2016 economic forecast for metro denver

2016 Economic Forecast for Metro Denver

Including Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, and Jefferson Counties

February 2016

Prepared By:

Development Research Partners

Development Research Partners specializes in economic research and analysis for local and state government and private sector businesses. Founded in 1994, Development Research Partners combines extensive experience in real estate economics and economic development to provide clients with reliable consulting services in four areas of expertise:

Economic and Demographic Research Research in support of business and community activities, ranging from community profiles to evaluating and forecasting economic and market conditions.

Industry Studies

Specialized research projects including industry cluster research, industry trends analysis, and strategic competitive analysis.

Fiscal and Economic Impact Analysis

Comprehensive analysis and analytical tools to evaluate and forecast site‐specific activities and model public‐private sector relationships.

Real Estate Economics

Preparation of strategic market data and analysis for prospective real estate development and public‐private partnerships.

Development Research Partners

Patty Silverstein, President & Chief Economist Erica Blake, Research Economist 10184 West Belleview Avenue Suite 100 Littleton, Colorado 80127 www.DevelopmentResearch.net 303.991.0070

TABLE OF CONTENTS

Metro Denver Economic Development Corporation | February 2016

Table of Contents

EXECUTIVE SUMMARY ................................................................................................................................. i

U.S. ECONOMY ............................................................................................................................................ 1

International Economy ................................................................................................................................................ 1 Gross Domestic Product .............................................................................................................................................. 2

Household Spending .......................................................................................................................................................... 2 Business Spending .............................................................................................................................................................. 3

Government Spending ....................................................................................................................................................... 4 Net Exports ......................................................................................................................................................................... 5

Interest Rates .............................................................................................................................................................. 5 Employment & Unemployment ................................................................................................................................... 6 Income ........................................................................................................................................................................ 7 Inflation ...................................................................................................................................................................... 9

COLORADO ECONOMY .............................................................................................................................. 10

Employment & Unemployment ................................................................................................................................. 11 Colorado Exports ....................................................................................................................................................... 13 Population ................................................................................................................................................................ 14 Income & Spending ................................................................................................................................................... 15 Inflation .................................................................................................................................................................... 16

METRO DENVER ECONOMY ...................................................................................................................... 17

Employment & Unemployment ................................................................................................................................. 18

Industry Overviews ................................................................................................................................................... 19

Natural Resources & Construction ................................................................................................................................... 20 Manufacturing .................................................................................................................................................................. 23 Wholesale & Retail Trade ................................................................................................................................................. 25 Transportation, Warehousing & Utilities ......................................................................................................................... 25 Information ...................................................................................................................................................................... 26

Financial Activities ............................................................................................................................................................ 27 Professional & Business Services ..................................................................................................................................... 27 Education & Health Services ............................................................................................................................................ 28 Leisure & Hospitality ........................................................................................................................................................ 29 Other Services .................................................................................................................................................................. 30

Government ..................................................................................................................................................................... 31 Industry Clusters ....................................................................................................................................................... 32

Income ...................................................................................................................................................................... 34

Population ................................................................................................................................................................ 35

Residential Real Estate .............................................................................................................................................. 36

DATA APPENDIX ........................................................................................................................................ 39

REFERENCES .............................................................................................................................................. 40

Metro Denver Economic Development Corporation | February 2016 | Page iage i

Executive Summary

U.S. Economy

The United States continued on an expansionary path through 2015, as all jobs lost during the recession were recovered by mid‐2014 and employment growth occurred in 49 of 50 states in 2015. The nation’s businesses generated over 2.9 million jobs in 2015, the most jobs created in a single year since 1999 when the economy added 3.1 million jobs. The size of employment gains differed greatly across states, ranging from 0.4 percent in Wyoming to 4 percent in Utah. The employment growth rate is expected to increase at a slightly slower pace, falling from 2.1 percent in 2015 to 1.9 percent in 2016.

Gross domestic product will grow at a 2.6 percent pace in 2016, which is just below the historic average of 2.7 percent, spurred by rising consumer confidence, increased consumption, and rising business investment. The unemployment rate fell to 5.3 percent in 2015, recording the lowest unemployment rate since 2007. As GDP and employment expand, the nation’s unemployment rate will drop to 5.0 percent and personal income will increase 4.8 percent in 2016.

With significant improvement in the national employment situation and strong consumption measures, the Federal Reserve decided to raise the target federal funds rate for the first time since 2008, raising the range to 0.25 to 0.5 percent in December 2015. Following trends that started in mid‐2014, the price of oil continued to rapidly decline through 2015. The spot price for West Texas Intermediate crude oil dropped from a monthly average price of $106 per barrel in June 2014 to $37 per barrel in December 2015. The decline in oil prices is beneficial to consumers as they have more money in their pockets to spend on other goods and services; however, major oil‐producing states have reduced employment and shut down low producing wells in response to the downturn.

In addition to potentially rising interest rates, the greatest risks to U.S. economic growth are global economic conditions and social and political instability in the Middle East and Russia. In particular, the sluggish Chinese economy and low oil prices have had a negative influence in the U.S. stock market, leading to the worst beginning of the year performance on record. As these risks influence business and consumer confidence, which in turn influence overall spending patterns, more stability in these situations is needed for the U.S. recovery to remain on track.

Colorado Economy

Colorado is expected to be among the top 15 states for employment growth during 2015, as preliminary numbers suggest a 2.9 percent increase in jobs in 2015. The employment base will expand by about 65,800 jobs in 2016 to nearly 2.6 million workers, a 2.6 percent increase. The natural resources and construction, education and health services, and professional and business services supersectors are expected to lead the state in employment growth through 2016.

Personal income growth will accelerate in 2016 to 5.3 percent due to increasing wages, rising housing prices, and increased investment. Falling unemployment and rising personal income bode well for consumer spending in 2016. Retail trade sales increased by about 4.8 percent in 2015 as consumers had more discretionary spending due to increased income, low inflation, and historically low fuel prices. Retail trade sales are expected to increase at a faster pace of 5.4 percent in 2016.

Colorado’s expanding employment base, high quality of life, and increasing presence in the global business community will continue to attract individuals and businesses to the state. However, the region is challenged by the low price of oil as Colorado was ranked as the country’s seventh largest oil producer in 2014. While this industry has large multiplier effects, the state’s diversified economic base should help it weather the employment declines resulting from a slowdown in exploration activity due to the low price of oil.

