overall outlook from respondents is neutral heading into the third quarter of 2019.

According to new state revenue forecasts, Colorado taxpayers could receive TABOR refunds and tax cuts due to strong

state collections. The Legislative Council predicts revenue to be $575 million above the TABOR cap, meaning sales tax

refunds and income tax breaks for Coloradans despite previous forecasts that Colorado would not hit the revenue limit.

The Governor’s Office of State Planning and Budgeting forecasts revenue to be $300 million above the TABOR cap for

the 2018‐19 fiscal year. Lawmakers are now pushing for Proposition CC, a measure planned to be on the November

ballot which would give permission for the state to keep all the tax dollars it collects to spend on K‐12, higher

education, and transportation in equal amounts, in light of the possibility of refunds.

Colorado surpassed $1 billion in tax revenue from marijuana sales since its legalization in 2014. Colorado has 2,917

licensed marijuana businesses and 41,076 licensed individuals working in the industry.

According to the regional Beige Book by the Kansas City Federal Reserve, economic activity continued to expand

slightly in April and early May in the Tenth District, which includes Colorado. Consumer spending rose slightly as sales

increased in retail and tourism, while employment rose slightly across most sectors with additional gains expected for

the coming months. Wages rose at a modest pace, but agricultural credit conditions and farm income weakened

further.

Labor Force and Employment

Employment in Metro Denver increased 1.4 percent between May 2018 and 2019, adding 24,500 jobs over‐the‐year. The Denver‐Lakewood‐Aurora MSA added 17,900 jobs, an increase of 1.2 percent, while the Boulder MSA (+3.4 percent) added 6,600 jobs.

Nine of the 11 supersectors recorded growth over‐the‐year, led by professional & business services (+4.3 percent) and other services (+3.6 percent). The professional & business services supersector added the most jobs, increasing by 13,300 employees.

Financial activities (‐1.5 percent) and information (‐0.3 percent) reported the only declines over‐the‐year.

Employment in Colorado rose 1.8 percent between May 2018 and 2019, adding 48,200 workers. National employment levels increased over the same period by 1.5 percent, adding almost 2.3 million workers.


Nonfarm Wage & Salary Employment (000s, not seasonally adjusted)

Month of Month of Month of

Year‐to‐Date

Average

Year‐to‐Date

Average

Year‐to‐Date

Average

Annual Growth

Rate

Annual Growth

Rate

May‐19 Apr‐19 May‐18 YTD 2019 YTD 2018 % Change 2014 2009

Total 11‐County Metro Denver* 1,722.7 1,710.6 1,698.2 1,702.7 1,674.7 1.7% 3.7% ‐4.3%

Denver‐Aurora‐Lakewood MSA 1,520.4 1,511.0 1,502.5 1,504.3 1,482.3 1.5% 3.9% ‐4.2%

Boulder MSA 202.3 199.6 195.7 198.4 192.4 3.1% 2.5% ‐4.8%

Natural Resources & Construction 115.1 113.8 113.7 113.9 111.4 2.3% 12.1% ‐16.3%

Manufacturing 88.9 89.2 88.4 88.5 88.1 0.5% 2.2% ‐10.2%

Wholesale & Retail Trade 235.4 234.3 235.3 235.6 234.4 0.5% 2.9% ‐5.8%

Transp., Warehousing & Utilities 62.2 62.6 60.7 63.5 60.6 4.8% 3.6% ‐6.0%

Information 58.1 57.9 58.3 58.1 57.8 0.5% 1.3% ‐4.4%

Financial Activities 116.4 116.5 118.2 115.6 117.2 ‐1.4% 1.8% ‐4.4%

Professional & Business Services 319.4 318.1 306.1 313.7 300.9 4.2% 3.9% ‐6.2%

Education & Health Services 219.5 218.9 215.1 218.6 213.7 2.3% 4.8% 3.0%Leisure & Hospitality 193.8 188.5 191.7 187.0 186.3 0.4% 4.4% ‐3.4%

Other Services 66.4 66.8 64.1 66.3 63.2 5.0% 3.7% ‐1.8%

Government 247.5 244.0 246.6 241.9 241.1 0.4% 1.6% 1.5%

Federal Gov't 30.1 30.0 30.0 29.9 30.0 ‐0.4% ‐0.8% 0.6%

State Gov't 67.1 66.3 68.3 65.1 66.4 ‐1.9% 1.7% 4.0%

Local Gov't 150.3 147.7 148.3 146.9 144.6 1.6% 2.2% 0.8%

Colorado 2,763.6 2,756.7 2,715.4 2,741.4 2,692.4 1.8% 3.5% ‐4.5%

United States 151,629 150,942 149,360 149,976 147,441 1.7% 1.9% ‐4.3%

*Includes the Denver‐Aurora‐Lakewood MSA (Adams, Arapahoe, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson, and Park Counties) and the Boulder MSA (Boulder County).

Source: Colorado Department of Labor and Employment, Labor Market Information. (p) =preliminary (r) =revised

Metro Denver Industry Cluster Headlines

Aerospace

Defense contractor Raytheon Corp. has agreed to an all‐stock deal acquisition and merger with United Technologies

Corp. The merger would create the second‐largest defense and aerospace company behind The Boeing Co., with an

estimated $74 billion in revenue this year. Raytheon will keep its presence in its existing locations, and stated that they

expect no downward change in employment at the Aurora office. The transaction is expected to close in the first half of

2020.

Blue Canyon Technologies doubled its staff last year and plans to hire dozens again in 2019. The Boulder‐based small satellite company has been contracting for U.S. military and commercial space clients so successfully that the company has leased an additional 80,000 square feet of manufacturing space, employing a total of 170 workers. Blue Canyon has hired 30 people so far this year and currently has 25 other job openings they are looking to fill.

Bioscience – Pharmaceuticals and Biotechnology

CBD company Mile High Labs has purchased the former Sandoz Inc. pharmaceutical manufacturing facility in

Broomfield. The 400,000‐square‐foot campus will be the largest infrastructure purchase in the history of the CBD


market with an acquisition value of $18.8 million. When new manufacturing operations begin by the end of 2019 at

2555 W. Midway Blvd., employment is expected to increase from 175 to 250 workers.

Agilent Technologies Inc., a pharmaceutical manufacturer, has opened a new facility in Frederick. The $185‐million

facility, totaling 135,000 square feet, will become the second manufacturing site for Agilent in addition to their Boulder

facility. The new site will specialize in making active pharmaceutical ingredients for producing a wide range of

therapeutics.

Pfizer Inc. will acquire Boulder‐based pharmaceutical company Array BioPharma Inc. The deal is estimated to be worth

$11 billion and is expected to be completed later this year. Pfizer says Array’s workforce will remain at the Boulder

laboratory, with operations being folded into Pfizer’s Oncology Research and Development Network.

Boulder biotechnology company PanTheryx is getting $50 million in funding from Perceptive Advisors to develop new

treatments for gut‐related medical conditions. PanTheryx is the world’s largest manufacturer of bovine colostrum that

is used for boosting the immune system and healing injuries. The company plans to expand production of treatments

for the gastrointestinal tract, resulting in the addition of 30 employees to its current base of 170 workers in the next

four to six months.

Energy and Natural Resources – Natural Resources

Colorado coal mines produced under 4.9 million tons of coal through April 30 this year, a 5 percent increase from a

year ago. The industry appears to have found increased international demand for coal used in steel‐making production.

