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Winds of Change
Metro Denver2017 Economic ForecastJanuary 2017
© Can Stock Photo Inc. / BettinaBlass
2017 Economic Forecast 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
2017 Economic Forecast for Metro Denver
Mixed Global Growth Prospects
2015 2016 2017World 3.2% 3.1% 3.4%United States 2.6% 1.6% 2.2%
Canada 1.1% 1.2% 1.9%Mexico 2.5% 2.1% 2.3%China 6.9% 6.6% 6.2%Japan 0.5% 0.5% 0.6%European Union 2.3% 1.9% 1.7%United Kingdom 2.2% 1.8% 1.1%
Source: International Monetary Fund, World Economic Outlook, October 2016.
Year over Year Growth in Output
2017 Economic Forecast for Metro Denver
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%
1.7%2.3%
-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
2017 Economic Forecast for Metro Denver
Consumer Activity
The future's in the air.I can feel it everywhere.Blowing with the wind of change.– Klaus MeineScorpions, “Wind of Change”
© Can Stock Photo Inc. / FotoYou123
2017 Economic Forecast for Metro Denver
Components of Current GDP
-$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$12,000$13,000
1929
1932
1935
1938
1941
1944
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
Billio
ns ConsumptionInvestmentNet ExportsGovernment
Source: U.S. Bureau of Economic Analysis.
2017 Economic Forecast for Metro Denver
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 = 3.13 Million
Net Migration Natural Increase
Source: Colorado Division of Local Government, State Demography Office.
2017 Economic Forecast for Metro Denver
Percentage of In‐Migration by Millennials, ages 18‐34 years
0%
10%
20%
30%
40%
50%
60%
Atlanta Austin Dallas Denver Phoenix Portland Salt Lake City Seattle
Source: U.S. Census Bureau, 2014 American Community Survey.
2017 Economic Forecast for Metro Denver
Millennials largest population group*(*end of Centennials not yet determined)
0
10,000
20,000
30,000
40,000
50,000
60,000
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90+
Metro Denver Population 2016 = 3.13 million
Millennials754,790
Gen X705,570
Baby Boomers678,580
Silent Gen197,170
Greatest Gen
22,490
Centennials775,230
Source: Colorado Division of Local Government, State Demography Office.
2017 Economic Forecast for Metro Denver
Can Consumers Continue the Pace?
• Additional 50,900 jobs per year (2014-2016)• Avg Annual Wage +2.1% per year (2014-2016)• DOW +13.4%; S&P 500 +9.5%• Total HH Debt: $12.3 Trillion (Q2 2016), +3.7%
• Savings rate 5.8%, up from 20-year avg of 5%
Trillions Q2 2016 Q2 2015 % ChangeMortgage $8.4 $8.1 3.0%Home Equity $0.5 $0.5 -4.2%Student Loans $1.3 $1.2 5.8%Auto Loans $1.1 $1.0 9.7%Credit Cards $0.7 $0.7 3.7%Other $0.4 $0.3 4.9%TOTAL $12.3 $11.9 3.7%
2017 Economic Forecast for Metro Denver
Millennials not yet at income potential
$400
$500
$600
$700
$800
$900
$1,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Median Weekly Earnings by Age Group
25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65 years and over
Source: U.S. Bureau of Labor Statistics, Current Population Survey.
2017 Economic Forecast for Metro Denver
Spending patterns differ by generational group (Top 3 categories = 70% Millennials; 62% Gen X & Boomers)
$0 $5,000 $10,000 $15,000 $20,000 $25,000
All Other
Education & reading
Apparel & services
Entertainment
Healthcare
Personal insurance & pensions
Food
Transportation
Housing
55 years+($49,260)
35-54 yrs($64,140)
< 35 yrs($44,510)
Source: U.S. Bureau of Labor Statistics, 2014 Consumer Expenditure Survey.
Consumer Spending by Category by Age
Age Group (Avg Ann Spending)
2017 Economic Forecast for Metro Denver
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%
2.2% 2.4%
-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.2016e = DRP estimate; 2017f = DRP forecast
2017 Economic Forecast for Metro Denver
Residential Real Estate
My lips are chapped from the winds of change.– Sarah Vowell
© Can Stock Photo Inc. / ksenchik30
2017 Economic Forecast for Metro Denver
Metro Denver ranked #16 and Boulder #7 for highest median home price in 3Q 2016
$222 $218$197
$172 $173 $166 $177$197 $209 $224 $234 $247
$250 $245$219 $220 $232 $231
$252$281
$310$354
$383$404
$366 $376 $360 $346 $358 $353$384 $372
$391
$454
$515$546
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f
Median Home Prices (in thousands)
United States Metro Denver Boulder
Source: National Association of REALTORS.2016e = DRP estimate; 2017f = DRP forecast
2017 Economic Forecast for Metro Denver
Denver has 2nd highest median home price and fastest price increase of competitors
$0
$100
$200
$300
$400
2007 2008 2009 2010 2011 2012 2013 2014 2015 3Q2016
Austin
Dallas
Denver
Salt Lake City
Portland
Atlanta
U.S.Phoenix
Source: National Association of REALTORS.
