By Jenni Lantz
On January 14, 2016, some 370 ULI Colorado members and non-members gathered at the Marriott City Center to learn about 2016’s Emerging Trends in Real Estate. The breakfast event offered two keynote speakers and an expert local discussing investment trends in various sectors of real estate in comparative regions globally. Denver cracked the top 10 of investment regions in 2015 and continues to hold number 6 in 2016.
The annual event began with a welcome from ULI Colorado Executive Director, Michael Leccese and Amy Cara, ULI District Council Chair. Both discussed the success of 2015 and hopes for a great 2016.
Kathleen Carey, the first keynote speaker, joined ULI Colorado for the second year in a row to present Emerging Trends on a national and local level. A veteran of corporate real estate, Carey is Chief Content Officer for The Urban Land Institute and helped found ULI’s Women’s Leadership Initiative. Here are the highlights of the 2016 Emerging Trends from Carey. Click here for pdf of the complete 2016 Emerging Trends report.
- 18-Hour Cities 2.0
- After identifying the rise of the 18-hour city in 2015, Emerging Trends is finding a growing confidence in these cities, which include Denver
- Next Stop: the Suburbs… What Is a Suburb?
- As prices rise in the urban core of many cities, suburban opportunities are growing, especially as millennials mature and form households. The suburbs that win will provide the walkable, mixed-use environments that millennials prefer.
- Offices: Barometer of Change
- As employment rises, so does the demand for office space, though that office space is different now than it was in the past, with more employees in less space. How will the market for office development react to this new reality?
- A Housing Option for Everyone
- Can you rent the American Dream? Homeownership rates dropped during the Great Recession and have yet to bounce back. Will millennials rent long-term or eventually get into this market? Meanwhile about half of consumers surveyed say they will move in the next five years.
- Parking for Change
- What is the future for parking lots and structures with the prospect of driverless cars on the horizon? ULI is studying ways to repurpose these spaces, including offices and athletic facilities.
After discussing national trends, Carey moved to a local outlook. While dropping slightly to the #6 market to watch versus #4 in 2015, Denver is still a great region because of strong public/private partnerships and a high ranking in Emerging Trends for investment capital. The outlook is good, especially for the single-family housing market which is expected to remain hot in 2016.
Dr. Glen Mueller, Professor at the Franklin L. Burns School of Real Estate and Construction Management, Denver University, was the second guest speaker. Dr. Mueller presented findings on real estate cycles. There are four phases to a real estate cycle: recovery, expansion, hyper-supply and recession. Different parts of the real estate industries may find themselves at different points of the cycle. For instance, Denver is currently over-supplied with apartments, but hotels are behind in the cycle, so are still booming. Contact Sarah Franklin of Colorado ULI (firstname.lastname@example.org) for a copy of the cycle report.
A local panel of experts provided the final portion of the breakfast, exploring Colorado’s 2016 forecast and including experts from all fields of the real estate industry: Pete Schippits, Senior Managing Director at CBRE; Mary Beth Jenkins, Founder and President at Laramie Company; Walter Isenberg, President and CEO at Sage Hospitality; and John Covert, Regional Director at Metrostudy; with Patricia Gage, Executive Vice President of Colorado Business Bank, as moderator.
The panel delved into each expert’s field: office, retail, hotel or for-sale housing with time for roundtable questions. Some thought on the next phases for Denver include fixing the construction defects issue to allow higher density and more affordable housing, increasing international flights, and fixing the I-70 commute to the mountains to preserve the appeal of ski resorts and summer tourism as well.
Panelist John Covert of Metrostudy said that population growth will continue to fuel the housing market. “We added 100,000 to Colorado last year,” he said. “That’s like Pueblo showing up. Most are millennials who want to move to Denver, which is filling up all those new apartments.” He expressed concern about affordability with almost no housing starts last year priced less than $300,000.
Yet Isenberg saw “the oversupply of apartments” as the greatest threat to the regional real estate market.
While concerned about competition from Air BnB, Walter Isenberg of Sage also expressed optimism about the hotel market as occupancy rates have been rising from 62 percent in 2010 to a projected 76 percent in 2019.
For retailers, Mary Beth Jenkins addressed “Death by Amazon” and said developers and property owners may have to subsidize retail rents to get the desired mix. “Unique retailers may not be able to afford $50 a square foot rent, but you have to be sure they are committed to remaining open 365 days a year.”
Peter Schippits saw ecommerce as the “silver lining” in the commercial market. As services like Amazon Prime and Amazon Now grow, the need for warehouse space is also growing to a projected 35 square feet per resident. Schippits also sees the growing potential of the co-working movement, which CBRE is committing to in the redesign of its own headquarters.
Emerging Trends 2016 painted a great picture for Denver and the nation. Kathleen Carey shared that 84 percent feel that next year will be a success. We hope the national and local markets will live up to people’s expectations.