In March, the U.S. Department of Interior approved a 1,720‐acre expansion of the underground West Elk coal mine

near Somerset, Colorado, where there is an estimated 26.5 million tons of recoverable coal and likely three years of

added mining operation available. A total of 1,158 miners are employed in Colorado coal mines, 27 more than at the

start of May 2018.

Energy and Natural Resources – Renewable Resources

Vestas Wind Systems, a wind turbine manufacturer with plants in Brighton, Windsor, and Pueblo, recaptured its

position as the world leader in supplying wind power. Vestas installed 10.4 gigawatts of wind power in 2017, according

to Navigant Research.

A new Colorado wind farm will be built in Weld County by Leeward Renewable Energy Development LLC to provide

power to Xcel Energy. The wind farm could be built as soon as 2020 and is likely to cost $250 million or more. The

project could generate as much as 380 megawatts of electrical power, enough to power 285,000 homes at peak

production.

Financial Services – Banking & Finance

Bank of America plans to create 12 additional bank branches in Denver by 2021, with an expectation of adding 80 new jobs. The company currently has 70 open positions in Denver, 30 of which are technology focused.

Financial Services – Insurance

SelectQuote Insurance Services Inc., a Kansas‐based insurance brokerage, plans on more than doubling its headcount this year in their Centennial office. The company plans on hiring 150 employees to prepare for the Medicare Annual Enrollment Period beginning in October. Open positions will include inside sales and sales support, enrollment reps, customer care agents, and quality assurance support.


Food and Beverage Production

Boulder will welcome two new cider operations this summer. BOCO Cider, located at 1501 Lee Hill Drive, has produced cider for several Boulder and Denver accounts and opened its own taphouse in June. Locust Cidery, a Washington‐based operation, will open its fifth location at 5446 Conestoga Court in early July.

Five Colorado cities made the list for most craft breweries per capita in the U.S., the most in any state. Boulder placed fourth overall in the study of 500 cities across the U.S., with 14 breweries per 50,000 people. The other Colorado cities on the list were Fort Collins (#11), Loveland (#12), Denver (#18), and Longmont (#19).

Denver‐based coffee company Dazbog completed construction on a new five‐story production facility at 1090 Yuma St., allowing the company to triple its production capabilities. The company currently has about 30 coffee shops around Colorado and Wyoming and employs about 150 people across its retail stores and corporate offices.

Healthcare & Wellness

National Jewish Health is expanding its Denver campus with a new $76.6 million facility set to break ground later this year or in early 2020. The current plans submitted to the city call for a five‐story, 104,000‐square‐foot building on East Colfax Avenue and Garfield Street that would contain clinical exam and procedure rooms, along with other ancillary services. The health system is now awaiting approval from the city before moving forward with the project.

The annual Kids Count report from the Annie E. Casey Foundation showed Colorado made progress on 12 out of 16 measures of children’s well‐being. However, the report showed 28 deaths out of 100,000 children in 2017, compared with 25 per 100,000 in 2010, but these numbers tend to fluctuate each year. Seven out of 10 child and teen deaths in Colorado in 2017 were caused by accidents, homicide, or suicide.

IT‐Software

KPA, a Lafayette‐based tech company specializing in environmental health and safety compliance, is expecting significant employee growth. KPA creates software for mid‐sized companies to maintain regulatory compliance with EPA and Occupational Safety and Health Administration regulations, employing 320 employees total with 90 of them based in their Lafayette location. The company’s leaders hope to double employment in the next five years.

Swimlane, LLC, a Louisville‐based cybersecurity automation company, has raised almost $23 million in capital, according to the U.S. Securities and Exchange Commission. Swimlane has continued to boost revenues by 544 percent since the beginning of 2017, doubling its staff last year to a total of 74 employees.

Matillion, a Denver software company, has closed a Series C funding of $35 million. Matillion provides data transformation software built for the cloud that allows customers to extract data from a wide number of sources for use in analytics, machine learning, and artificial intelligence. The company plans to open its first permanent location downtown later this summer, and currently employs more than 30 people in Denver with plans to nearly double its staff by the end of the year.

Red Eye Apps, an Australian software firm that provides a cloud‐based platform for storing engineering and architectural drawings, opened its North American headquarters in Golden on June 6. Red Eye plans on growing to 10 employees in Golden by the end of the year and expects to double every year after that, hiring across marketing, sales, customer service, accounting, and software development.

Galvanize, a Denver‐based education platform and coworking space that teaches coding and data science, is looking to close one of its Denver locations and lay off 7 percent of its current workforce. The company laid off 27 employees in six states, 10 of those from Colorado. Galvanize currently has three campuses in Colorado, and the company is considering closing its location at 1062 Delaware St.

A‐LIGN, a Tampa‐based cybersecurity company, expanded to Denver, creating their second office in the Industry shared office space in RiNo. The company is looking to expand into the mountain west area after raising more than $50 million


in funding last year and increase its total workforce to 315 by the end of the year. A‐LIGN currently has 30 employees in Denver, marking the second‐largest concentration behind their headquarters in Florida.

Skupos, a San Francisco startup that offers a data platform for convenience stores, plans to add more than 120 jobs in Denver following a Series B funding of $26 million. Skupos opened its Denver office in May 2018 and has since grown the operation to over 50 employees. The company plans to add at least 30 employees in sales, 75 in customer experience, 10 software engineers, and 5 data scientists in the next year.

Denver tech workers reportedly made an average salary of $117,000 in 2018, a 4 percent increase over‐the‐year, according to Hired’s “2019 State of Salaries Report”. Salaries increased the fastest in Boston, with wage increases of 9 percent, followed by Austin (+6 percent) and Washington, D.C. (+6 percent). San Francisco pays their employees the highest salary at $145,000, but only saw a 2 percent increase over‐the‐year.

Other Industry Headlines

Amazon plans to add over 2,000 new warehouse positions across their warehouse network in Metro Denver. This comes after news in April of Amazon expanding its Denver technology hub by creating 400 new high‐tech jobs.

Boulder Scientific Co. added 33,000 square feet of new research laboratories to its existing operation in Longmont in order to boost research, development, and manufacturing capabilities at the firm’s 4161 Special Place facility. The company currently has 10 employees working in Longmont and expects to add an additional 10 jobs with gradual growth continuing over the next few years.

Employment Outlook

Denver‐Aurora MSA employers expect to hire at a slower pace in the third quarter of 2019. Among employers surveyed, 29 percent expect to add workers in the third quarter, which is 6 percentage points lower than the previous quarter and the same pace as the third quarter of 2018. The percentage of companies laying off employees for the third quarter of 2019 remains static at 1 percent, the same as the previous quarter. Of the companies surveyed, 68 percent expect to not change their payroll, while 2 percent of companies are unsure.

The U.S. employment outlook is positive, with 27 percent of companies surveyed expecting to hire, an increase of 3 percentage points from the prior quarter and the prior year.

All 13 industries across the U.S. reported double‐digit hiring intentions, hitting a 13‐year high with the strongest outlooks coming from the professional & business services industry (+28 percent), leisure & hospitality (+27 percent), and transportation & utilities (+25 percent).


Employment Outlook Survey

Quarter 3 Quarter 2 Quarter 3 YTD YTD Ann Avg Ann Avg

2019 2019 2018 2019 2018 2014 2009

Denver‐Aurora‐Broomfield MSA Percent of Companies Hiring 29% 35% 29% 29% 28% 21% 11%

Percent of Companies Laying Off 1% 1% 4% 3% 3% 6% 12%

Percent of Companies No Change 68% 63% 65% 68% 66% 71% 74%

Percent of Companies Unsure 2% 1% 2% 1% 3% 2% 3%

United States

Percent of Companies Hiring 27% 24% 24% 25% 23% 19% 15%

Percent of Companies Laying Off 3% 3% 3% 4% 4% 6% 14%

Percent of Companies No Change 69% 72% 71% 71% 72% 72% 68%

Percent of Companies Unsure 1% 1% 2% 1% 2% 3% 5%

Source: Manpower Inc.

