Spire: A Bellwether for Continuing Growth in Downtown Denver

There was a very positive development for the Denver Metro Region recently when it was announced that construction on Spire (http://www.spiredenver.com/), a 41-story residential condominium with ground floor retail will be resuming shortly. Work on the tower, located at 891 14th Street in Downtown Denver, was halted last year after the primary construction lender, a U.S. based subsidiary of a German financial institution, backed out of its loan commitment. I first blogged about this situation back in September 2007 (http://aviewoftherockies.blogspot.com/2007/09/global-credit-squeeze-and-metro-denver.html)

In my recent blog on 10 Metro Denver Economic Development Issues to Watch For in 2008 ( http://aviewoftherockies.blogspot.com/2007/12/10-metro-denver-economic-development.html ) I called Spire "a key signpost indicating whether the local downtown residential construction boom will continue or tail off in the face of economic and credit market headwinds." Spire is a well conceived project, targeting the ripe segment of young professionals who want to live in Downtown Denver with moderately priced units starting at around $200,000. Spire's developer Randy Nichols has a strong reputation backed by substantial experience. If Spire had withered on the vine it would have been a powerful signal that the current residential expansion in Central Denver was slowing and confidence in Metro Denver was diminishing.

Spire, and other similar projects are helping to transform Denver into a more urban city with the possibility of 24 hour life and improved amenities. This transformation will play a key role in Denver's future economic development because it will help attract, young, educated workers who can power a knowledge-based economy. The fact that Spire will be financed in spite of the global credit market turmoil and fears of a U.S. recession shows that the financial markets are still willing to invest in Denver's economic future.

The rendering of Spire in this blog entry is from the Rocky Mountain News website.

Airline Developments and the Denver Regional Aviation Cluster

If you are a regular reader of this blog you will probably notice that I frequently discuss developments in the airline industry and at Denver International Airport. The reason for this emphasis is this industry serves a dual economic role in Denver. It is part of the local economic base, employing a higher than national average concentration of workers in Denver (See my blog from July 4, 2007 for a discussion of the Metro Denver economic base http://aviewoftherockies.blogspot.com/2007/07/analyzing-metro-denver-economic-base.html) and air transport is a vital part of the regional transportation infrastructure impacting the area’s overall economic competitiveness. Air transportation is particularly critical to Metro Denver given its spatial isolation from other large metropolitan areas and its lack of a water port. The aviation cluster, has been identified as a sector targeted for recruitment efforts by the Metro Denver Economic Development Corporation (MDEDC http://www.metrodenver.org/industries-companies/industries/aviation.html). According to the MDEDC, the cluster contains 240 companies which employ more than 14,000 workers in the nine county Denver Metro Area.

I want to blog about a couple of recent airline developments which could have big impacts on economic development in Metro Denver. Southwest Airlines announced over the next few months it will be adding18 new daily flights to six new destinations from DIA: Los Angeles; San Jose; St. Louis; Philadelphia; Raleigh-Durham; and San Antonio. This will bring the total number of Southwest flights in Denver to 79 from 0 a few years ago. On balance this should have a positive economic impact for the region as it will increase connectivity to important national business centers, help drive down travel costs for businesses and consumers and add new jobs.

However, Southwest’s expansion has put competitive pressure on Denver-based carrier Frontier Airlines. It would be an economic development loss for Denver if Dallas-based Southwest drove Frontier totally out of business, costing Metro Denver a corporate headquarters in the aviation sector. Additionally, the new Southwest fights do appear to validate DIA’s facilities expansion plans discussed in my blog from July 30, 2007 (http://aviewoftherockies.blogspot.com/2007/07/dia-expansion-fullfilling-vision.html ).

The other big airline-related piece of news is the continued speculation about a merger between United and Delta airlines. Denver is United’s second largest hub after Chicago-O’Hare but Delta uses Salt Lake City as its regional hub. If the merger goes forward, the key economic development question for Denver will be - “Can the 'Mile High City' maintain its hub status, concentration of flights and number of employees post merger?” Given the Denver Metro Areas’ central geographic location, high quality airport facilities and population size, I am guessing the answer to that question would be “yes” but anytime a merger occurs it opens up the risk of a negative outcome. If the merged Delta/United, reduced its presence in Denver and Salt Lake City took over Denver's hub role, that would be a serious blow to the Metro Denver economy.

Photos provided courtesy of Denver International Airport.

Third Annual Colorado Competitiveness Study Released

The Metro Denver Economic Development Corporation (MDEDC ) released its third competitiveness study - Toward A More Competitive Colorado - which benchmarks competitive factors related to economic growth and job creation (http://www.metrodenver.org/files/documents/news-center/research-reports/TMCC_III_FullStudy.pdf). This impressive report presents a comprehensive series of rankings showing Colorado versus the highest and lowest performing states and Colorado versus competitor states. Factors assessed include: economic vitality, productivity, innovation, taxes, business costs, livability, K-12 education, higher education, health, health care, quality of life, and infrastructure.

