Progress on Office/Mixed Use Developments a Great Sign for Downtown Economy

In the DenverInfill Blog, I noticed progress has been made recently on two new downtown mixed use developments with substantial office components : Two Tabor Center and 999 17th Street. Having just filed its building permit, the long awaited second tower at the Tabor Center is much further along in the development cycle than 999 17th Street which is in the preliminary design stage.

However, progress on both these two projects is a positive sign for the downtown Denver economy. Although I do not have any direct or inside knowledge of the situation, I believe both projects' office components are at least partially speculative, meaning they do not have 100% pre-lease commitments for the space. The types of businesses likely to occupy this type of "Class A or higher" CBD office space include companies in the FIRE sectors (financial services, insurance, real estate), professional services firms and corporate or regional headquarters operations. The willingness and ability of Callahan Capital Partners and Shea Properties to move these projects forward in the face of macroeconomic and capital market headwinds, is compelling evidence that Denver's CBD is well poised to grow its base of high paying jobs and attract new businesses.

This continued progress at the likely start of a U.S. economic recession is particularly notable compared to the office space downturn that hammered Denver in the great 1980s construction boom and bust. It is evidence that the current regional economy is more diversified and resilient than it was in the eighties and that the office sector has not been overbuilt during the current construction boom.

The fact that both Two Tabor and 999 17th Street are mixed use projects is notable. With office, hotel, retail, parking and residential condo components, 999 17th street will be a highly diversified real estate development. Economic weakness in any one use category can be offset by strengths in the others. In fact, this development, with its widely mixed uses is emblematic of the broader changes in land use in downtown Denver over the past 25 years and helps explain why the core is so much stronger today than it was in the 1980s.

Branding Colorado's Green Energy Cluster

This year has seen a wave of positive developments for the green energy sector in Colorado, from the ConocoPhillips purchase of the former Storage Technology site to to the massive $130 million venture capital funding of Broomfield-based biofuel company Range Fuels.

The time is now ripe for regional boosters, civic organizations and clean energy trade groups in Colorado to come up with a memorable nickname for the alternative energy cluster in the region to help brand this sector's presence in Colorado in the same way that "Silicon Valley" represents the technology sector in the San Jose/San Francisco corridor. Giving the sector a concrete, memorable identity will help plant the idea in the public consciousness that Colorado is the place to be for green entrepreneurs, investors and workers, and serve as a rallying cry to help recruit employers and complementary economic entities to the area. This branding action will serve as a preemptive strike against other metro areas who are fiercely competing for similar jobs and investments. Once the nickname is established, a focused public relations and advertising campaign should be used to create brand awareness.

A short, simple, catchy, relevant, two to three word nickname is required. To get the ball rolling here are some suggested components for the name.

Possible alternatives for the first part of the phrase:

• green
  
• renewable
  
• alternative
• clean
• sustainable
  

Possible alternatives for the second part of the phrase:

• prairie
  
• plains
  
• foothills
  
• mountains
• range
• slope
  

The alternative that sounds best to me is "The Renewable Range." I like the meaning, the catchiness of the "double r" alliteration and the implied geographical references to "the Front Range," the well known term for the most populous part of Colorado on the eastern slope of the Rocky Mountains.

I am wondering what others think? Please send your suggestions and comments.

Denver and the REIT Sector

On Thursday April 3, I attended the New York University 2008 Annual REIT Symposium. One of the featured speakers was Jeffrey Schwartz the Chairman and CEO of Denver-based Real Estate Investment Trust (REIT) ProLogis. ProLogis develops and manages one of the largest global portfolios of distribution facilities. The company has operations all over the planet many of which are located in key port cities and help facilitate international trade flows. ProLogis is investing heavily in China. See here for a definition of REIT.

One of the key takeaways from Mr. Schwartz's presentation was that international trade is consistently growing three times faster than global GDP, providing a tremendous opportunity for companies like ProLogis who participate in the process. As I was thinking about the fact that Prologis is headquartered in Denver, I found it really interesting that Denver, a landlocked city without a major water port, which is geographically removed from other large metropolitan areas, has been able to attract and retain a globally oriented company like ProLogis.

The Denver Office of Economic Development has posted an interesting podcast interview with Walt Rakowich, COO and President of ProLogis where Mr. Rakowich discusses the company's relationship with the City of Denver. He cites the City of Denver's business friendly climate, strong infrastructure, world class airport, high quality amenities (mountains, sports teams), highly skilled labor force, and local culture of sustainable development as key factors that have made Denver a hospitable location for the company.

During lunch at the REIT Symposium in New York I met an executive at another REIT which is also located in Denver who told me that ProLogis has informally spun off several other local REITs in the Denver area as talented employees have started new REIT ventures. This got me thinking that perhaps there is an emerging cluster of REITs in Denver.

I found the following web site which lists REITs by geographic location and shows that there are at least nine publicly traded REITs in Metro Denver (ten if you include ProLogis which is not on this list). Also this list does not include private REITs like DCT Industrial and Dividend Capital. At least anecdotally this does seem to be a high concentration of REITs for a single metro area. I am wondering if anyone knows how Denver stacks up compared to other metro areas as a REIT host city?

Colorado Springs Retains USOC Headquarters, Positive Spillovers for Denver?

Civic leaders in Colorado Springs are celebrating their city's successful efforts to retain the United States Olympic Committee's (USOC) headquarters. See here for the city memo which describes this full details of the arrangement between the city and the USOC and here for a summary of the key points.

As reported in the Colorado Springs Gazette, the city and a private developer are offering the USOC $53 million in incentives to relocate their administrative offices to a new six story downtown office building at Colorado Avenue and Tejon Street (See rendering above. Note both images in this Blog entry are from the Gazette's website). Another near-by office building, formerly occupied by a city utility, will be made available for several national sports governing bodies. Public officials believe the activity generated by these two buildings will help revitalize the downtown district in Colorado Springs. The USOC training center at Union Blvd. and Boulder Street (see photo below from the Gazette 's web site) will be redeveloped and renovated with additional living and training facilities constructed for athletes. Colorado Springs will retain thousands of jobs, millions of dollars in economic activity and will have the right to officially associate the city with the Olympic brand.

Since this is a a blog about economic development in the Denver region, you might be asking "Why are you writing about Colorado Springs?" First, although Colorado Springs is not in the Metro Denver Region, its only 70 miles from downtown Denver to Colorado Springs, close enough for there to be substantial economic spillover effects between the two metro areas. One of Metro Denver's biggest weaknesses as a regional economic entity is that it only receives limited spillover traffic and activity from near-by economic entities, unlike cities in the northeast corridor, on the west coast or in Texas for example. A more prosperous Colorado Springs will ultimately benefit the entire Front Range and Denver region. The spillover benefits become even more clear when you consider that the likely alternative location for the USOC was Chicago.

Second, if the Denver region is serious about efforts to win the right to host a Winter or Summer Olympics, the presence of the USOC and the accompanying dignitaries and officials just down the road in the Springs is a major advantage.

Third, this retention helps reinforce the State of Colorado's "global brand" as place with an appealing sports-oriented outdoor lifestyle. The USOC would be welcomed in any community in America but its decision to stay in Colorado speaks volumes about quality of life in the state.

Congratulations to Denver's friends to the south.