Sunday, June 28, 2009

Daniel Gross in Slate on Renewable Energy in Denver

Slate recently posted an interesting article by business writer Daniel Gross on the Denver Region's success in attracting a renewable energy cluster (what I refer to as the "Renewable Range").

The basic thesis of this article is that Colorado's proximity to clean energy generation opportunities in the great plains make it a natural hub for renewable energy manufacturing, research and generation.

Money quotes.

"The Mile High City occupies the high ground when it comes to clean energy—and clean living. Denver's sheer outdoorsiness can be by turns charming and infuriating. (The question "What do you do?" is likely to be answered with an outdoor activity, not a profession.) When I showed up at Gov. Bill Ritter's office, an aide was carting a bicycle rack out of the inner sanctum. And while the state's jewel of a capital may be testimony to its heritage of extraction—walls of Colorado-mined rose onyx, a dome covered in gold, and Works Progress Administration-era frescoes paying tribute to coal mining—a new Colorado is dawning. In November 2004, Denver-area citizens voted to boost sales taxes to expand the region's light-rail system, and the state's voters approved a ballot initiative mandating that utilities draw a chunk of electricity from renewable sources. The quasi-independent republic of Boulder is a capital of
composting, recycling, hybrid-driving, and general eco-fabulousness....

The Great Plains are the Saudi Arabia of wind, and the turbines—a tower can be up to 300 feet high, and each of the three blades weighs up to 7 tons—are very expensive to transport. Colorado's proximity to markets, its highly educated work force, and tax breaks drew Vestas, the Danish turbine maker. The Danes opened their first U.S. manufacturing facility in Windsor, Colo., in 2008, and have three more in the works in the state. The tower factory under construction in Pueblo will be the largest in the world. "We will be processing 200,000 metric tons of steel per year," said Hans Jefpersen, general manager of Vestas Blades America. Total capital investment: $700 million. Suppliers are following: Hexcel, an advanced carbon materials supplier based in Stamford, Conn., is setting up a 100-employee facility in Windsor."

Sunday, June 21, 2009

Brookings Tracks Recission and Recovery in U.S. Metro Areas: Denver in Top 40

The Metropolitan Policy Program at the Brookings Institute has a program called MetroMonitor which tracks the top 100 metro areas in the United States economic performance during the recession on a quarterly basis using metrics such as unemployment rate, wages, gross metropolitan product, housing prices and bank owned real estate. Denver ranks in the second strongest 20 Metro Areas (i.e. top 40 out of 100). See here for the full report.
Source of Photo: The Brookings Institute

Western Governors' Association Report on Renewable Energy Sites

The Western Governors' Association and the U.S. Department of Energy recently released a joint report describing prime locations where renewable energy could be generated in the Western U.S. including four places in Colorado. Three of the Colorado locations, located in the Eastern Plains are suited for wind energy generation and a fourth location in South Central Colorado is a potential home to solar energy generation.

Tax Incentives Played Role in DaVita Location Decision

In addition to factors previously cited in DaVita's decision to move to metro Denver, The Denver Post discusses the role of state tax incentives:

Money Quote:

"A new state law was critical in the decision by the country's largest
kidney-dialysis provider to move its corporate headquarters to
Colorado...Incentives in a new law that takes effect in August "were relevant
and necessary," DaVita chief executive Kent Thiry said Wednesday at a news
conference...Thiry called the incentives the "necessary lubricant" to assist the
company with the time and financial commitments of relocation...How much
incentive money flows to DaVita "is yet to come," said Don Elliman, director of
the Colorado Office of Economic Development and International Trade.
Elliman said the law gives a state income-tax credit of 3.8 percent for up to
five years to companies if they select Colorado over competitors and create at
least 20 jobs."

Saturday, June 13, 2009

Moodys Assessment of Metro Denver Commercial Real Estate Health Indicates Weakness

The rating firm Moodys does a periodic report intended to measure the health of commercial real estate markets in the U.S. by metro area as part of their assessment of commercial mortgage backed securities (CMBS).

Denver's commercial real estate sector has generally been perceived in the media to be healthier than many markets across the country but the data in this report suggests this assessment should be reconsidered. Overall, Denver has a low yellow score which indicates substantial weakness. Denver is ranked 41st out of 60 major metro markets in terms of commercial real estate health. For those people employed in the Front Range's construction sector and local real estate development buffs such as myself these scores are, not surprisingly, a cause for concern.

Of course any metro wide measurement of real estate market health can mask conditions in localized sub-markets and individual sectors which should be specifically analyzed when considering any given project proposal.

First a bit about the study's methodology and then details on the Denver Region's scores. According to Moody's:

"The scores are derived using supply and demand forecasts, as well as current
market conditions and momentum. The report is based on data from
the fourth quarter of 2008"

Each real estate sector (Multifamily, Industrial, Office: Central Business District, Office: Suburban, Retail, Hotel: Full Service, and Hotel: Limited Service) is given a ranking between 0 and 100, 0 being the lowest, least healthy score.

RED=Less than 33 (Unhealthy)


GREEN=67 or more (Healthy)

Now the Metro Denver Results Based on Fourth Quarter 2008 Data

Clearly Moody's believes the hotel and suburban office property sectors are extremely unhealthy in Metro Denver today and unlikely to experience additional new development in the short to medium term. Even the CBD office market, which is in better supply demand balance than it was in the eighties and nineties is currently in a low yellow status. The multifamily sector is the single source of strength in Metro Denver's commercial property markets.

No one study or report should be taken as the final word in assessing something as complex and fluid as a region's commercial real estate market health but people with rosy short term assessments of the Denver property markets would be well advised to consider these results as they make short term decisions and long term plans

Full Report Name: CMBS: Red - Yellow- Green Update, First Quarter 2009 Quarterly Assessment of U.S. Property Markets, April 21, 2009.

Friday, June 5, 2009

Denver 18th Ranked North American High-Tech Metro Area

See interactive data from new Milken Institute Report North America’s High-Tech Economy: The Geography of Knowledge-Based Industries. Click here for Denver specific data.