Unemployment

Metro Denver’s not seasonally adjusted unemployment rate fell 0.2 percentage points between April and May. Over‐the‐year, the rate fell 0.3 percentage points to 2.4 percent between May 2018 and 2019.

All seven counties in Metro Denver reported decreases in the unemployment rate both over‐the‐year and over‐the‐month. Jefferson and Boulder Counties had the highest over‐the‐year decrease of 0.3 percentage points, the same decrease as the Colorado unemployment rate. All other counties decreased by 0.1 or 0.2 percentage points during the period.

Metro Denver added 28,803 people either employed or looking for work between May 2018 and 2019. The labor force rose across all seven counties, ranging from a 1.4 percent increase in Jefferson, Douglas, and Adams Counties to a 2.9 percent increase in Boulder County.

Colorado reported an unemployment rate of 2.5 percent, a decrease of 0.2 percentage points from last month’s rate and 0.3 percentage points lower than the same time last year. Colorado’s labor force grew 1.8 percent over‐the‐year to 3.1 million, adding 55,312 people. The national unemployment rate increased over‐the‐month to 3.4 percent.


Labor Force Statistics (000s, not seasonally adjusted civilian labor force)

May 2019 (p) 2019 YTD AVG 2018 YTD AVG 2014 2009

Total Labor

Force Unemploy‐ment Rate

Total Labor Force

Unemploy‐ment Rate

Total Labor Force

Unemploy‐ment Rate

Ann AvgUnemploy‐ment Rate

Ann Avg Unemploy‐ment Rate

Metro Denver 1,824.6 2.4% 1,822.0 3.0% 1,782.3 2.9% 4.7% 7.3%

Adams County 272.2 2.7% 272.1 3.4% 266.5 3.3% 5.7% 8.5%

Arapahoe County 366.0 2.5% 365.7 3.1% 358.2 3.0% 4.9% 7.3%

Boulder County 199.1 2.1% 197.6 2.7% 191.7 2.6% 4.1% 6.1%

Broomfield County 40.2 2.3% 40.1 2.8% 39.3 2.7% 4.2% 6.9%

Denver County 416.8 2.5% 416.6 3.1% 407.8 2.9% 4.8% 8.1%

Douglas County 193.0 2.2% 192.7 2.7% 188.8 2.6% 4.0% 6.2%

Jefferson County 337.3 2.3% 337.1 2.9% 330.1 2.8% 4.6% 7.1%

Colorado 3,126.9 2.5% 3,124.1 3.2% 3,053.9 3.0% 5.0% 7.3%

United States 162,655 3.4% 162,494 3.8% 161,225 4.1% 6.2% 9.3%

Source: Colorado Department of Labor and Employment, Labor Market Information. (p) =preliminary

Between April and May, initial unemployment insurance claims in Metro Denver decreased 3.6 percent. The May level was 2.1 percent higher than the same time last year. The average year‐to‐date total claims increased by 4.2 percent, the fifth consecutive month of increasing year‐to‐date monthly claims.

Claims throughout Colorado decreased over‐the‐month, falling 4.4 percent to 1,872. Claims rose 5.2 percent over‐the‐year. Still, the year‐to‐date average monthly claims fell for the second consecutive month after rising from January to March 2019.

Weekly First‐Time Unemployment Insurance Claims

Month of Month of Month of YTD Avg YTD Avg YTD Avg Ann Avg Ann Avg2009 May‐19 Apr‐19 May‐18 2019 2018 % Change 2014

Metro Denver 924 959 905 1,077 1,034 4.2% 1,415 2,541

Colorado 1,872 1,959 1,779 2,036 2,043 ‐0.3% 2,657 4,752

Note: Reference week data includes the 19th day of the month for all months except November and December, which include the 12th day of the month. Source: Colorado Department of Labor and Employment, Labor Market Information.


Consumer Sector

Sentiment & Spending

The Consumer Confidence Index for the U.S. declined by 9.8 points from May to June, settling at 121.5 (1985=100). The Present Situations Index declined by 8.1 points compared with last month, while the Expectations Index declined 10.9 points.

Analysts at The Conference Board stated that consumer’s assessment of present‐day conditions declined in June, noting the percentage of consumers claiming business conditions are “good” declined from 38.4 percent to 36.7 percent. Consumers were less optimistic about the short‐term outlook of improving business conditions during the month and had a less favorable outlook for the labor market. Expectations on short‐term income changes decreased as well, with more consumers expecting no improvement in wages. The Conference Board notes that the global trade and tariff tensions “appear to have shaken consumers’ confidence” and “continued uncertainty could result in further volatility in the Index…”.

Colorado is included in the Mountain Region Index and the area reported a decrease in consumer confidence between May and June. The Index fell from 137 in May to 133.6 in June, a decrease of 2.5 percent. Over‐the‐year, the Mountain Region Index rose 16.1 percent. The Present Situation Index rose 2 percent over‐the‐month to 184.3 in June, while the Expectations Index fell 7.5 percent to 99.9.

Consumer Confidence Index

Month of Month of Month of YTD Avg YTD Avg YTD Avg Ann Avg Ann Avg Jun‐19 May‐19 June‐18 2019 2018 % Change 2014 2009

Mountain 133.6 137.0 115.1 133.1 129.4 2.8% 89.2 49.7

United States 121.5 131.3 127.1 126.6 127.1 ‐0.5% 86.9 45.2

Source: The Conference Board. (p) = preliminary (r) = revised

National retail sales decreased between March and April, with total retail sales falling 1.7 percent below the previous month’s sales. Three of the 13 supersectors reported growth over‐the‐month, with the greatest increase in building materials and garden equipment and supplies stores (+13.4 percent), followed by gasoline stations (+5.2 percent) and miscellaneous store retailers (+4.7 percent).

Between April of 2018 and 2019 retail sales activity increased 5.6 percent and 11 of the 13 retail supersectors reported growth. Non‐store retailers grew the fastest at 12.5 percent, followed by health and personal stores which rose 6.5 percent. Electronics and appliance stores decreased 5.5 percent, and sporting goods, hobby, book and music stores decreased 3 percent over‐the‐year.


National Retail Sales ($millions)

Source: U.S. Census Bureau.

Price Changes

The U.S. Consumer Price Index (CPI) rose 1.8 percent between May 2018 and May 2019. Seven of the eight components increased during the period, with the greatest increases in housing (+2.8 percent), medical care (+2.1 percent), and food and beverage (+2 percent). Apparel reported the only decrease, falling 3.1 percent over‐the‐year.

The CPI for the Denver‐Aurora‐Lakewood area rose 1.6 percent, with six of the eight components increasing between May 2018 and May 2019. The greatest increases were in other goods and services (+4.1 percent), medical care (+3.1 percent), and transportation (+2.8 percent). Recreation posted no change and apparel decreased by 5.2 percent over the period.

According to the AAA Daily Fuel Gauge Report, the national average fuel price for June decreased 4.2 percent from the prior month to $2.71 per gallon. The average fuel price was 5.1 percent lower than the prior year’s level. The Metro Denver average fuel price was $2.63 per gallon, a 5.5 percent decrease from May to June and a 4.7 percent decrease over‐the‐year. The average fuel price in Metro Denver was $0.08 higher than the national average.

