Emerging Trends ranked Denver No. 23 out of 78 cities, its worst showing in a decade in the high-profile and comprehensive analysis of markets throughout the U.S. and Canada.
The last time Denver fared worse was when Emerging Trends ranked Denver in 28th place for 2007. Denver was ranked No. 11 for 2017. Seattle was ranked No. 1 by Emerging Trends in its most recent report.
Emerging Trends in Real Estate 2018 was released late last week by the Urban Land Institute at a ULI conference in Los Angeles.
It was the 39th Emerging Trends report, an annual forecast report released by ULI and PwC.
The outlook report is based on surveys and interviews with a wide range of industry experts, including investors, fund managers, developers, property companies, lenders, brokers, advisers and consultants.
ULI and PwC interviewed more than 800 industry movers and shakers and received more than 1,600 surveys for Emerging Trends. The 123-page Emerging Trends report analyzed 78 different metropolitan statistical areas.
Despite its drop in ranking, the money quote in Emerging Trends for the Mile High City was: “Everyone loves Denver and is looking for other markets in the region where they can replicate that level of success.”
Denver was ranked No. 1 among what Emerging Trends describes as the “Mountain” region, which also includes Salt Lake City; Phoenix;, Boise, Idaho; Las Vegas; Spokane, Washington; Tucson, Arizona; and Albuquerque, New Mexico.
“The Mountain region markets are diverse, with some seeing higher recent and projected growth rates than others … While the markets are somewhat diverse, similarities in the variables make them attractive for real estate investment, and they are likely to face similar challenges in the future,” according to Emerging Trends.
The report noted that “attractive quality of life,” has “helped spur recent population growth” in Denver, as well as in Salt Lake City and Boise.
“The Denver market has seen growth in technology, financial services and energy,” Emerging Trends noted.
Also, Denver and other Mountain cities are not overbuilt, according to the report.
“While some of this can be attributed to developer discipline, Denver, Boise and Las Vegas all indicate lender constraints as a reason that some development projects that might have been built during past cycles are missing from the current environment,” according to Emerging Trends.
“The perceived stability of these markets is seen as making them more attractive as national investors look for additional markets in which to place capital,” the Emerging Trends report continued.
A challenge to Denver, and some other Mountain cities, however, is that that “rising home prices could have a negative impact on their affordability.”
A contributing factor to high home prices in Denver and other cities is the “shortage of construction labor,” the report notes.
By asset class, Denver scored highest for its industrial market.
Denver was second only to Northern New Jersey as far as the outlook for industrial investments.
That is not surprising.
At a Colorado Real Estate Journal conference in September, one panel member said that “industrial is the new multifamily,” as far as the asset class most favored by lenders and investors. Ironically, that CREJ conference was focused on the office market.
And when industrial titan Ed Roski Jr. was in Aurora in September to commemorate the launch of the largest spec industrial building ever built in Colorado, he told me that the Denver area industrial market is firing on all cylinders.
“Denver, right now, is about as active and healthy as any market in the country,” said Roski, while standing at his Majestic Commercenter. “There is a lot of interest from companies for storage space with your low unemployment and strong economy.”
Most surprising to me was Denver’s poor showing as far as multifamily. Denver did not even rank on the top 20 list of cities ranked by Emerging Trends as most attractive to investors for multifamily housing.
However, as far as development and redevelopment opportunities, Denver was ranked No. 3, bested only by No. 1 Nashville, and Dallas/Fort Worth.
For the local economy prospects, Denver was in seventh place, a category led by Seattle.
Denver was ranked No. 14 in three categories by Emerging Trends: office, hotels and homebuilding prospects.
Denver came in 16th for investor demand.
And Emerging Trends ranked Denver 17th in a category that was a mouthful: top destination market for migration from primary markets by total in-migration, 2011-2015. Denver also ranked No. 17 for local public-private investments. Denver was in 21st place for availability of debt and equity capital.
To put Denver’s latest ranking in a historical perspective, Emerging Trends ranked it No. 6 and No. 4, respectively, in 2016 and 2015. In 2002, Denver ranked No. 1. However, in the early 1990s, Denver was ranked dead last by Emerging Trends.