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Patty Silverstein's economic update for Real Estate BarCamp Denver 2010
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2010 Economic Update for Metro Denver
Picking Up The PiecesPicking Up The Pieces
Metro Denver2010 Economic UpdateJune 2010
2010 Economic Update for Metro Denver
Real Gross Domestic Product Growth
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009e 2010f
4.1%
1.1%
1.8%2.5%
3.6%3.1%
2.7%2.1%
0.4%
-2.4%
2.1%
Source: U.S. Bureau of Economic Analysis.
2010 Economic Update for Metro Denver
Consumption (70%)
Household spending on goods and services.
Investment (16%)Residential real estate + business spending on software,
equipment, & real estate.
Government Spending (19%)
Goods and services, debt service, transfer payments/social programs.
International Trade (-5%)
Global demand for US goods, US import activity.
“Pieces” of the Economy…Each Affected by Recession
2010 Economic Update for Metro Denver
Consumer Activity
Income
Wealth
Prices
Borrowing Costs
Consumer Confidence
Retail Activity
Housing Sales
Savings Rate
2010 Economic Update for Metro Denver
Population by County
Denver22%
Arapahoe20%
Jefferson19%
Adams16%
Boulder11%
Douglas10%
Broomfield2%
2009 Population = 2.83 million
2010 Economic Update for Metro Denver
Metro Denver Annual Change in Population
Source: Colorado Division of Local Government
2010 Economic Update for Metro Denver
Consumer Confidence Index
20
40
60
80
100
120
140
160
Jan
-00
May
-00
Sep
-00
Jan
-01
May
-01
Sep
-01
Jan
-02
May
-02
Sep
-02
Jan
-03
May
-03
Sep
-03
Jan
-04
May
-04
Sep
-04
Jan
-05
May
-05
Sep
-05
Jan
-06
May
-06
Sep
-06
Jan
-07
May
-07
Sep
-07
Jan
-08
May
-08
Sep
-08
Jan
-09
May
-09
Sep
-09
Jan
-10
May
-10
Mountain Region U.S.
Source: The Conference Board.
2010 Economic Update for Metro Denver
Unemployment Rates (not seasonally adjusted)
0%
2%
4%
6%
8%
10%
12%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f
4.0%4.7%
5.8%6.0%
5.5% 5.1%4.6% 4.6%
5.8%
9.3%10.1%
2.6%
3.8%
5.9%6.4%
5.8%5.2%
4.4%3.9%
4.9%
7.8%8.6%
United States Metro Denver
Metro Denver Total Labor Force = 1.5 million
Sources: U.S. Bureau of Labor Statistics; CO Dept. of Labor & Employment.
2010 Economic Update for Metro Denver
Colorado Personal Income Growth Rate
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009e 2010f
12.5%
6.4%
0.8%1.4%
5.4%6.6%
8.2%
5.7%
3.3%
-2.5%
2.2%
Sources: U.S. Bureau of Economic Analysis.
2010 Economic Update for Metro Denver
Dow Jones Industrial Average
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Jan-
00
Jul-
00
Jan-
01
Jul-
01
Jan-
02
Jul-
02
Jan-
03
Jul-
03
Jan-
04
Jul-
04
Jan-
05
Jul-
05
Jan-
06
Jul-
06
Jan-
07
Jul-
07
Jan-
08
Jul-
08
Jan-
09
Jul-
09
Jan-
10
Source: Yahoo! Finance.
2007: 18% of U.S. families have stocks; 53% have retirement accounts
2010 Economic Update for Metro Denver
Metro Denver Real Retail Trade Sales Growth Rates
-15%
-12%
-9%
-6%
-3%
0%
3%
6%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f
-3.3% -2.8%
-0.5%
4.5%
1.7%
4.0% 4.4%
-4.8%
-12.0%
0.6%
Source: Colorado Department of Revenue.
2010 Economic Update for Metro Denver
Metro Denver Existing Home Sales
25,000
30,000
35,000
40,000
45,000
50,000
55,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f
48,61147,832 47,919 47,966
54,01253,106
50,244 49,789
47,837
42,070
45,900
Source: Metrolist, Inc.