Stock Market

All four stock market indices increased between May and June, contrary to the past month’s declines in all indices over‐the‐month due to the trade war with China. Bloomberg Colorado index had the largest increase over‐the‐month (+8.3 percent) followed by NASDAQ (+7.4 percent) and DJIA (+7.2 percent). Over‐the‐year, DJIA increased 9.6 percent to 26,591.9, followed by S&P 500 (+8.2 percent). Bloomberg Colorado reported the smallest over‐the‐year increase, rising 4.5 percent to 577, and NASDAQ had an increase of 6.6 percent to eclipse 8,000 over‐the‐year.

Stock Market Indexes

Month of Month of Month of YTD Return YTD Return Ann Avg Return

Ann Avg Return

Jun‐19 May‐19 Jun‐18 2019 2018 2014 2009

Bloomberg Colorado 577.4 533.0 552.4 25.4% 11.0% ‐1.6% 46.2%

S&P 500 2,941.8 2,752.1 2,718.4 17.3% 1.1% 11.4% 23.5%

NASDAQ 8,006.2 7,453.2 7,510.3 20.7% 8.8% 13.2% 43.9%

DJIA (Dow Jones) 26,591.9 24,815.0 24,271.4 14.0% ‐2.3% 7.6% 18.8%

Sources: Bloomberg.com; Yahoo! Finance.

Month of Month of Month of YTD Total YTD Total YTD Total Annual Growth

Annual Growth

Apr. 2019 (p) Mar. 2019 Apr. 2018 2019 2018 % Change 2014 2009

Total Retail Sales 509,529 518,304 482,412 1,931,770 1,875,281 3.0% 4.3% ‐7.4%

Motor Vehicles 104,108 111,110 99,132 393,732 385,506 2.1% 6.4% ‐14.5%

Furniture and Home 9,245 9,793 9,175 36,001 36,392 ‐1.1% 4.6% ‐14.2%

Electronics & Appliance 6,940 7,754 7,343 29,471 30,852 ‐4.5% 0.5% ‐9.5%

Building Materials 34,635 30,546 33,127 117,104 112,908 3.7% 5.5% ‐13.3%

Food and Beverage 62,667 63,912 59,907 247,166 241,176 2.5% 4.4% ‐0.2%

Health and Personal Care 29,419 29,579 27,617 115,728 111,039 4.2% 6.2% 2.5%

Gasoline Stations 44,071 41,909 41,476 157,527 155,705 1.2% ‐2.0% ‐22.3%

Clothing & Accessories 21,547 22,093 20,616 78,184 77,486 0.9% 2.3% ‐5.2%

Sporting Goods 6,012 6,132 6,201 22,791 24,646 ‐7.5% 1.0% ‐4.1%

General Merchandise 56,542 58,421 53,570 216,796 213,005 1.8% 2.3% ‐1.0%

Miscellaneous Store 10,710 10,229 10,223 39,275 39,791 ‐1.3% 3.1% ‐8.1%

Non‐Store Retailers 59,979 60,262 53,291 233,640 212,305 10.0% 8.7% ‐2.5%

Food Service & Drinking 63,654 66,564 60,734 244,355 234,470 4.2% 6.1% ‐0.9%


Travel & Tourism

According to Longwoods International, Denver brought in 31.4 million visitors in 2018, a drop from the 31.7 million visitors in 2017 and the first time visitors have decreased in the last 13 years. While overall visitor numbers have fallen, the region attracted a record 7.1 million overnight marketable leisure travelers who came purely for visitation purposes rather than business/family reasons, with estimates that those visitors spent an average of $166 per day in Denver.

Rocky Mountain National Park ranked among the top 10 out of 61 national parks in a ranking by The Discoverer outdoors and travel website. Included in the list was also Black Canyon of the Gunnison, Mesa Verde National Park, and Great Sand Dunes National Park. In 2018, national parks in Colorado supported 7,100 jobs and $743 million in economic output in Colorado.

Colorado resorts ended the ski season with a record 13.8 million skier days, a 13 percent increase from last year and nearly 12 percentage points above the five‐year average, according to Colorado Ski Country USA. Vail Resorts reported third‐quarter earnings and revenue that topped Wall Street expectations, with a lot of the success coming from a consistent pattern of snow throughout the winter and spring seasons.

Colorado ski resorts operating on public land paid $26.8 million in rent payment to the federal government for the 2017‐2018 season, setting the record once again for rent payment to the U.S. for federal land use. It is estimated that every year the 122 U.S. ski resorts on public land send rent payment of about $37 million to the U.S. Treasury. These numbers are expected to increase year after year as resorts continue to bolster growth through season pass sales and off‐season business ventures.

Colorado Casinos in Black Hawk, Central City, and Cripple Creek raked in a combined $842.1 million in revenue in 2018 according to the American Gaming Association, representing a 1.7 percent increase over 2017 and a nearly 13 percent increase over 2014. Central City had a 9.9 percent increase in revenue from 2017, while Cripple Creek had a 3.8 percent increase. Black Hawk brought in $623.2 million in total.

The average hotel occupancy rate in Metro Denver rose 2.4 percentage points over‐the‐year, increasing to 77.6 percent in the month of May. The average hotel room rate increased 1.7 percent over the period, increasing by $2.45 per night to $145.60. This was a 2.8 percent increase from the previous month.

Metro Denver Hotel Statistics

Month of Month of Month of YTD Avg YTD Avg YTD Avg Annual Annual

May‐19 Apr‐19 May‐18 2019 2018 % Change 2014 2009

Percent of Hotel Rooms Occupied 77.6% 75.0% 75.2% 69.9% 69.3% 0.1% 75.8% 59.0%

Average Hotel Room Rate $145.60 $141.62 $143.15 $135.76 $135.09 0.0% $124.37 $106.85

Source: Rocky Mountain Lodging Report.

Denver International Airport (DEN) is expecting a record‐breaking summer for passengers traveling through the airport.

On June 16, 216,000 passengers passed through DEN, topping the daily record set last year. That record was then

broken again both on June 19 and 20 of this year. The airport expects to have its busiest day of the year around mid‐

July, estimating a record 230,000 passengers.

DEN plans to widen Peña Boulevard to facilitate transit along the route leading into the airport. The Denver City Council

approved a $93 million contract to widen the road from I‐70 to DEN by three lanes and add new interchanges. The first

phase of the expansion is scheduled for completion in 2022.

Spokespeople for Denver International Airport (DEN) reported that more than 5.3 million passengers passed through the airport in April, an increase of 4.4 percent from the previous year, or an additional 225,318 passengers. In addition, the April level was 2.4 percent lower than the previous month.


Denver International Airport Passengers

Month of Month of Month of YTD Total YTD Total YTD Total Annual Annual

Apr‐19 Mar‐19 Apr‐18 2019 2018 % Change 2014 2009

Number of Airline Passengers 5,321,719 5,451,215 5,096,401 20,275,933 19,405,761 4.5% 53,472,514 50,167,485

Source: Denver International Airport, Traffic Statistics.

Residential Real Estate

Michael Eisenstein, founder of Land Capital LLC, plans on building a 40‐story, 1,300‐unit apartment tower with a focus on art and brand creation, calling it a ‘kaleidoscope in the sky’. The site in question is a parking lot in the Central Business District in downtown Denver, which Eisenstein is under contract to purchase for $28 million. Either the lot will remain for parking, generating high revenues year‐over‐year, or be converted into one of the largest apartment complexes in Denver.