Metro Denver Economic Development Corporation | February 2016 | Page iiage i

Executive Summary

Metro Denver Economy

Metro Denver experienced job growth in each supersector except information in 2015, leading to a gain of 48,400 jobs across the seven‐county area. This employment growth rate of 3.2 percent was well above the nation and the state. In 2016, job gains will continue to be broad‐based. Two of the three supersectors that added the most jobs in 2015–professional and business services, education and health services, and natural resources and construction–are likely to maintain this position in 2016. The natural resources and construction supersector is likely to be replaced by the wholesale and retail trade supersector as the third‐fastest growing segment of the economy. The unemployment rate in Metro Denver is expected to average about 3.5 percent in 2016, representing extremely tight labor market conditions.

Since many of Metro Denver’s key competitors are also experiencing rapid economic growth, it is important to place Metro Denver’s level of economic activity into context. Therefore, this economic report compares various economic indicators for Metro Denver with its top six national economic development competitors, consisting of the following metropolitan areas:

Atlanta‐Sandy Springs‐Roswell, Georgia

Austin‐Round Rock, Texas

Dallas‐Fort Worth‐Arlington, Texas

Phoenix‐Mesa‐Scottsdale, Arizona

Portland‐Vancouver‐Hillsboro, Oregon‐Washington

Salt Lake City, Utah

Austin hardly was influenced by the Great Recession and has continued to add workers at a brisk pace. Dallas was the next competitor to recover, driven by strength in the energy sector. Metro Denver and Salt Lake City recovered all jobs lost at roughly the same time in early 2013 and have been on a similar growth path since. Recovery in Portland and Atlanta occurred about a year later, whereas Phoenix did not reach pre‐recession employment until late in 2015. For Metro Denver to maintain its competitive edge, it is important to understand how other economic indicators such as unemployment rates, average annual wage increases, and housing prices are tracking in Metro Denver versus its main economic development competitors.

With limited supply in the residential real estate market and above average population growth, Metro Denver home prices will continue to rise and construction activity will continue at a quick pace. Multi‐family construction represented 43 percent of the new units built in 2015, higher than the 35 plus‐year average of multi‐family units representing roughly one‐quarter of construction. Single‐family detached construction has been slow over the past few years, but construction will start to pick up as developers find new areas for large, planned communities. Single‐family detached permits represented 54 percent of building permits in 2015, an increase of 4.6 percentage points over the prior year’s level. With rising apartment rental rates, individuals are regarding home ownership as a more viable option.

Metro Denver’s expanding economy will continue to be supported by a strong entrepreneurial environment, business friendly policies, and a talented workforce. The region will be constrained by a tight residential housing market, but commercial construction will continue at levels at or above historical averages. With a strong employment situation and positive business investment, Metro Denver is poised to achieve new economic milestones in 2016.

U.S. ECONOMY

Metro Denver Economic Development Corporation | February 2016 | Page 1 1

U.S. Economy

The United States continued on an expansionary path through 2015, with employment levels reaching record highs and unemployment rates falling to the lowest levels since 2007. The nation’s businesses generated over 2.9 million jobs in 2015, the most jobs created in a single year since 1999 when the economy added 3.1 million jobs. Preliminary data suggests that 49 of the 50 states posted average annual increases in employment between 2014 and 2015 with West Virginia reporting the only decline in employment (‐1.1 percent). The size of employment gains differed greatly across states, ranging from 0.4 percent in Wyoming to 4 percent in Utah. This was the first time in six years that North Dakota did not led the states in employment growth, but the slip from first to 46th place is likely attributed to restructuring of oil companies during the current energy downturn.

Most analysts expect U.S. economic activity to strengthen in 2016 through increased consumer spending, rising home sales, new construction activity, and strong employment growth. The unemployment rate fell to 5.3 percent in 2015, recording the lowest unemployment rate since 2007. With significant improvement in the national employment situation and strong consumption measures, the Federal Reserve decided to raise the target federal funds rate for the first time in seven years, raising the range to 0.25 to 0.5 percent in December 2015. The increase in the federal funds rate is a reflection of the strength of the national economy, because the Federal Reserve believes the economy is expanding at a moderate pace allowing it to support higher interest rates.

Following trends that started in mid‐2014, the price of oil continued to rapidly decline through 2015. The spot price for West Texas Intermediate crude oil dropped from a monthly average price of $106 per barrel in June 2014 to $37 per barrel in December 2015. Even more currently, prices dropped to $27 per barrel on January 20, 2016 and have rebounded slightly as of the end of January. The decline in oil prices is beneficial to consumers as they have more money in their pockets to spend on other goods and services; however, major oil‐producing states have reduced employment and shut down low producing wells in response to the downturn.

In addition to potentially rising interest rates, the greatest risks to U.S. economic growth are global economic conditions and social and political instability in the Middle East and Russia. In particular, the sluggish Chinese economy and low oil prices have had a negative influence in the U.S. stock market, leading to the worst beginning of the year performance on record. As these risks influence business and consumer confidence, which in turn influence overall spending patterns, more stability in these situations is needed for the U.S. recovery to remain on track.

International Economy

According to the International Monetary Fund (IMF), a modest and uneven recovery is expected to continue through 2016, with a gradual narrowing in output gaps. The IMF expects the global growth rate to average 3.1 percent in 2015, but increase slightly to 3.4 percent in 2016. The biggest risks to the global outlook include a generalized slowdown in emerging market economies, the rebalancing of the Chinese economy, lower commodity prices, and a gradual exit from extraordinary accommodative monetary conditions in the United States. The IMF states that if these challenges are not managed successfully, global growth could be derailed. Economic growth in the advanced economies is expected to rise from 1.9 percent in 2015 to 2.1 percent in 2016. Euro Zone output increased 0.9 percent in 2014 and should increase 1.5 percent in 2016. The Euro Zone has recorded strong private consumption bolstered by low oil prices and easy financial conditions. Much of the growth in the Euro Zone is attributed to Germany and France.

The value of output in the emerging economies is expected to grow from 4 percent in 2015 to 4.3 percent in 2016. The IMF reported that mixed inflation developments in emerging market economies reflect the conflicting implications of weak domestic demand and lower commodity prices versus marked currency depreciations over the past year. A few of the emerging economies are expected to contract in 2016 including Russia and Brazil.

U.S. ECONOMY


U.S. Economy

Gross Domestic Product

Throughout this publication, (e) is used to represent data that are estimated in the absence of data for all 12 months of 2015; (f) indicates a forecast figure.