2010 Economic Update for Metro Denver
Residential Mortgage Loans in Foreclosure or Delinquent
Sources: Mortgage Bankers Association, National Delinquency Survey
2010 Economic Update for Metro Denver
Metro Denver Foreclosures
0
5,000
10,000
15,000
20,000
25,000
30,000
1988 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f
17,122
4,223
6,537
9,42212,250
14,335
18,958
26,52024,799
26,51025,735
Sources: CB Richard Ellis; County Public Trustees.
2010 Economic Update for Metro Denver
Median Home Price(in thousands)
$0
$50
$100
$150
$200
$250
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f
$147.3$156.6 $167.6
$180.2$195.2
$219.0 $221.9 $217.9
$196.6
$173.2 $174.7
$196.8
$218.3$228.1
$238.2 $239.1$247.1 $249.5 $245.4
$219.3 $219.9 $222.5
United States Metro Denver
Source: National Association of REALTORS.
2010 Economic Update for Metro Denver
Metro Denver Building Permits
0
5,000
10,000
15,000
20,000
25,000
30,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f
Multi-Family Two-Family Single-Family
Source: Home Builders Association of Metropolitan Denver.
2010 Economic Update for Metro Denver
Business Activity
Sales Expectations
Profit Expectations
Interest Rates
Other Borrowing Costs
Human Resources
Software, Equipment Purchases
Commercial Real Estate
2010 Economic Update for Metro Denver
Nonfarm Job Growth Rates
-6%
-4%
-2%
0%
2%
4%
6%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f
2.2%
0.0%
-1.1%
-0.3%
1.1%1.7% 1.8%
1.1%
-0.6%
-4.3%
-0.3%
4.3%
0.0%
-3.1%
-1.4%
0.8%
1.9% 2.0% 2.2%
1.0%
-4.4%
0.1%
United States Metro Denver
Sources: U.S. Bureau of Labor Statistics; CO Dept. of Labor & Employment.
2010 Economic Update for Metro Denver
Metro Denver Net New Jobs
(80,000)
(60,000)
(40,000)
(20,000)
-
20,000
40,000
60,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f
56,300
300
(42,400)
(18,800)
10,700
25,400 27,500 29,800
13,500
(62,700)
1,400
Source: CO Dept. of Labor & Employment.
2010 Economic Update for Metro Denver
Key Metro Denver Industry Clusters
Employment 2009 Job Growth
Concentration Rank (50 metros)
Aerospace 19,900 -1.2% 2Aviation 15,700 -1.5% 10Bioscience Pharmaceuticals & Biotechnology 5,600 4.5% 18 Medical Devices & Instruments 9,500 1.6% 6Broadcasting & Telecommunications 41,400 1.7% 4Energy Fossil Fuels 15,800 0.4% 8 Cleantech 16,300 4.6% 7Financial Services Banking & Finance 44,000 -0.3% 4 Investments 23,300 0.3% 7 Insurance 26,700 -5.9% 23IT/Software 42,300 -0.2% 9
2010 Economic Update for Metro Denver
Metro Denver Office Vacancy Rates(with sublet)
Existing Square Feet = 163.0 millionCompleted 2009 = 1.6 MSF; Under Construction = 1.2 MSF
Source: CoStar Realty Information, Inc.
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f
8.3%
13.2%
16.5% 16.6% 16.3%
14.5%13.8%
12.6%14.0%
14.8% 15.2%
2010 Economic Update for Metro Denver
Metro Denver Industrial Vacancy Rates (with sublet)
Source: CoStar Realty Information, Inc.
Existing Square Feet =214.7 millionCompleted 2009 = 0.2 MSF; Under Construction = 0 MSF
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f
5.7%6.3%
7.5%8.3% 8.6%
8.0%
7.0%
6.1%
7.0% 7.0%7.3%
2010 Economic Update for Metro Denver
Metro Denver Retail Vacancy Rates(with sublet)
Existing Square Feet = 155.3 millionCompleted 2009 = 2.1 MSF; Under Construction = 0.4 MSF
Source: CoStar Realty Information, Inc.