A 475‐unit apartment complex has been proposed near the 38th and Blake streets commuter rail station in RiNo. Crescent Communities submitted a site‐development plan to the city and is planning to build on a 2.7‐acre site that is currently home to a large industrial building. The complex, called Novel RiNo, would be 12 stories, with the ground floor being approximately 10,000 square feet of retail space.

Vancouver‐based company Amacon will begin construction on what will be one of Colorado’s tallest and largest condominium projects ever. The “Block 176” condo project will include 461 total units, consisting of two towers with retail space on the ground floors. The first tower will measure 39 stories and is scheduled to have residents moving in the first half of 2022. The second tower will be 32 stories, set to be completed sometime mid‐2023.

Evergreen Devco, a Denver‐based developer, hopes to get final approvals from City of Littleton officials to build hundreds of homes, apartments, and shops on 33 acres of vacant land near the southwest corner of Mineral Avenue and Santa Fe Drive. The project calls for roughly 250 apartments with an additional 150 units in a senior living facility. The northeastern side of the parcel would be used for commercial and retail uses.

Hines, a Houston‐based developer, has partnered with Cresset Capital Management to acquire a 2.5‐acre site just west of the upcoming concert venue Mission Ballroom to develop a 10‐story apartment building for $21 million. The building, located on Brighton Blvd between 40th and 43rd streets, will have 392 units and approximately 15,000 square feet of retail space. Construction is set to begin later this year or next and will be completed roughly 30 months after breaking ground.

CU Denver is planning on developing a $68 million housing project on the Auraria Campus that could house more than 500 students. The Auraria Campus, a traditionally commuter‐based campus, only has one housing complex affiliated with the school near Broncos Stadium at Mile High. The project is set to be voted on by the CU Board of Regents.

A new 350‐unit apartment building is planned in Aurora, located adjacent to the 13th Avenue Light Rail Station. Pinnacle Real Estate Advisors represented the unknown buyer for the 12.5‐acre plot of land, intended to house Class A multi‐family units with easy access to the rail line.

MicWhinney plans to build a 17‐story, 348‐unit apartment complex with retail units on the ground floor in Denver’s

RiNo district near the 38th and Blake St. RTD station. The building will offer both affordable units and top‐tier

penthouses, becoming the tallest building in the RiNo district. No timetable for construction has been agreed upon yet.

The Denver City Council approved a rezoning for an affordable housing complex near Sloan’s lake. The project will include 160 apartments and 160 condos at the southeast corner of Sloan’s Lake, with 160 units being designated


affordable for the next 30 years. Zocalo Community Development says construction of “17th & Newton” could begin within 18 months.

Loveland‐based development firm McWhinney has broken ground on the company’s first Longmont multi‐family residential project. The Clovis Point community is expected to be available summer of 2020 and will include 208 apartments ranging from 560‐square‐foot studios to 1,252‐square‐foot three‐bedroom units.

First Stone Development is proposing a five‐story condominium building for a site in the Santa Fe arts district. The complex would include 117 units and about 11,000 square feet of ground‐floor retail space. The development company has already completed or is currently building townhome projects in Denver’s West Highland, Sloan’s Lake, and Berkeley neighborhoods. Target completion date will be summer 2021.

More than 100 affordable housing units are planned for East Colfax Ave after Denver bought two adjacent sites in 2017 with hopes of creating an economic boost to the area. Mercy Housing Mountain Plains and Brothers Redevelopment are set to build 80 apartments, with 17 of them for households earning up to 30 percent of the area median income. The complex will house 72 families at 7900 E. Colfax.

LCP Development plans to upgrade an office building at 777 Grant St. and build a 68‐unit apartment complex adjacent to the site. The project is expected to break ground this fall and will include four stories of apartments and two levels of underground parking.

Koelbel & Company filed a demolition application for a funeral home that shut down services earlier this year in Denver’s Berkeley neighborhood. While nothing has been finalized on the future use of the space, plans for a 58‐unit townhome project on the two‐acre site were submitted for city review on May 31.

Westside Investment Partners closed on 50 S. Kalamath St. for $16.5 million, with hopes of building new apartments on

the 6.5‐acre site. While zoning restrictions are in place now, the company plans to have the lot rezoned for a five‐story

complex that could break ground in 2020.

Home Resales

Metro Denver

Metro Denver existing home sales increased 16.9 percent between April and May and increased 7.4 percent over‐the‐year.

Unsold homes on the market were 26.8 percent higher in May than in April and 38.1 percent higher than May 2018. Compared with last year, there were an additional 2,454 homes on the market.

The average sales price for single‐family homes increased 1.5 percent over‐the‐year to $535,613, while the average sales price for condominiums ($318,986) increased 4.7 percent during the same period

Previously‐Owned Home Sales Activity

Month of Month of Month of YTD Total YTD Total YTD Total Ann Total Ann Total


Home Sales (Closed) 5,743 4,914 5,346 21,518 20,918 2.9% 54,068 42,070

Unsold Homes on Market 8,891 7,012 6,437 8,891 6,437 38.1% 6,744 19,762

Average Sales Price‐Single Family $535,613 $529,969 $527,557 $512,398 $507,059 1.1% $363,604 $264,803

Average Sales Price‐Condo $318,986 $308,414 $304,780 $310,127 $296,301 4.7% $224,997 $159,628

Median Sales Price‐Single Family $449,900 $440,000 $436,700 $306,000 $219,000

Median Sales Price‐Condo $280,000 $274,950 $273,500 $180,000 $135,000

Source: Colorado Comps LLC; Denver Metro Association of Realtors; REcolorado.


National

According to the National Association of Realtors (NAR), total existing‐home sales increased 2.5 percent from April to May to a seasonally adjusted annual rate of 5.34 million. Total sales are down 1.1 percent from a year ago, which totaled 5.4 million in May 2018. All four major U.S. regions reported growth in sales over‐the‐month led by the Northeast region.

Total housing inventory at the end of May increased to 1.92 million, up from 1.83 million existing homes available in April. The housing inventory increased 2.7 percent from 1.87 million a year ago. Unsold inventory is at a 4.3‐month supply, up from the 4.2‐month supply posted in both April 2019 and May 2018.

Properties remained on the market for an average of 26 days in May, up from 24 days in April and equal to 26 days in May of 2018. Of the homes sold in May, 53 percent were on the market for less than a month.

Home Prices

NAR data shows that the median existing‐home price for all housing types in May was $277,700, up 4.8 percent from May 2018 ($265,100). This increase marked the 87th straight month of year‐over‐year gains. The median price in the Northeast was $304,100, up 6.6 percent from the same time last year. In the Midwest, the median price increased 5.6 percent from a year ago to $220,500. The median price in the South was up 3.6 percent to $241,400, while the median price in the west was $409,100, up 4.1 percent from May 2018.

A separate NAR report revealed that the median price in the Boulder MSA ($603,600) during the first quarter of 2019 was 1.9 percent higher over‐the‐quarter and 2.6 percent higher over‐the‐year. The Denver‐Aurora MSA ($446,600) was 1.9 percent higher than the fourth quarter and 1.2 percent above the year‐ago level.

The national median sales price during the first quarter of 2019 decreased 1.2 percent over‐the‐quarter to $254,800 but was 3.9 percent higher than the previous year’s level.