Gross Domestic Product: +2.5 percent in 2015(e); +2.6 percent in 2016(f).

Gross domestic product (GDP)—the total value of goods and services produced in the U.S. economy—is a key gauge of the nation’s economic health. Between 1980 and 2014, annual GDP growth averaged about 2.7 percent; growth above that trend has often meant falling unemployment rates, and below‐trend growth resulted in a stagnant economy.

GDP growth averaged 2.1 percent between 2010 and 2015. National GDP reported six consecutive quarters of growth between the second quarter of 2014 and the third quarter of 2015. Consumption has been strong over the past few quarters, contributing to strong quarterly GDP growth through 2015. Nonresidential fixed investment, state and local government spending, and residential fixed investment have also positively contributed to recent GDP growth. With strong personal consumption and continued business spending, annual growth is forecast to be 2.5 percent in 2015 and accelerate slightly to 2.6 percent in 2016.

Reasons for the increase in growth are easiest to recognize when GDP is broken down into its four components: 1) household spending on goods and services; 2) business spending on software, equipment, and real estate; 3) government spending on goods and services; and 4) net exports, or foreign purchases of U.S. goods less our imports.

Household Spending

Household spending contributes about two‐thirds of national output and has a long‐term average annual growth rate of 3 percent. Consumer confidence and employment levels reached new highs through 2015, pushing consumer spending to the highest level on record in the third quarter of 2015. Several factors, some positive and some negative, will influence consumer spending in the year ahead.

Wage growth pressure developing. With the unemployment rate slowly declining over the past several years, wage growth was slow and irregular. Moody’s Analytics reported

U.S. ECONOMY


U.S. Economy

that wage growth has remained pedestrian and that there is significant debate as to what is causing slow wage growth. Some argue that the job market has more slack than previously thought, while others argue that the link between a tightening job market and wage growth has been impaired. Moody’s reports it is more likely that businesses are attempting to avoid bigger pay increases for their workers, which is quite typical, particularly coming out of a period with a slack job market. Further, the quickly rising number of job openings suggests that this business technique is no longer working. As the unemployment rate moderates at or below 5 percent in the next year or two, job market candidates will have more latitude for salary negotiations.

Home price increases adding to household wealth. According to the S&P/Case‐Shiller home price indices, the national home index was up 5.2 percent between November 2014 and 2015. The increase in housing prices provides a wealth effect to homeowners’, however, much of the increase in price is attributed to a disequilibrium in supply and demand as well as a lack of access to skilled labor and increased construction costs. Data from Freddie Mac shows the total home equity cashed out through refinancing during the first three quarters of 2015 ($30.6 billion) was 82.1 percent above the same period the previous year, indicating more households are seeking financing through home equity.

Volatile stock market creating nervous investors. About 55 percent of American adults were invested in the stock market in 2015, down from 65 percent in 2007, according to Gallup’s annual Economy and Finance survey. The stock market is an economic indicator that is influenced by daily fluctuations in the economy and 2015 marked a year where economic uncertainty over the international economy and national policies had a lasting effect. A few of the major factors that influenced the U.S. stock market in 2015 included the economic situation in Greece, the anticipated rise in the federal funds rate, declining oil prices, and fluctuations in China’s stock market and economic growth path. Two of the three U.S. stock market indices reported negative returns, while the NASDAQ reported slightly positive returns. Relief for the stock market in 2016 may not come until later in the year. According to the Wall Street Journal, the first week of January was the worst opening week to a year for the U.S. stock market in market history.

Household debt composition remains in check. After the housing bubble burst in 2007, total household debt plunged compared with prior years. The housing component of the recession heavily influenced the mortgage debt portion of household debt. However, total household debt has been positive for 16 consecutive quarters. Mortgage debt growth remained positive for every quarter between the second quarter 2014 and the third quarter of 2015, the longest stretch of positive growth since prior to the Great Recession. Consumer credit debt has continued to grow for 21 consecutive quarters, reaching the highest levels since at least 2005.

Business Spending

During the Great Recession, corporate profits took a major hit as consumers purchased less goods and services, investors were cautious of further economic declines, and Wall Street reeled from the impact of the housing crisis. Since the low of 2008, corporate profits have increased significantly and recorded a record high in mid‐

U.S. ECONOMY


U.S. Economy

2015 before a small retreat in the third quarter. Profits were also 6 percent higher compared with the same three quarters of 2014. Corporate profits are expected to remain on a generally positive trend through 2016, with the return of earnings growth being a big factor in stock market performance in 2016.

Business spending on real estate steadily increased between the second quarter of 2013 and the fourth quarter of 2014. However, spending on real estate declined during the first and third quarters of 2015. Spending on equipment continued to increase significantly and reached the highest level since the availability of the quarterly data in 1947. Equipment spending was heavily concentrated in information processing equipment, with spending increasing 8.7 percent between the third quarters of 2014 and 2015. Intellectual property products spending increased 5.4 percent during the same period, with research and development contributing the strongest increase. This indicates that businesses are slowly investing in facilities, but are much more willing to invest in equipment and intellectual property to increase competitiveness and productivity.

Government Spending

According to the Congressional Budget Office (CBO), the federal budget deficit for fiscal year 2015 is forecast to be $439 billion as of January 2016, 9.5 percent lower than the prior year’s deficit. The federal deficit as a percentage of GDP declined to 2.5 percent, marking the sixth consecutive year of declines since peaking at 9.8 percent in 2009. The 2015 deficit is $46 billion less than the deficit of fiscal year 2014. The 2015 budget shortfall constituted the smallest since 2007 and is below the average deficit (relative to the size of the economy) over the past 50 years. The CBO stated that if current laws generally remain unchanged, within a few years the deficit would begin to rise again relative to GDP. The CBO economic forecast, which serves as the basis for its budget projections, expects that the economy will expand at a solid pace in calendar years 2016 and 2017 and at a more moderate pace in subsequent years. The CBO also stated that the pace of growth over the next few years is expected to reduce the quality of underused resources, or “slack,” in the economy, lowering the unemployment rate and putting upward pressure on compensation as well as on inflation and interest rates. If current policies do not change, the CBO expects the deficit as a share of GDP to increase from 2.5 percent in 2015 to 3.7 percent in 2025.

