Winds of Change - Amazon Web Serviceshypercache.h5i.s3.amazonaws.com/.../2016CPEWindsofChange.pdf · Blowing with the wind of change. – Klaus Meine Scorpions, “Wind of Change

Winds of Change

© Can Stock Photo Inc. / BettinaBlass

2016 Midyear Economic Update for Metro Denver

Global Outlook

If one does not know to

which port one is sailing,

no wind is favorable.

- Lucius Annaeus Seneca

(Seneca the Younger)

Courtesy of Portland State University


Mixed Global Growth Prospects

2015 2016 2017

World 3.1% 3.4% 3.1% 3.4%

United States 2.4% 2.6% 2.2% 2.5%

Canada 1.1% 1.7% 1.4% 2.1%

Mexico 2.5% 2.6% 2.5% 2.6%

Euro Area 1.7% 1.7% 1.6% 1.4%

China 6.9% 6.3% 6.6% 6.2%

Japan 0.5% 1.0% 0.3% 0.1%

United Kingdom 2.2% 2.2% 1.7% 1.3%

Source: International Monetary Fund, World Economic Outlook Update.

Red values January 2016. Black values July 2016.

Year over Year Growth in Output


Real U.S. Gross Domestic Product Annual Average Growth Rates

2.7%

1.8%

-0.3%

-2.8%

2.5%

1.6%

2.2% 1.7%

2.4% 2.6%

1.6% 2.0%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f

Source: U.S. Bureau of Economic Analysis.

2016e = DRP estimate; 2017f = DRP forecast


Employment

The pessimist complains about the wind;

the optimist expects it to change;

the realist adjusts the sails.

- William Arthur Ward

© Can Stock Photo Inc. / herreid


Colorado 5th fastest growing state in 2015; #11 through first half of 2016

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

AZ CO KS NE NM OK TX UT WY

Nonfarm Job Growth Rates

2014 2015 2016

#6 #5

#1

#11 #7

#5

#14

#25

#3

#49

Source: U.S. Bureau of Labor Statistics, Current Employment Statistics.

#3


Employment growth varies across the state

0.4%

0.5%

2.0%

2.9%

2.9%

3.6%

2.7%

1.8%

0.0% 1.0% 2.0% 3.0% 4.0%

Greeley

Grand Junction

Pueblo

Colorado Springs

Metro Denver

Fort Collins

Colorado

U.S.

Nonfarm Job Growth Rates by Metro Area, 1st Half 2016

Source: U.S. Bureau of Labor Statistics, Current Employment Statistics.


Nonfarm Job Growth Rates

1.9% 2.1% 1.8%

1.4%

3.7% 3.5%

2.8% 2.3%

-6%

-4%

-2%

0%

2%

4%

6%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f

United States Metro Denver

Metro Denver 2016 Employment = 1.6 million

2013-2015: average 52,700 jobs added per year; expect 45,000 in 2016

Source: U.S. Bureau of Labor Statistics.



Key Metro Denver and Northern Colorado Industry Clusters

• Aerospace

• Aviation

• Beverage Production

• Bioscience

• Medical Devices &

Diagnostics

• Pharmaceuticals &

Biotechnology

• Broadcasting &

Telecommunications

• Energy

• Fossil Energy

• Cleantech

• Financial Services

• Banking & Finance

• Investments

• Insurance

• Healthcare & Wellness

• IT/Software

NEW


Metro Denver and Northern Colorado Industry Clusters, 2014-2015

Source: Development Research Partners.


Commercial Real Estate

May you have a strong foundation when the winds of change shift…

- Bob Dylan, “Forever Young”

© Can Stock Photo Inc. / josephpucadyilphoto


Metro Denver Commercial Real Estate

Vacancy Rate (direct) Lease Rate

2Q 2015 2Q 2016 2Q 2015 2Q 2016

Office 9.7% 9.0% $23.88 $25.00

Industrial 2.9% 3.7% $6.57 $7.45

Retail 5.1% 4.8% $15.90 $16.42

Source: CoStar Group, Inc.