Median Sales Price of Existing Single‐Family Homes ($000s)

Quarter 1 Quarter 4 Quarter 1 YTD Avg YTD Avg YTD Avg Median Median

2019 (p) 2018 (r) 2018 2019 2018 % Change 2014 2009

Boulder MSA $603.6 $592.3 $588.5 $603.6 $588.5 2.6% $390.7 $345.5

Denver‐Aurora MSA $446.6 $438.3 $441.5 $446.6 $441.5 1.2% $310.2 $219.9

United States $254.8 $258.0 $245.3 $254.8 $245.3 3.9% $208.9 $172.1

Source: National Association of REALTORS. (p) =preliminary (r) =revised

Of the 178 MSAs included in the first quarter 2019 report, the Boulder MSA reported the sixth‐highest median price, while the Denver‐Aurora MSA median price was the 11th‐highest.


According to the S&P/Case‐Shiller home price index, Denver housing prices appreciated in April, increasing 0.8 percent over‐the‐month to 221.53. Denver housing prices increased 3.8 percent between April 2018 and 2019, while the national over‐the‐year growth rate was 3.5 percent.

Las Vegas (+7.1 percent) reported the largest over‐the‐year growth rate for the second straight month, followed by Phoenix (+6 percent) and Tampa (+5.6 percent). Denver ranked eighth out of the 20 cities listed in the series.

Seattle (+0.0 percent), San Diego (+0.8 percent), and Los Angeles (+1.5 percent) recorded the smallest increases over‐the‐year.

Foreclosures

Foreclosures in Metro Denver increased 6.8 percent between May of 2018 and 2019, rising by 14 homes foreclosed on during the period. Five of the seven counties reported an increase in foreclosures compared with last year. Adams County had the largest over‐the‐year percentage increase of 27 percent, followed by Arapahoe County and Broomfield County (+25 percent). Boulder County reported the largest decrease in foreclosures at 42.9 percent, decreasing by six homes over‐the‐year, followed by Jefferson County (‐20.4 percent).

Between April and May, Broomfield County (+25 percent) and Jefferson County (+21.9 percent) reported increases in foreclosure filings. Boulder County reported a decrease in foreclosure filings by 55.6 percent over‐the‐month, followed by Adams County (‐23 percent).

Real Estate Foreclosures

Month of Month of Month of YTD Total YTD Total YTD Total Annual Total Annual Total


Total Metro Denver* 220 246 206 1,197 1,185 1.0% 5,328 26,434 Adams County 47 61 37 276 257 7.4% 1,200 5,646 Arapahoe County 55 56 44 285 278 2.5% 1,314 6,243 Boulder County 8 18 14 69 63 9.5% 253 1,382 Broomfield County 5 4 4 25 19 31.6% 59 315 Denver County 42 46 37 238 226 5.3% 1,087 6,141 Douglas County 24 29 21 124 117 6.0% 437 2,680 Jefferson County 39 32 49 180 225 ‐20.0% 978 4,027

*The total number of election and demand setups (initial filings) received by county public trustees. Filings may be subsequently cured or withdrawn. Sources: County public trustees.


New Home Sales

Sales of new single‐family homes in May were at a seasonally adjusted annual rate of 626,000, according to estimates released by the U.S. Census Bureau and the Department of Housing and Urban Development. This was 7.8 percent below the revised rate from April 2019 of 679,000 home sales and 3.7 percent below the estimate from May 2018.

Between May 2018 and 2019, home sales in the Northeast and West regions fell by 15.2 percent and 17.2 percent, respectively. The Midwest had the largest over‐the‐year increase (+2.4 percent), followed by the South (+1.3 percent).

New Home Construction National

Builder confidence for newly built single‐family homes fell two points to 64 in June, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). While sentiment levels have held steady in the low‐ to mid‐60s for the past five months, builders continue to express concerns over trade issues and rising construction costs. Higher home prices have continued to pose challenges to new home buyers despite low mortgage rates.

According to the Census Bureau, the seasonally adjusted annual number of nationwide residential building permits increased 0.7 percent over‐the‐month in May to 1.299 million permits but decreased over‐the‐year by 0.2 percent.

Single‐family detached units across the U.S. reported the only increase from the past month (+3.1 percent), but fell 3.9 percent over‐the‐year to a total of 810,000 units.

Single‐family attached units fell 22.2 percent over‐the‐month but increased 2.9 percent over‐the‐year to a total of 35,000 units. Multi‐family units fell 1.1 percent over‐the‐month but increased 7.1 percent over‐the‐year to a total of 454,000 units.

The Northeast and Midwest regions reported decreases over‐the‐year for single‐family detached units, falling 28.4 percent and 17.2 percent, respectively. The South region had the highest over‐the‐year increase, growing 10.4 percent with the West region rising 2.1 percent over the period.

Metro Denver

Residential building permits for Metro Denver increased by 15.1 percent between May 2018 and 2019 with a total of 1,771 permits issued during the month.

Multi‐family units reported the only increase over‐the‐year, rising 119.2 percent or 347 permits issued. Single‐family attached units reported the largest decrease, falling 76.9 percent or 20 fewer units, while single‐family detached units fell 7.8 percent or 95 fewer units over the period.


The number of residential units permitted in Metro Denver increased 35.1 percent from April to May, due to a 98.8 percent increase in multi‐family units and a 14.5 percent increase in single‐family detached units. Single‐family attached units remained constant over‐the‐month at six permits for both April and May.

Residential Building Permits

Month of Month of Month of YTD Total YTD Total YTD Total Total Total


Single‐Family Detached Units 1,127 984 1,222 4,464 5,535 ‐22.5% 7,396 4,037Single‐Family Attached Units 6 6 26 70 113 ‐26.4% 399 224Multi‐Family Units 638 321 291 3,199 5,016 ‐36.0% 9,145 5,296Total Units 1,771 1,311 1,539 7,733 10,664 ‐29.5% 16,940 9,557

Source: U.S. Census Bureau.

Apartment Rental Market

The apartment vacancy rate throughout Metro Denver fell 0.4 percentage points between the fourth quarter of 2018 and the first quarter of 2019. Over‐the‐year, the rate also decreased, falling 0.7 percentage points to 5.4 percent vacancy. Vacancy rates ranged from 4.4 percent in Jefferson County to 7.3 percent in Douglas County.

The average monthly rental rate of apartments in Metro Denver increased over‐the‐quarter in five of the six submarkets in the first quarter of 2019. Douglas County reported the largest increase, rising 4.4 percent. Adams County reported the only decrease, falling 0.8 percent. The average rental rate ranged from $1,374 in Adams County to $1,617 in the Douglas County submarket. Over‐the‐year, all submarkets reported increases, with the largest gains in Douglas County (+5.8 percent), Arapahoe County (+5.4 percent), and Adams County (+4.9 percent).

Apartment Statistics

Quarter 1 Quarter 4 Quarter 1

YTD Average

YTD Average

YTD Average Ann Avg Ann Avg

2019 2018 2018 2019 2018 % Change 2014 2009

Apartment Vacancy Rate 5.4% 5.8% 6.1% 5.4% 6.1% 4.6% 8.1%

Average Monthly Rental Rate (all units) $1,481 $1,456 $1,420 $1,481 $1,420 4.3% $1,126 $877

Source: Denver Metro Apartment Vacancy and Rent Survey.

Commercial Real Estate

The Denver City Council has approved a massive development to replace the parking lots surrounding Broncos Stadium at Mile High. Backed by the football team, the proposal calls for a mixed‐use development with shopping and residential buildings, parks, and affordable housing for low to middle income residents. While the project scope is not fully known yet, the current estimates show the development adding 3.5 million square feet, with housing for 2,000 new residents plus retail, restaurants, offices, and hotel rooms.