The International Monetary Fund’s (IMF) World Outlook Database reports that the U.S. government gross debt in 2015 was estimated to be nearly 105 percent of GDP, the seventh highest rate of the world’s advanced

U.S. ECONOMY


U.S. Economy

economies. The IMF estimates that gross debt will be at 106 percent of GDP in 2016. In October 2015, Congress reached a two‐year agreement to raise the federal debt ceiling. The legislation will raise spending by $80 million over two years, but includes spending cuts on Medicare and Social Security disability benefits, as well as savings from other programs including selling oil from the nation’s strategic oil reserves.

The 2013 Census of Government: Annual Survey of State Government Finances reported that total revenues by state and local governments increased 16.3 percent between 2012 and 2013 to nearly $2.2 trillion. Further, nearly three‐quarters (73.9 percent) of the increase in revenue was attributed to growth in insurance trust revenue, which rose 89.7 percent between 2012 and 2013 to $485.2 billion. The major sources of general revenue for state governments were from taxes (49.5 percent), federal grants (30 percent), and current charges (10.7 percent). Total expenditures for state governments in 2013 were $2 trillion, an increase of 1.2 percent compared with the 2012 level.

Net Exports

Demand for U.S. exports declined during 2015, falling 4.6 percent through November compared with the same period in 2014. Imports were also 2.8 percent lower during the same period. Imports and exports fell to the lowest levels of the last three years. Major U.S. exports include transportation equipment, computers, and oil products. The nation’s largest trading partners are Canada, Mexico, China, Japan, and Germany.

The greatest risk to U.S. exports currently is continued appreciation of the dollar. U.S. exports declined year‐over‐year in 2015 for the first time since 2009, as the value of the dollar hit its highest level in over a decade. The strong dollar makes U.S. goods more expensive for consumers in other countries to purchase. With expensive goods, the demand for exports declined and overall U.S. exports have suffered.

Interest Rates

Prime rate: 3.3 percent in 2015; 3.8 percent in 2016(f).

The Federal Reserve increased its target federal funds rate for the first time in seven years, raising the range to 0.25 to 0.5 percent in December 2015. The Federal Open Market Committee (FOMC) meeting in December 2015 reported that the committee believes that economic activity has been expanding at a moderate pace. Further, continued job gains and declining unemployment showed further improvement and confirmed that underutilization of the labor resources had

U.S. ECONOMY


U.S. Economy

diminished appreciably since early in 2015. The committee stated that taking into account domestic and international developments, risk to the outlook for both economic activity and the labor market is balanced. The committee expects inflation to rise 2 percent over the medium term as the transitory effects of declining energy and import prices dissipate and the labor market strengthens further.

Employment & Unemployment

Employment: +2.1 percent in 2015(e); +1.9 percent in 2016(f).

Unemployment: 5.3 percent in 2015(e); 5.0 percent in 2016(f).

The U.S. employment situation continued to improve through 2015, averaging 2.1 percent growth for the year. The non‐seasonally adjusted employment level in December was 4.7 million jobs above the pre‐recession peak of 139.4 million jobs in November 2007. Businesses became more confident in the short‐run economy through 2015, resulting in the fastest employment growth since 2000. In 2015, unemployed individuals over the age of 16 remained jobless for an average of 7 months, which was one month less than the prior year, and the lowest level since 2009 when the average was 6 months. The labor force participation rate fell to 62.6 percent in December, while the U.S. unemployment rate fell to 4.8 percent in December.

The White House Council of Economic Advisors stated that the country added more jobs over the past three years than in any other three‐year period since 2000. The council also reported that unemployment in November was the lowest level since April 2008. Further, the unemployment rate has consistently fallen much faster than economists expected throughout the economic recovery, reaching 5 percent or below considerably earlier than projected.

According to the most recent Manpower Employment Outlook Survey for the first quarter of 2016, hiring will be slower compared with the fourth quarter of 2015 as the number of companies expecting to hire fell to 20 percent. Compared with the year‐ago level, the first quarter number was 1 percentage point higher in 2016 than 2015. Further, the percentage of companies planning to hold employment steady decreased 1 percentage point to 72 percent between the first quarters of 2015 and 2016. Only 6 percent of companies expect to reduce their workforce, which was unchanged from the prior quarter and the previous year.

U.S. ECONOMY


U.S. Economy

Income

Income growth: +4.5 percent in 2015(e); +4.8 percent in 2016(f).

Personal income has several components: earnings from work, asset‐based income, and government social insurance (transfer) payments. Slack in the labor market in previous years has led to slow growth in wage‐based income. With the national unemployment rate continuing to decline, wage pressure will begin to build slowly through 2016. Fourteen states began 2016 with higher minimum wages and 12 of those states increased their rates through legislation in 2014 or 2015, while two states automatically increased their rates based on the cost of living.

Personal income growth is expected to accelerate in 2016 as wage growth resumes, leading to a 4.8 percent increase, up from the 4.5 percent increase in 2015.

Wage and salary growth has been slow since 2009 due to a large supply of available workers, resulting in minimal wage increases. During recessionary periods, workers lose negotiating power for wages because there are more people available to work than there are available jobs, allowing business owners to be more selective of whom to hire. In 2015, the unemployment rate fell to the lowest level since 2007. Employers are now trying to fill open positions from a smaller pool of available workers, and discovering that they may need to increase wages and/or offer more extensive benefits to attract and retain workers.

Income growth often becomes an area of focus among workers and employers when the business cycle transitions into economic expansion, with business activity increasing, gross domestic product rising, and strong employment growth. America’s governmental leaders frequently debate the plight of “the middle class” and how proposed rules and legislation affect this group. However, there is no standard definition of middle class, and the label tends to mean different things to different people. Some define middle class as those sharing common social views or social positions, while others define the group based on income.

The issue is not whether the middle class is getting larger or smaller. Rather, the issue is whether economic conditions are creating opportunities for households to maintain and improve their standard of living. The most common way to measure the standard of living is by examining the income distribution over time.

The number or share of households classified as lower, middle, or upper income varies according to how the income categories are defined. The Pew Charitable Trusts defines “middle class households” as those earning between 67 percent and 200 percent of a state’s median household income. The Brookings Institution often uses a narrower definition of middle‐income households as those earning between 75 percent and 125 percent of an area’s median income, which captures the middle strata of income. This analysis is based on the narrower definition put forth by the Brookings Institution.