Construction Activity (YTD through 2Q 2016)

• Office: 0.5 MSF completed; 4.0 MSF under construction

• Industrial: 2.1 MSF completed: 3.5 MSF under construction

• Retail: 0.6 MSF completed; 1.0 MSF under construction


New Commercial Real Estate Added in Metro Denver

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e

Millio

ns

of

Sq

uare

Feet

Office Industrial Retail

Source: CoStar Realty Information

2016 estimate=DRP analysis of CoStar data


Consumer Activity

The future's in the air. I can feel it everywhere. Blowing with the wind of change.

– Klaus Meine

Scorpions, “Wind of Change”

© Can Stock Photo Inc. / FotoYou123


Components of Real GDP ($billions, 2009 chained; seasonally adjusted at annual rates)

-$1,000

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,00019

29

19

32

19

35

19

38

19

41

19

44

19

47

19

50

19

53

19

56

19

59

19

62

19

65

19

68

19

71

19

74

19

77

19

80

19

83

19

86

19

89

19

92

19

95

19

98

20

01

20

04

20

07

20

10

20

13

Consumption

Investment

Net Exports

Government

Source: U.S. Bureau of Economic Analysis.


Personal Savings Rate

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

19

59

19

61

19

63

19

65

19

67

19

69

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

Recession Personal Savings Rate

Source: St. Louis Federal Reserve.

20-year average rate = 5.0%; 2015 and first half 2016 = 5.8%


Household Debt Balance & Composition


Metro Denver Annual Change in Population

-5,000

5,000

15,000

25,000

35,000

45,000

55,000

65,000

75,000

2000 2005 2010 2015 2020 2025 2030

2016 Population = 3.12 Million

Net Migration Natural Increase

Source: Colorado Division of Local Government, State Demography Office.


Metro Denver Real Retail Trade Sales Growth Rates

4.0% 4.3%

-4.7%

-10.6%

3.3% 3.1%

5.4%

2.4%

5.2% 4.4%

2.3% 2.5%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f

Source: Colorado Department of Revenue.



Residential Real Estate

My lips are chapped from the winds of change.

– Sarah Vowell

© Can Stock Photo Inc. / ksenchik30


Home sales begin to slip, though remain at a reasonable level

50,244 49,789

47,837

42,070

38,818 38,105

45,203

53,631 54,068 55,509

54,121 52,498

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f

Metro Denver Existing Home Sales Closed

Sources: Metrolist (2005-2010); Denver Metro Association of REALTORS (2011-2015).



Metro Denver ranked #18 for median home price in 2015 (Boulder #7 at $454K)

$222 $218 $197

$172 $173 $166 $177

$197 $209

$224 $237

$249

$250 $245

$219 $220 $232 $231

$252

$281

$310

$354

$382 $403

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f

Median Home Prices (in thousands)

United States Metro Denver

Source: National Association of REALTORS.



Apartment Vacancy and Rental Rates

$800

$900

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

3%

5%

7%

9%

11%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e

Mo

nth

ly R

en

tal R

ate

V

acan

cy R

ate

Metro Denver Vacancy Rate Metro Denver Rental Rate

Source: Denver Metro Apartment Vacancy & Rent Survey.

2016e = DRP estimate


Multi-family represents 54% of new construction in 2016 (30+ year average = 28%)

0

5,000

10,000

15,000

20,000

25,000

30,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f

Metro Denver Building Permits*

Multi-Family (5+ units)

Single-Family Attached (2-4 units)

Single-Family Detached (1 unit)

* The Census Bureau tracks building permits by the number of housing units in the structure.

Source: U.S. Census Bureau, Building Permits.



www.metrodenver.org

Documents

Winds of Change - Amazon Web Serviceshypercache.h5i.s3.amazonaws.com/.../2016CPEWindsofChange.pdf · Blowing with the wind of change. – Klaus Meine Scorpions, “Wind of Change