The report describes Colorado in the following way:

"In 2007, Colorado remained a competitive state for new job growth. The
state's citizens are healthy, productive, and innovative. Colorado is one
of the most highly educated states in the nation. Our natural environment,
and our willingness to retain it, lends itself to healthy lifestyles and out
ability to attract highly educated workers."(p. 10)

"Colorado is an affluent 'Island' in the middle of the country,
geographically distant from major trading regions. Ranked eighth in
the country in per capita income, Colorado is surrounded by states
that have lower wages and, often, lower business costs...To compete against
these lower- cost markets, Colorado must foster greater productivity and
innovation - creating jobs that pay higher wages but produce higher value
goods and services."(p. 10).

I would say the overall tone of the report is one of concern that the competitiveness of Colorado in the knowledge based economic sectors is at risk of slipping.

"We remain concerned with mediocre high school graduation rates, the
disconnection between the requirements of our high-technology employment
clusters and low funding levels provided for citizens to acquire these
skills. We remain particularly concerned with the ongoing low levels of
funding for higher education." (p.12)

"This year we are not certain that public sector investments in education
(particularly higher education), transportation, and our citizens' health
are sufficient to ensure our economy's long term competitiveness"(p. 13)

The report cited the Colorado Competitiveness Council, the Metro Denver WIRED Initiative, and the Metro Denver Health and Wellness Commission as tools to help address the concerns cited above.

The report profiles the MDEDC's six industry clusters targeted for recruitment efforts:

• Aerospace
• Aviation
• Bioscience
• Energy
• Financial Services
• Information Technology - Software

The report also profiles the MDEDC's three industry clusters targeted for retention and expansion:

• Beverage Production
• Broadcasting and Telecommunications
• Information Technology - Hardware

The competitor states used in the report were Texas, Georgia, Arizona and New Mexico. According to the report, Texas and Arizona are Colorado's most frequent economic development competitors. However, I would have liked to have seen a more detailed discussion of why all four of the competitor states were chosen. Based on recent competition with Chicago for aviation related headquarters (Boeing and United) and Milwaukee for the MillerCoors headquarters, I am thinking it would also be useful to have a mid-western state (Illinois or Wisconsin) on the list of competitor states.

Another methodological question that I would be interested in learning more about is why the ranking were done on the state level instead of the metro area level. It seems to me that the metro area as opposed to the state is the more appropriate unit of analysis for an assessment of economic development competitiveness.

The Aerotropolis and Global Competitiveness

Happy New Year.

I just spent 10 days in Metro Denver and really enjoyed the seasonal cheer and winter weather.

For my first blog entry in 2008, I wanted to provide a link to an article in Fast Company magazine from the July/August 2007 issue written by Greg Lindsay titled "Rise of the Aerotropolis" (www.fastcompany.com/magazine/107/aerotropolis.html ).

"In the relatively obscure world of urban planning, [John] Kasarda, a professor at the University of North Carolina's Kenan-Flagler Business School, has made a name
for himself over the past decade with his radical (some might say bone-chilling)
vision of the future: Rather than banish airports to the edges of cities and
then do our best to avoid them, he argues, we should move them to the center and
build our cities around them. Kasarda's research has laid bare the invisible
plexus of air-cargo networks that have shrunk the globe (much as railroads did
for the American West). " (Lindsay, Fast Company).

The importance of Denver International Airport (DIA) to Metro Denver's global competitiveness is an ongoing theme of this blog so I found this article very interesting. Lindsay does a nice job of describing the myriad economic benefits that flow from airport connections. He also summarizes the development of multibillion dollar "airport cities" in places like Hong Kong, Beijing, Soul, Bangkok and Dubai, pointing out that, for the most part, U.S. metro areas have not made new investments on the scale of these Asian cities.

He briefly mentions the decommissioning of Denver's Stapleton Airport as an example of how local politics in the U.S. hinder the expansion of existing U.S. airport facilities. Of course, I think he is misses the more important point that the closure of Stapleton coincided with the launch of DIA (http://www.flydenver.com/) as one of the few new airports built from the ground up in North America in the last 20 years and one of the few airports in the U.S. with space for runway and terminal expansion. At 54 square miles, DIA covers more land area than all of Manhattan or the City and County of San Francisco.

After reading this article, I am even more convinced that the upcoming expansions at DIA (FasTracks commuter rail to the Union Station, a new terminal, on-site hotel, expanded gates and a commuter jet facility) mentioned in my blog from July 30, 2007 (http://aviewoftherockies.blogspot.com/2007/07/dia-expansion-fullfilling-vision.html) are critically important investments in Denver's international competitiveness.

Another interesting topic covered by Lindsay was the plans for expanding Detroit Metro Airport (http://www.metroairport.com/) into a fully fledged Aerotropolis. Detroit has thousands of acres of woods and greenfields surrounding the airport making it one of the few U.S. airports beside DIA with ample room for expansion. I wonder if the expansion of Metro Airport posses a long term competitive threat to DIA?

Finally, see Figure 1 below taken from the Fast Company website which shows Detroit, Memphis, Dallas-Fort Worth, Ontario and Denver airports as "planned" or "rudimentary" Aerotropolis facilities in the U.S.

Figure 1: "The Aerotropolis Goes Global" from Fast Company (http://www.fastcompany.com/magazine/107/aerotropolis.html)