U.S. ECONOMY


U.S. Economy

The national median household income in 2014 was $53,660, which was 2.7 percent higher than the previous year’s level. While this was a small increase in income, it was the fastest over‐the‐year growth rate for the nation since 2007 when income increased 4.7 percent. The median household income decreased in 2009 and 2010, falling 3.5 percent and 0.3 percent, respectively. During the recession, the median household income fell to its lowest in 2010 ($50,050), but the median income has since increased to record highs.

In 2014, there were 117.3 million households in the U.S., of which about 21.3 percent of households were in the middle‐income category. Households in the middle‐income category earned between $40,240 and $67,070 per year in 2014, compared with $34,680 and $57,800 per year in 2005.

Changes in the distribution of income are but slight over time. The nation’s middle‐income category was largest in 2006, when 23 percent of households fell into this category. The middle‐income category contracted to 22 percent of total households during the height of the recession and has represented 21 percent of households since 2010.

Between 2005 and 2010, the upper‐income category represented 40 percent of total households in the United States. In 2011, this portion increased to 41 percent and remained at that level through 2014. Between 2005 and 2009, the lower‐income category represented about 38 percent of total households, except for a slight decline to 37 percent in 2006. The portion of households in the lower‐income category increased to 39 percent between 2010 and 2012, but fell back to 38 percent in 2013 and 2014.

When considering the absolute change in households over the last ten years, the data shows the upper‐income category has added more households than the middle‐ and lower‐income categories. The number of households in the U.S. increased by 6.2 million from 2005 to 2014, a 5.6 percent increase. Of these households, 3.7 million were added to the upper‐income category (+8.4 percent) and 1.8 million were added to the lower‐income category (+4.2 percent). The middle‐income category added about 650,000 households, a 2.7 percent increase.

U.S. ECONOMY


U.S. Economy

Inflation

Consumer Price Index: +0.1 percent in 2015; +1.7 percent in 2016(f).

The Federal Reserve target inflation rate is 2 percent in the medium‐term, and the 2015 average was 0.1 percent. Typically, a rise in interest rates is followed by slower inflation because consumers have less money to spend and prices of goods and services fall in response. However, the Federal Reserve pledges to watch inflation closely and is reasonably confident that inflation will rise over the medium term. The national consumer price index is heavily influenced by changes in energy prices. The collapse of worldwide oil prices began in late 2014 and declined precipitously through 2015, leading to little to no inflation. Despite the decline in oil prices, the production of crude oil continued to rise due to the productivity increases allowed by technological advancement.

The U.S. Federal Energy Information Administration (EIA) forecasted that Brent crude oil prices would average $53 per barrel in 2015 and $56 per barrel in 2016. Further, oil price volatility was lower during October than during August and September, but it remained elevated compared with levels in recent years. The EIA estimated that crude oil production would decrease through the third quarter 2016 before growth resumes late in 2016 and projected that U.S. crude oil production would average 9.3 million barrels per day in 2015 and 8.8 million barrels in 2016.

Food price inflation is expected to be in line with the historical average through 2015 and 2016. According to a forecast of consumer prices by the Economic Research Service at the U.S. Department of Agriculture (USDA), food prices may increase one to 2 percent in 2015 and increase 2 to 3 percent in 2016. However, the USDA stated that ongoing drought conditions in California could have large and lasting effects on fruit, vegetable, dairy, and egg prices. Conversely, if oil prices remain low through 2016, the decline in production and transportation costs may be passed through to retail prices.

National Economy Summary

The United States continued on its expansionary path, as all jobs lost during the recession were recovered by mid‐2014 and employment growth occurred in 49 of 50 states in 2015. The employment growth rate is expected to increase at a slower pace, falling from 2.1 percent in 2015 to 1.9 percent in 2016. Gross domestic product will grow at a 2.6 percent pace in 2016, which is just below the historic average of 2.7 percent, spurred by rising consumer confidence, increased consumption, and rising business investment. As GDP and employment expand, the nation’s unemployment rate will drop to 5.0 percent and personal income will increase 4.8 percent in 2016. The low level of inflation and the expected rise in income will positively influence construction activity and home sales, with consumers willing to jump back into the housing market, driving up demand for various housing types.

COLORADO ECONOMY


Colorado Economy

Colorado is expected to be among the top 15 states for employment growth during 2015, although final state employment data for the year will not be released until March. Between 2012 and 2014, Colorado ranked among the top five states for job growth, adding more than 202,000 jobs over the three‐year span. Preliminary numbers suggest state employment growth of 2.9 percent in 2015, which is higher than the national growth rate of 2.1 percent. The employment base will expand to nearly 2.6 million workers in 2016, representing the addition of 65,800 jobs. Historically, Colorado has amplified national employment trends and added jobs at a faster pace than the national average, but the state’s growth trend began to converge with the national in 2015.

Colorado’s growing labor market is supported by a diverse industry base and dynamic business climate. Colorado’s expanding employment base, high quality of life, and increasing presence in the global business community continue to attract individuals and businesses to the state. Colorado’s economy is expected to report positive trends through 2016 across many economic indicators.

Colorado has experienced strong economic growth over the past two years, but many of the state’s key competitors are also reporting strong economic environments. Therefore, this economic forecast compares various

economic indicators for Colorado with its key economic development competitors. While companies that are expanding or relocating their operations are often evaluating locations across the globe, Colorado’s top five national competitors, as ranked by the number of economic development prospect deals over the past ten years, consist of Georgia, Texas, Arizona, Oregon, and Utah.

The state has several unique advantages. The expanding entrepreneurial community, increasing start‐up activity, and highly educated workforce make Colorado an attractive location for business. In 2015, the state ranked:

…second‐most entrepreneurial state by NerdWallet, where Colorado recorded a 50.2 percent increase in Small Business Administration loans per 100,000 people between 2012 and 2015.

…third on Business Insider’s list of the nation’s top economies for its low unemployment and strong housing price growth.

…third for its technology employment concentration (9.2 percent in 2014) on the CompTIA’s Cyberstates 2015 report.

…fourth on CNBC’s list of the nation’s best states for business and Colorado was recognized for its economy, technology and innovation, access to capital, and quality of life.

…fourth on the 2015 Clean Tech Leadership Index by Clean Edge, Inc., where high ranking states are recognized for producing ecofriendly and environmentally safe technology.

…fifth best state for business by Forbes. Colorado was noted for its healthy population, labor supply, and educational attainment.

These favorable rankings suggest the state will continue to grow solidly and attract attention as a highly desirable place to live and work.

