Metro Denver growth offers opportunities, challenges for builders

Denver’s challenges are result of economic success, not downturn
Colorado is fighting a perception problem, but there are still opportunities for builders.

The Construction Resource Group hosted a Lunch and Learn event on Thursday examining the economic environment that builders in the Denver metro area are working in. Sam Bailey, vice president of economic development at the Metro Denver Economic Development Corporation, presented on current economic conditions in the area.

Colorado’s workforce is the primary factor in economic growth and bringing new companies to the area, Bailey said.

“It used to be that real estate people ran the discussion about where projects went,” Bailey said. “Then it was the tax people—that’s when incentives used to be much bigger than they were—but now it’s really talent.”

However, Colorado has a perception problem, he said. The leaders of large firms believe Colorado is all about tourism and recreation. IT, cybersecurity, bioscience, and food and agriculture are strong and growing sectors of our economy, but potential developers don’t see that.

In fact, IT software is among the fastest growing sectors, Bailey said, noting it is growing at 6%.

State of construction in Denver

Construction defect legislation eliminated the middle market, Bailey said. He called the construction reform bill that passed last year a “fix of a fix” that didn’t solve the affordable housing problem.

[Related: The next evolution in Colorado construction defect litigation?]

“Trial lawyers are having a free-for-all and making hundreds of millions of dollars on suing Joe, Dick and Sally and making it impossible for builders” to work, he said.

“The legislature’s expectation was that we’re just going to start building condos” right away after passing the legislation, but builders have been waiting to see what happens to other companies who wade into condo construction before they take the plunge themselves, Bailey said.

He urged builders to “heckle” their state representatives about construction defect reform. “You employ people. You are active in the market. … You should be giving them a hard time—they work for you,” he said.

He noted that there have been some small condo projects going up, but “the price range that we need them to be to be successful … it’s just not there.” First-time homebuyers can’t spend $800,000 on a condo, he said.

That’s why more entry-level homes are being built to Erie, Fort Collins, Lafayette, Longmont, Loveland and other cities along the Front Range.

[Related: Are you building ‘affordable’ or ‘attainable’ housing?]

Cities farther afield have benefited from the boom in Denver, too, as development gets cheaper in places like Salt Lake City, St. Louis, Kansas City and Boise, Idaho.

“We’re suffering from symptoms of economic success, not economic downturn,” he added.

Denver is still in the running for the location of Amazon’s second headquarters, Bailey said. If successful, that could create around 50,000 jobs over the next 10 to 15 years, or 2,700 to 3,500 net new jobs every year, he said.

To mitigate some of the problems that would come with that growth, Bailey suggested channeling some of the tax revenue a new Amazon headquarters would bring into education, transportation and housing projects.

Bailey estimates that if the project were implemented to full scale in 20 years, it would direct around $750 million to public schools.

“What are the taxable ways that we can divert Amazon’s revenues to help invest in areas where we have challenges?” he said. “How can we use the leakage fee generated by that 8.1 million square feet [proposed by Amazon for its new headquarters] and divert that to affordable housing funds?”

[Related: Brick by brick—Meeting today’s builder challenges]

Danielle Andrus

Editor, Colorado Builder Magazine

Danielle Andrus has 89 posts and counting. See all posts by Danielle Andrus

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