A draft plan has been submitted for Loretto Heights, calling for housing, restaurants, and shops to revamp the former college campus. The campus features 15 historic buildings and structures, meaning the project will require flexibility and careful planning to work around the structures and make sure the new buildings are sensitive to the campus’ historic nature. The draft submitted calls for a central hub including housing, restaurants, and other entertainment amenities for the area, with plans for guiding development for a 300‐acre section of southwest Denver in and around the campus.

Gayeski Capital Equities LLC is developing a 292‐acre project called Bennett Crossing, located at the northeast corner of I‐70 and CO Highway 79 in Bennett. The development will be mixed‐use, including residential, hospitality, retail, restaurant, medical, office, industrial, and senior housing. Of the 292 acres, 56 acres will be developed for 275 single‐family detached homes by LGI Homes. Another 2.4 acres will be used for a 78‐room Comfort Inn & Suites, to be developed by Colorado Hospitality Services.

A new SCL Health‐owned health care facility will anchor the new Clear Creek Crossing commercial development. Located southwest of Interstate 70 and Highway 58 in Wheat Ridge, the 110‐acre development is owned by Evergreen Devco Inc and is being built in partnership with City Street Investors. The facility is still in the planning stage and still needs approval for what type of health care facility will be constructed.

The Opus Group is planning on constructing a 264,000‐square‐foot industrial development in the Dove Valley Business Park in unincorporated Arapahoe County, focusing on industrial, e‐commerce, aerospace, manufacturing, and food‐service tenants. There is currently no estimation on when construction will begin. The property is located at the southwest corner of South Potomoc Street and South Chambers Road.

Karis Capital is building a 163,790‐square‐foot front‐park, rear‐load building at 1910 N. Gun Club Road in Park 70 business park in Aurora. The project will break ground July 1 and include outside storage for tenants. This comes at a time when more and more companies require trailer parking for commercial use. Karis plans to invest in more industrial deals in Denver in the future.

Construction has started on a $50 million Gateway Crossing development, a mixed‐use property in Green Valley Ranch, with hopes of attracting needed tenants to the area. The 100,000‐square‐foot property will have approximately 20 buildings with a mix of retail, recreation, restaurant, grocery, and medical space focusing on internet‐resistant retail to serve the growing residential community. The project is slated for completion by summer 2020.

Denver‐based Evergreen Devco Inc. broke ground on a new retail project in Stapleton. The retail development is a joint venture with City Street Investors, the same owners and operators of Larimer Square and Union Station in Denver. ‘The Shops at Beeler Park’ will be located at 56th Avenue and Central Park Boulevard, built on 6.8 acres of land, and will consist of two multi‐tenant buildings and five single‐tenant buildings totaling 16,500 square feet of space.

Dallas‐based Fayth Hospitality Group LLC expects to break ground on a 107‐suite Home2 Suites by Hilton hotel in Broomfield at 505 Zang St. this summer. Opening is targeted for summer 2020. The four‐story hotel will be located on a large lot offering more outdoor space to guests, in addition to having an attached building with an indoor pool.

The Denver area has the fastest pace of hotel construction in America, according to a Costar Market Analytics report, with 13 hotel projects with 100 rooms or more currently under construction. Stonebridge, the largest of these, is a 382‐room, 21‐story tower at 801 15th St. near the Colorado Convention Center.

The University of Colorado broke ground on a new $45 million building that will connect CU’s Leeds School of Business and the College of Engineering and Applied Science complex. The new building will be 45,000 square feet and is set to be complete by 2020. The project will include a new 200‐seat auditorium and four 90‐seat active‐learning classrooms.

Glendale‐based Westside Investment Partners purchased a vacant warehouse in the Baker neighborhood once used by Sports Authority, as well as two parking lots across the street. Westside is pursuing rezoning of the 6.5 acres in the vicinity of 39 S. Kalamath Street so that they can demolish the warehouse and build an apartment complex and an office building on the site. They hope to have the property rezoned within a year.


Office Market The Metro Denver office market reported generally positive trends in the second quarter of 2019. According to Costar

Realty data, while the average direct vacancy rate increased 0.1 percentage points over‐the‐quarter, the rate

decreased 1.1 percentage points over‐the‐year to 8.9 percent. The average lease rate rose 1.2 percent over‐the‐year to

$26.95 per square foot.

Office construction in Metro Denver has slowed compared with the prior two years, with over 850,000 square feet of

space completed across 16 buildings by the end of the second quarter of 2019. In contrast, 2.9 million square feet had

been completed at the same time last year. New office buildings were completed in six of the seven Metro Denver

counties, with 56 percent of the space added in the City and County of Denver. The largest building completed was The

Hub (279,317 square feet), a Class A office building located in RiNo.

There was over 3.1 million square feet of space spread across 36 buildings that were under construction at the end of

the second quarter of 2019, a 16.4 percent decrease over‐the‐year from 3.72 million square feet under construction in

the second quarter of 2018. The largest project under construction was the Block 162 Tower, which will be adding

566,050 square feet of office space in downtown Denver. Of the office space under construction, 53 percent was in the

City and County of Denver.

Office Market Statistics

Quarter 2 Quarter 1 Quarter 2 Quarter 2 Quarter 2 Quarter 2

2019 2019 2018 2017 2016 2015

Number of Buildings 6,420 6,410 6,388 6,347 6,304 6,263

Existing Square Feet (millions) 193.9 193.2 191.5 187.6 184.4 181.9

Vacant Square Feet (direct, millions) 17.2 17.1 19.2 18.3 16.5 17.5

Vacancy Rate (direct) 8.9% 8.8% 10.0% 9.8% 8.9% 9.6%

Vacancy Rate (with sublet) 9.7% 9.7% 10.8% 10.7% 9.5% 10.1%

Avg. Lease Rate (direct, per sq. foot, full service) $26.95 $26.74 $26.64 $26.19 $25.32 $24.00New Construction Completed (year‐to‐date) 0.85 MSF,

16 Bldgs0.48 MSF,

5 Bldgs2.88 MSF,21 Bldgs

1.96 MSF, 21 Bldgs

0.46 MSF, 10 Bldgs

0.30 MSF, 7 Bldgs

Currently Under Construction 3.11 MSF, 36 Bldgs

3.35 MSF, 40 Bldgs

3.72 MSF,37 Bldgs

4.69 MSF, 41 Bldgs

3.95 MSF, 34 Bldgs

2.93 MSF, 26 Bldgs

Source: CoStar Realty Information, Inc. MSF=Million Square Feet

Industrial & Flex Market

Costar reported that the industrial market’s average lease rate increased 1.9 percent between the second quarters of

2018 and 2019. The direct vacancy rate increased 0.5 percentage points to 4.5 percent during the period.

There was 2.55 million square feet of industrial space completed across 21 buildings as of the end of the second

quarter of 2019, a record amount of space added by this point compared with prior years. Major completed projects

included Nexus at DIA (540,931 square feet) and Building 23 at 18300 E 40th Ave in Aurora (419,060 square feet).

Adams County accounted for over 1.8 million square feet and 71 percent of the recently completed square feet.

There was 4.31 million square feet across 33 buildings under construction in the second quarter of 2019, with the

largest project being the First Aurora Commerce Center (555,840 square feet). As with completed space, most of the

space currently under construction is in Adams County, accounting for 77 percent of square footage under

construction.


Vacancy rates fell in the Metro Denver flex market, decreasing 0.7 percentage points over‐the‐year. The average lease

rate for the flex market decreased by $0.99, down 0.7 percent to $12.08.