COLORADO ECONOMY


Colorado Economy


Note: Annual benchmark revisions to the employment and unemployment data series can significantly alter historic trends. As 2015 job data will be revised in March 2016, the exact revisions are not yet known. The following forecast is based on expected revisions to the data.



Colorado employment increased an estimated 2.9 percent in 2015, a decline of 0.4 percentage points from the previous year’s growth rate of 3.3 percent. Estimates show the state gained 70,900 jobs in 2015 compared with 2014, and it is expected to gain another 65,800 jobs during 2016. Data from the U.S. Department of Labor’s Current Employment Statistics (CES) show that statewide employment surpassed its pre‐recession peak in June 2013. Between 2011 and 2015, Colorado added 309,400 jobs to the state’s economy.

According to the unrevised, published employment numbers from the CES data, during the first 11 months of 2015 Colorado employment increased 2.4 percent compared with the same period the prior year. Texas and Arizona also reported employment growth of 2.4 percent, while Utah (+4 percent), Oregon (+3.2 percent), and Georgia (+2.7 percent) all reported stronger growth during the period. Colorado, Texas, and Utah have been among the top ten states for employment growth since 2011, while Arizona, Georgia, and Oregon have only recently started recording strong employment growth to push them into the top rankings. Employment growth for Colorado and Texas was spurred by an expanding energy sector, while Utah experienced strong in a diverse set of sectors that was led by an expanding professional and business services supersector.

Colorado’s fastest growing supersector was natural resources and construction, reporting a 5.7 percent increase between November 2014 and 2015. The natural resources and construction supersector added 10,500 jobs during the same period. The leisure and hospitality and the education and health services supersectors also reported the most jobs added over the year, increasing 4.9 percent and 4 percent, respectively. The natural resources and construction, education and health services, and professional and business services supersectors are expected to lead the state in employment growth through 2016. All eleven supersectors in Colorado are expected to have employment growth through 2016.

Despite the strong employment growth rate at the state level, employment growth continues to be inconsistent across the state’s regions. The Greeley Metropolitan Statistical Area (MSA), which consists of Weld

COLORADO ECONOMY


Colorado Economy

County, continues to be the fastest growing region in the state; however, the region did have a significant decline in its growth rate between 2014 and 2015 largely due to the decline in energy prices as employees were laid off from oil and gas companies. Both the Fort Collins and Pueblo MSAs recorded stronger growth rates in 2015 compared with 2014, signaling improvements to each region’s employment situation. Employment growth along the Western Slope slowed to levels below the national average, as indicated by the 1.1 percent growth rate posted in the Grand Junction MSA through November 2015.

An additional key facet of Colorado’s employment base is the state’s level of entrepreneurial activity. Sole proprietors are not counted in the nonfarm employment numbers for the state, and these individuals represent a tremendous force in the state. In 2014, Colorado had over 855,800 sole proprietors, earning over $27.4 billion in income. Sole proprietor employment increased 1.3 percent between 2013 and 2014, while sole proprietor income increased nearly 7 percent during the same period. Colorado has the fifth‐highest concentration of sole proprietors of the 50 states.

The Manpower Employment Outlook Survey for Colorado showed a similar employment outlook compared with the nation between the first quarters of 2015 and 2016. Hiring expectations for the state declined during the first quarter of 2016 compared with the prior year, falling 3 percentage points. However, the percent of companies planning to lay off workers was unchanged during the period. The percent of companies planning to lay off employees and increase employment levels were both higher than the fourth quarter of 2015.

Colorado employers have been optimistic about their business future, recording employment trends that are consistent with the national average. More than two‐thirds of employers reported plans to maintain staffing levels through the beginning of 2016, but one‐fifth intend to increase staffing levels. As companies consistently increase staffing levels, Colorado’s labor force is expected to tighten to levels not seen since before the Great Recession. The state’s unemployment rate will remain below the national average. The state tied with Kansas and Vermont for the ninth lowest unemployment rate of the 50 states as of November 2015.

Colorado’s unemployment rate peaked in 2010, reaching 9.1 percent, but it has steadily declined as the state moved from recovery to expansion. The state’s unemployment rate averaged 5 percent in 2014 and is expected to average 4.1 percent in 2015. The 2015 level will be the lowest level for the state since 2007, when the unemployment rate was 3.7 percent. The state’s unemployment situation is expected to improve into 2016 as companies continue to expand their workforces and employment matching between skill sets and available jobs improves. With Colorado’s unemployment rate declining in 2016 and the state operating

1Q 4Q 3Q 2Q 1Q

2016 2015 2015 2015 2015

% Hiring 20% 18% 28% 21% 23%

% Laying Off 6% 5% 2% 1% 6%

% No Change 72% 75% 70% 74% 68%

% Unsure 2% 2% 0% 4% 3%

U.S.

% Hiring 20% 21% 24% 22% 19%

% Laying Off 6% 6% 4% 4% 6%

% No Change 72% 71% 70% 72% 73%

% Unsure 2% 2% 2% 2% 2%Source: Manpower Inc.

Colorado

Colorado Employment Outlook Survey

COLORADO ECONOMY


Colorado Economy

at more than full employment, wage pressure will build as employers compete for the limited available supply of workers. The average annual unemployment rate is expected to fall to 3.8 percent in 2016.

In terms of unemployment, Colorado, Utah, and Texas have recovered significantly since the recession, while Arizona, Georgia, and Oregon continue to work on reducing their unemployment rates. Utah’s unemployment rate was the lowest of the competitor states in 2014, reaching 3.8 percent and the fourth lowest level in the country. At the peak of the recession in 2010, Utah had the lowest unemployment rate of the competitors at 7.8 percent, making its path to full employment shorter than the other states. Between 2013 and 2014, Arizona, Georgia, and Oregon each recorded declining unemployment rates, falling to 6.9 percent, 7.2 percent, and 6.9 percent, respectively. While these three states recorded declining rates, they were all above the national average for 2014 and were ranked among the highest rates in the nation. Further, these three states had unemployment rates above 10 percent at the peak of the recession, making their road to low unemployment more difficult than other states.

While Colorado’s unemployment rate continued to decline in 2015, there was still an imbalance in the employment market. Not all employed individuals are paired with the job for which they are most qualified. The underemployment rate, referred to as U‐6 unemployment, tracks individuals who are marginally attached to the labor force. This includes individuals who work part‐time and would prefer a full‐time position or individuals who are not employed but who would join the labor force under better circumstances.