0%
2%
4%
6%
8%
10%
12%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f
0.8% 1.2%2.1%
5.6% 6.0%6.7%
7.3% 7.3%8.5%
9.2% 9.7%
2010 Economic Update for Metro Denver
Government Activity
National Security
Overall Economic Health
Tax Collections
Political Leadership
Fiscal Policy
Monetary Policy/ Interest Rates
Regulatory Reforms
2010 Economic Update for Metro Denver
Economic Stimulus Highlights
$787 billion American Recovery & Reinvestment Act (ARRA, February 2009) Tax Relief (37%), State & Local Fiscal Relief (18%), Infrastructure & Science (14%), Protecting the Vulnerable (10%), Health Care (7%), Education & Training (7%), Energy (6%), Other (1%)
$700 billion Emergency Economic Stabilization Act (EESA, October 2008)Created TARP, which led to the Financial Stability Plan, which includes CPP, CBLI, CAP, TALF, AGP, TIP, SSFI, etc.
Federal Reserve maintains 0 – 0.25% target federal funds rate
Other monetary policy actions
2010 Economic Update for Metro Denver
U.S. Historic and Projected Budget Deficits by Fiscal Year($bil)
Source: Congressional Budget Office.
-$1,600
-$1,400
-$1,200
-$1,000
-$800
-$600
-$400
-$200
$0
$200
$400
1990 2000 2010 2020
2010 Economic Update for Metro Denver
Colorado Budget Concerns
A state and local “budget tsunami” – lower revenues and higher obligations.
More than $2 billion shortfall addressed for FY 2009-2010. Further cuts possible.
Projected shortfall for FY 2010-2011 budget more than $1 billion. Proposed reductions:K-12, higher education funding
Modifications of tax exemptions and credits
Changes in capital construction, public safety and corrections, Medicaid, and other areas
2010 Economic Update for Metro Denver
International Activity
Relative Quality, Price of Goods
Value of the Dollar
Financial Markets
Trade Policies
Exports: Sales of U.S. Goods and Services
Imports: Purchases of Foreign Goods and Services
2010 Economic Update for Metro Denver
Year-Over-Year Growth in Exports
-30%
-20%
-10%
0%
10%
20%
30%
2000 2003 2006 2009
12.4%
-6.8% -4.9%
4.6%
12.4%10.6%
13.9%11.9% 12.1%
-17.9%
11.2%
-7.1%-9.8%
10.2% 9.4%
1.7%
17.4%
-7.6%
4.9%
-25.1%U.S. Colorado
Source: U.S. Department of Commerce, International Trade Administration.
Key Colorado Trading Partners: Canada, Mexico, China, Japan, GermanyKey Products: Computers and electronics, chemicals, processed foods, machinery
2010 Economic Update for Metro Denver
Commercial Real Estate.
Funding a major challenge for maturing loans, new development. Demand for space will be slow to rebound.
Fiscal Health.
Tax revenues down sharply and are likely to lag economic recovery.
Inflation.
Monetary easing, other stimulus policies could fan inflation in coming years. Potential to dampen recovery.
Engine of Growth? Not consumers. What will support and sustain recovery?
Some “Pieces” Still Out of Place…
2010 Economic Update for Metro Denver
Consumer Confidence Rebounding.
Confidence still fragile, but improved wealth prospects (homes, stocks) helping.
Residential Real Estate Improving.
Home prices more solid, foreclosures down, sales activity picking up.
Employment Stabilizing.
Pace of job losses slowing, but unemployment will still rise.
Stimulus Dollars Flowing Federal dollars helping to thwart state budget cuts while offering some job
opportunities.
…But Other “Pieces” Starting to Fit
2010 Economic Update for Metro Denver
Development Research PartnersDevelopment Research Partners10184 West Belleview Avenue, Suite 10010184 West Belleview Avenue, Suite 100
Littleton, Colorado 80127Littleton, Colorado 80127(303) 991-0070(303) 991-0070
www.DevelopmentResearch.netwww.DevelopmentResearch.net
Patricia Silverstein, PresidentPatricia Silverstein, [email protected]@DevelopmentResearch.net