There was 89,304 square feet completed across 4 buildings as of the second quarter of 2019, including The Collective

flex space in Boulder County (31,000) and Phase 3 at 2300 E 76th Ave in Adams County (30,000). Eight buildings

offering 443,966 square feet of space were under construction at the end of the quarter. The largest projects are the

Bioscience 3 building at the Fitzsimons Innovation Campus in Aurora, adding 117,000 square feet of flex space, and a

152,761‐square‐foot flex building at 16205 Sheridan Parkway in Broomfield.

Industrial Market Statistics


2019 2019 2018 2017 2016 2015






Avg. Lease Rate (direct, per square foot, NNN) $8.15 $8.24 $8.00 $7.60 $7.42 $6.63New Construction Completed (year‐to‐date) 2.55 MSF,

21 Bldgs1.08 MSF, 12 Bldgs

1.34 MSF,11 Bldgs

1.93 MSF, 22 Bldgs

2.07 MSF, 11 Bldgs

0.89 MSF, 3 Bldgs


4.43 MSF, 29 Bldgs

6.33 MSF,37 Bldgs

3.26 MSF, 24 Bldgs

3.46 MSF, 23 Bldgs

0.86 MSF, 3 Bldgs


Flex Space Statistics


2019 2019 2018 2017 2016 2015






Avg. Lease Rate (direct, per square foot, NNN) $12.08 $12.07 $12.17 $11.73 $10.92 $10.28New Construction Completed (year‐to‐date) 0.09 MSF,

4 Bldgs0.21 MSF,

3 Bldgs0.35 MSF,

7 Bldgs0.46 MSF,

9 Bldgs 0.1 MSF, 3 Bldgs

0.32 MSF, 3 Bldgs


0.31 MSF, 8 Bldgs

0.32 MSF,9 Bldgs

0.14 MSF, 4 Bldgs

0.31 MSF, 7 Bldgs

0.07 MSF, 1 Bldg


Retail Market

The Metro Denver retail market reported an increase in the average lease rate of 2.4 percent, up to $18.97 per square foot in the second quarter of 2019. The direct vacancy rate increased 0.1 percentage points to 4.4 percent across the 12,555 buildings in the retail sector.

There were 49 buildings and 467,451 square feet completed in Metro Denver as of the second quarter of 2019. The largest projects completed were Summit Thornton in Adams County (49,980) and Emich Volkswagen in the City and County of Denver (45,000).


There was 1.15 million square feet of retail space across 68 buildings under construction during the second quarter of 2019, the largest project being the Vista Highlands in Broomfield totaling 96,500 square feet. The City and County of Denver has the most retail development under construction, accounting for 15 of the 68 buildings.

Retail Market Statistics


2019 2019 2018 2017 2016 2015






Avg. Lease Rate (direct, per square foot, NNN) $18.97 $18.99 $18.53 $17.50 $16.42 $15.78 New Construction Completed (year‐to‐date) 0.47 MSF,

49 Bldgs0.08 MSF, 14 Bldgs

0.53 MSF,48 Bldgs

0.86 MSF, 45 Bldgs

0.64 MSF, 44 Bldgs

0.34 MSF, 20 Bldgs


1.04 MSF,60 Bldgs

1.59 MSF,66 Bldgs

1.43 MSF, 73 Bldgs

1.04 MSF, 45 Bldgs

0.78 MSF, 32 Bldgs



Monthly Economic Indicators

Positive Changes

12,100 24,500 28,000

29% 29% 29%

2.4% ‐0.3 percentage points 3.0%

‐3.6% 2.1% 4.2%

‐1.7% 5.6% 3.0%

133.6 16.1% 133.1

77.6% 2.4 percentage points 69.9%

‐2.4% 4.4% 4.5%

577.4 4.5% 25.4%

26,591.9 9.6% 14.0%

5,743 7.4% 21,518

$446,600 1.2% $446,600

220 6.8% 1,197

1,771 15.1% 7,733

Permits increased 35.1% from

Apr to MayPermits up May 2018 to 2019

YTD permits down 27.5%

through May 2019

Foreclosures

Down 10.6% from Apr to May Up from May 2018 to 2019 Up 1% YTD through May 2019

Residential Building Permits (Total)

Home Sales (closed)

Sales up 16.9% between Apr and May Sales up from May 2018 to 2019 YTD sales up 2.9% through May 2019

Median Home Price

(Denver‐Aurora MSA)Up 1.9% from 4Q 2018 to 1Q 2019 Price up from 1Q 2018 to 1Q 2019 YTD price 1.2% higher through 1Q 2019

Bloomberg Colorado Index

Index up 8.3% from May to Jun Index up from Jun 2018 to 2019 YTD return up through Jun 2019

Dow Jones Industrial Average

Index up 7.2% from May to Jun Index up from Jun 2018 to 2019 YTD return up through Jun 2019

Hotel OccupancyIncreased 2.6 percentage points from Apr

to May

Occupancy increased from May 2018 to

May 2019YTD occupancy up from last year

Denver International Airport Passengers

Passengers down from Mar to Apr Passengers up from Apr 2018 to 2019YTD passengers increased through Apr

2019

Total National Retail Sales

National sales decreased from Mar to AprNational sales increased from Apr 2018 to

2019YTD sales rose through Apr 2019

Mountain Region Consumer Confidence Index

Index down 2.5% from May to Jun Index up from Jun 2018 to 2019 YTD average up 2.8% through Jun 2019

Unemployment RateUnemployment down 0.2 percentage

points between Apr and May

Unemployment down from May 2018 to

2019

Up 0.1 percentage point from 2018 YTD

average

Initial Unemployment Insurance Claims

Claims decreased from April to May Claims increased from May 2018 to 2019YTD average claims increased through

May 2019

Nonfarm Employment GrowthEmployment up 0.7% from Apr to May

Employment up 1.4% from May 2018 to

2019YTD employment up 1.7% through May

% Companies Hiring

(Denver Area) Companies hiring fell 6 percentage points

from 2Q 2019 to 3Q 2019

Companies hiring rose had no change

from 3Q 2018 to 3Q 2019

YTD average up 1 percentage point

compared with 2018

Monthly/Quarterly Direction Year‐Over‐Year Direction Year‐to‐Date Direction

11 of 18 13 of 18 12 of 18


5.4% ‐0.7 percentage points 5.4%

Vacancy decreased 0.4

percentage points from 4Q

2018 to 1Q 2019

Vacancy decreased from 1Q

2018 to 1Q 2019

YTD average down 0.7

percentage points from last

year

9.7% ‐1.1 percentage points ‐1.1 percentage points

No change in vacancy rate from

1Q 2019 to 2Q 2019

Vacancy rate down from 10.8%

one year ago

Vacancy rate down from 10.8%

one year ago

4.8% +0.6 percentage points +0.6 percentage points

Vacancy rate increased from 1Q

2019 to 2Q 2019

2Q 2019 vacancy up from 4.2%

one year ago

2Q 2019 vacancy up from 4.2%

one year ago

4.5% ‐0.0 percentage points ‐0.0 percentage points

Vacancy rate increased 0.1

percentage point from 1Q 2019

to 2Q 2019

2Q 2019 vacancy the same as

one year ago

2Q 2019 vacancy the same as

one year ago

Office Vacancy Rate (with Sublet)

Industrial Vacancy Rate (with Sublet)

Retail Space Vacancy Rate (with Sublet)

Apartment Vacancy Rate

Economic and Demographic Research Industry Studies Fiscal and Economic Impact Analysis Real Estate Economics 10184 West Belleview Avenue Suite 100 Littleton, Colorado 80127 www.DevelopmentResearch.net 303.991.0070

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