In 2014, Colorado’s underemployment rate was 9.4 percent, 6 percentage points below the peak level of 15.4 percent in 2010. High underemployment rates during recessionary periods are expected trends, as individuals who were laid off settle for jobs they would not ordinarily take during economic expansions. With Colorado on an economic expansionary path, the underemployment rate continued to fall through 2015. As of the third quarter of 2015, the state’s underemployment rate was 8.4 percent, about 1 percentage point above the pre‐recession low. The third quarter rate is roughly double the unemployment rate, which is the typical relationship between unemployment and underemployment rates. Of the 50 states, Colorado had the 11th lowest underemployment rate in 2014. Utah was the only competitor to have a lower underemployment rate at 8.2 percent, while Arizona (14.7 percent) and Oregon (14.2 percent) had the highest underemployment rates of the competitors.

Colorado Exports

Colorado exports declined through 2015. Through the first nine months of 2015, Colorado exports totaled nearly $6.1 billion, falling 1.3 percent compared with the same period in 2014. This decline follows a 2.4 percent decrease in annual exports in 2014 and a 4.6 percent increase in 2013. When both goods and services exported are considered, Colorado ranked 35th in export dollars for 2015, which was down one position from the previous year.

According to the U.S. Census Bureau, Colorado’s top four trade partners were Canada, Mexico, China, and Japan, accounting for 46.5 percent of total Colorado export activity. The strong value of the dollar and exchange rates has made Colorado and U.S. goods and services more expensive for other countries. This lowered the demand

COLORADO ECONOMY


Colorado Economy

for Colorado goods and hindered the state’s ability to compete globally. The demand will continue to drop through 2016, eventually leading to a decline in the value of the dollar. Major Colorado exports include beef, engines, medical equipment, and computers. The 2015 year‐to‐date decline in overall exports is attributed to declines in petroleum and coal products, oil and gas, agricultural products, and food manufacturing products.

Population

Population: 5.44 million in 2015(e) (+1.7 percent); 5.54 million in 2016(f) (+1.7 percent).

According to data from the Colorado State Demography Office, the state’s population growth rate averaged 1.6 percent per year between 2005 and 2015. The population growth rate was estimated to be 1.7 percent in 2015 and is expected to maintain that level of growth in 2016. Looking further in the future, total population is expected to increase an average of 1.7 percent per year through 2025. Demographers expect net migration—or the inflow of residents minus the outflow—will be the major contributing factor to Colorado’s population growth throughout the decade, representing about 65 percent of the state’s population increase in 2016.

Colorado is experiencing two major demographic shifts in the state’s population. First, in 2015, the largest generational group residing in the state became the millennials (born 1981‐1997), surpassing the baby boomers (born 1946‐1964). Second, Colorado’s share of the population 65 years and older is increasing rapidly. Among the 50 states, Colorado ranked as having the fifth lowest share of those 65+ (12.7 percent) in 2014. The State Demography Office projects that by 2030, this percentage will increase to 18 percent of the population, rising from 681,000 to nearly 1.3 million people.

Of Colorado’s competitors, Oregon had the slowest population growth, increasing 1 percent between 2013 and 2014. Texas was the only competitor with faster population growth in 2014. Net migration is an indicator of the attractiveness of a state and strong net migration will increase the demand for jobs, housing, and resources. In 2014, 62 percent of Colorado’s population growth was attributed to net migration. In comparison, Oregon had the highest portion of net migration of the competitor states at 70 percent, while Utah had the lowest portion at 11 percent. Arizona (+58 percent), Texas (+53 percent), and Georgia (+46 percent) all had positive net migration, but at lower rates than Colorado. Companies are attracted to Colorado for its friendly business environment, central location, and access to a talented workforce, while people relocate to Colorado for its work‐life balance, employment opportunities, and high quality of life.

COLORADO ECONOMY


Colorado Economy

Income and Spending

Personal Income: +5.0 percent in 2015(e); +5.3 percent in 2016(f).

Retail Trade Sales: +4.8 percent in 2015(e); +5.4 percent in 2016(f).

Personal income growth in Colorado during 2015 was supported by improving economic conditions throughout the state. Declining unemployment, rising housing prices, and increased investment contributed to Colorado’s strong personal income gains through the year. Personal income growth has been faster in Colorado than the national average. Personal income declined 3.3 percent for both the nation and the state in 2009. Between 2009 and 2015, personal income in Colorado increased 33.2 percent, while national personal income increased 27.1 percent. In 2015, personal income increased 5 percent and growth will increase slightly in 2016 to 5.3 percent.

Per capita personal income in Colorado was the 14th highest of the 50 states for 2012, 2013, and 2014. Colorado’s per capita personal income increased 4.5 percent between 2013 and 2014 to $48,870. This growth rate for Colorado was the sixth largest increase of the 50 states in 2014. Oregon was the only competitor state to be ranked higher than Colorado, placing fifth with a 4.6 percent increase. Utah ranked the lowest of the competitors, placing 36th with a 3.1 percent increase over‐the‐year.

Of the competitor states, Colorado was the only state to record a per capita personal income level that was higher than the national average in 2014. Per capita personal income in Colorado was $2,820 higher than the national average. Utah ($37,660), Arizona ($37,900), Georgia ($38,980) reported the lowest per capita personal income levels of the competitor states for 2014. Texas and Oregon reported per capita personal income levels that were nearest the national average, recording $45,670 and $41,220, respectively. Georgia (40th), Arizona (41st), and Utah (43rd) have per capita personal income levels that are among the ten lowest in the country, while Texas (22nd) and Oregon (32nd) fall into the middle of the pack.

Retail trade sales in Colorado increased in 2015 as unemployment declined and more confident consumers were encouraged to shop. As of December 2015, Consumer confidence in the Mountain Region was 12.3 percent higher than in 2014. Coupled with personal income growth, retail trade sales will rise as the state economy continues to expand. In 2015, retail trade sales grew 4.8 percent. A slightly faster 5.4 percent growth rate is expected in 2016 due to lower gasoline sales leading to increased income from other places.

COLORADO ECONOMY


Colorado Economy

Inflation

Denver‐Boulder‐Greeley CPI: +1.2 percent in 2015; +2.3 percent in 2016(f).