Median Home Price (in 000s)
Seattle
2017 Economic Forecast for Metro Denver
Home sales begin to slip, though remain at a reasonable level
50,244 49,789 47,837
42,070
38,818 38,106
45,210
53,676 54,07356,062 55,634
53,965
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 2016 2017f
Metro Denver Existing Home Sales Closed
Sources: Metrolist (2005-2010); Denver Metro Association of REALTORS (2011-2016).2017f = DRP forecast
2017 Economic Forecast for Metro Denver
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
Monthly Rental Rate
Vaca
ncy
Rate
Metro Denver Vacancy Rate Metro Denver Rental Rate
Source: Denver Metro Apartment Vacancy & Rent Survey.2016e = DRP estimate
2017 Economic Forecast for Metro Denver
Multi‐family represents 52% of new construction in 2016 (30+ year average = 28%)
0
5,000
10,000
15,000
20,000
25,000
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.
2016e = DRP estimate; 2017f = DRP forecast
2017 Economic Forecast for Metro Denver
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
2017 Economic Forecast for Metro Denver
Colorado 5th fastest growing state in 2015; #9 through 3Q 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
#9#7 #5#14
#25
#4
#49
Source: U.S. Bureau of Labor Statistics, Current Employment Statistics.
#3
2017 Economic Forecast for Metro Denver
Employment growth varies across the state
0.6%
1.1%
2.2%
2.4%
3.1%
3.5%
2.8%
1.8%
0.0% 1.0% 2.0% 3.0% 4.0%
Grand Junction
Greeley
Pueblo
Colorado Springs
Metro Denver
Fort Collins
Colorado
U.S.
Nonfarm Job Growth Rates by Metro Area, through 3Q 2016
Source: U.S. Bureau of Labor Statistics, Current Employment Statistics.
2017 Economic Forecast for Metro Denver
Nonfarm Job Growth Rates
1.6% 1.9% 2.1%1.7% 1.6%
3.6% 3.7% 3.5%2.9%
2.4%
-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 million2013-2015: 53K jobs added per year; 2016: 45K; 2017: 39K
Source: U.S. Bureau of Labor Statistics.2016e = DRP estimate; 2017f = DRP forecast
2017 Economic Forecast for Metro Denver
Proprietors Are Another Significant Component Of Employment
Source: U.S. Bureau of Economic Analysis.
Proprietors Employment25% of Colorado’s Total Employment (US avg = 22%)
708,914
769,237 776,680797,054 796,997
820,310 825,917849,189
869,464 893,366
500,000
600,000
700,000
800,000
900,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
2017 Economic Forecast for Metro Denver
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
2017 Economic Forecast for Metro Denver
Metro Denver and Northern Colorado Industry Clusters, 2015‐2016
Source: Development Research Partners.
2017 Economic Forecast for Metro Denver
Commercial Real Estate
May you have a strong foundation when the winds of change shift… - Bob Dylan, “Forever Young”
© Can Stock Photo Inc. / josephpucadyilphoto
2017 Economic Forecast for Metro Denver
Metro Denver Commercial Real Estate
Vacancy Rate (direct) Lease Rate4Q 2016 4Q 2015 4Q 2016 4Q 2015
Office 9.3% 9.6% $25.36 $24.65
Industrial 3.8% 3.1% $7.41 $7.03
Retail 4.5% 5.0% $16.55 $16.00
Source: CoStar Group, Inc.
Construction Activity (YTD through 4Q 2016)• Office: 1.4 MSF completed; 5.9 MSF under construction• Industrial: 4.5 MSF completed: 2.3 MSF under construction• Retail: 1.3 MSF completed; 1.2 MSF under construction
2017 Economic Forecast for Metro Denver
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 2016
Mill
ions
of S
quar
e Fe
et
Office Industrial Retail
Source: CoStar Realty Information
2017 Economic Forecast for Metro Denver
New Commercial Real Estate by Area
Source: Denver Business Journal, “Denver Crane Watch,” 12/29/2016.
2017 Economic Forecast for Metro Denver
Winds that are blowing….
Challenges• Global economic
uncertainty• Rising interest rates• Rising inflation rate• Seeking clarity on
taxes, healthcare• Infrastructure needs
> funding options• Affordable housing
Opportunities• More confident
consumer• Changes in who is
buying what & where• Strong job growth
continues• Active commercial
real estate market• Technology driving
major changes
2017 Economic Forecast for Metro Denver
Questions?
Development Research Partners10184 West Belleview Avenue, Suite 100
Littleton, Colorado 80127(303) 991-0070
www.DevelopmentResearch.net
Patricia Silverstein, PresidentPatty@DevelopmentResearch.net
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