Changes in the Denver‐Boulder‐Greeley Consumer Price Index (CPI), which are generally used to measure inflation or deflation, have often magnified changes in the national CPI. However, local inflation trends during and after the recent recession followed a slightly different course. The decline and subsequent increase in the Denver‐Boulder‐Greeley CPI in 2009 and 2010 differed from national averages by a few tenths of a percentage point.

The Denver‐Boulder‐Greeley area reported prices that increased at a faster pace than the U.S. between 2013 and 2015, which is a trend that is expected to continue in 2016. The pace of inflation in the Denver‐Boulder‐Greeley area slowed in 2015 to 1.2 percent compared with 2014. Inflation in 2016 is expected to pick up, partially due to continued housing price increases.

CPI data suggests three categories that are putting downward pressure on prices for both the Denver‐Boulder‐Greeley area and the nation. Through 2015, transportation costs, which include energy and gasoline prices, fell 8.9 percent over‐the‐year. During the same period, transportation costs in the U.S. were down 7.8 percent. Further, energy costs fell 20.4 percent in the Denver‐Boulder‐Greeley index, while energy costs declined by 16.7 percent in the U.S. Apparel and education and communication recorded the other declines in prices in 2015 in the Denver‐Boulder‐Greeley index, falling 0.5 percent and 0.2 percent, respectively. The national index recorded a 1.3 percent decline in apparel prices, but education and communication increased 0.5 percent.

Denver and Portland had the highest rate of inflation of the competitor cities in 2015 at 1.2 percent. The Dallas‐Fort Worth CPI deflated 0.4 percent in 2015, marking the first year of deflation for the region since 2009 when prices fell 0.6 percent. However, the region’s inflationary levels have been heavily impacted by the rapid decline of energy prices during the year. The Great Recession hit the Atlanta CPI and the Phoenix‐Mesa CPI the hardest of the competitors in 2009, reporting deflation of 2.6 percent and 1.4 percent, respectively. Phoenix and Atlanta reported price growth at a slower pace than Denver in 2015, rising 0.2 percent and 0.3 percent, respectively.

Colorado Economy Summary

Colorado will be among the top 15 states for employment growth during 2015 and will post a 2.6 percent increase in employment in 2016. The employment base is expected to reach nearly 2.6 million workers in 2016, representing the addition of 65,800 jobs. The natural resources and construction, education and health services, and professional and business services supersectors are expected to lead the state in employment growth through 2016.

Personal income growth will accelerate in 2016 to 5.3 percent due to increasing wages, rising housing prices, and increased investment. Falling unemployment and rising personal income bode well for consumer spending in 2016. Retail trade sales increased by about 4.8 percent in 2015 as consumers had more discretionary spending due to increased income, low inflation, and historically low fuel prices. Retail trade sales are expected to increase at a faster pace of 5.4 percent in 2016. Colorado’s expanding employment base, quality of life, and increasing presence in the global business community continue to attract individuals and businesses to the state.

METRO DENVER ECONOMY



The seven‐county Metro Denver region consists of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, and Jefferson Counties. There are two metropolitan statistical areas (MSAs) located wholly or partly within the Metro Denver region: the Boulder MSA (Boulder County) and the Denver‐Aurora‐Lakewood MSA.1

Since many of Metro Denver’s key competitors are also experiencing rapid economic growth, it is important to place Metro Denver’s level of economic activity into context. Therefore, this economic report compares various economic indicators for Metro Denver with its top six national economic development competitors, consisting of the following metropolitan areas:

Atlanta‐Sandy Springs‐Roswell, Georgia

Austin‐Round Rock, Texas

Dallas‐Fort Worth‐Arlington, Texas

Phoenix‐Mesa‐Scottsdale, Arizona

Portland‐Vancouver‐Hillsboro, Oregon‐Washington

Salt Lake City, Utah

Metro Denver reported strong economic trends in 2015 and similar trends are expected to continue through 2016. Compared with the national average, employment growth in Metro Denver was 1.1 percentage points higher at 3.2 percent and included gains in each supersector except information. The expanding Metro Denver economy is bolstered by a vibrant entrepreneurial community, an active start‐up market, and optimistic businesses. Metro Denver received several accolades in 2015, including:

Forbes ranked Denver as the nation’s best place for business and careers.

WalletHub ranked the Denver MSA the fourth‐best MSA for science, technology, engineering, and mathematics (STEM) professionals.

NerdWallet ranked the Boulder MSA fifth and the Denver MSA 13th for tech jobs.

Forbes ranked Denver the sixth‐fastest growing city for population and economic growth.

The Milken Institute ranked the Denver MSA 12th and the Boulder MSA 13th on their 2014 Best‐Performing Cities Index.

Coldwell Banker Commercial Affiliates ranked Denver as the nation’s top commercial real estate market.

Investopedia ranked Denver among the top four cities to become an entrepreneur.

Metro Denver will experience particularly strong employment growth in the natural resources and construction, education and healthcare services, and the professional and business services supersectors. The residential real estate market will continue to improve, with rising average home prices and increased construction, but the market will remain constrained due to the limited inventory. With all indicators considered, Metro Denver will continue to perform better than the nation economically and will expand at a faster than average pace.

1 The Denver‐Aurora‐Lakewood MSA includes Adams, Arapahoe, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson, and Park Counties.





Note: Annual benchmark revisions to the employment and unemployment data series can significantly alter historic trends. As 2015 job data will be revised in March 2016, the exact revisions are not yet known. The following forecast is based on expected revisions to the data.

Employment: 1.57 million in 2015(e) (+3.2 percent); 1.61 million in 2016(f) (+2.9 percent).


Over 60 percent of employment in Colorado is located in Metro Denver, resulting in the region having a large influence on statewide job levels. Employment in the City and County of Denver accounts for nearly one‐fifth of all Colorado employment (19.1 percent). The City and County of Denver also accounts for just under one‐third of the employment in the Metro Denver region (31.1 percent). Over one‐fifth of the region’s employment base is in Arapahoe County (20.6 percent) and 15 percent is located in Jefferson County. The employment in the remaining four counties represents one‐third of the Metro Denver total (33.3 percent).

The pace of Metro Denver job gains slowed slightly during 2015, finishing out the year with the addition of 48,400 jobs. Employment rose 3.2 percent from 2014 to 2015 and is expected to increase 2.9 percent between 2015 and 2016.

By converting employment data for each of the competitor areas to an index in which the June 2007 employment level equals 100, interesting comparisons about the employment growth patterns in each area are revealed. Employment in Austin dipped below the June 2007 level for a few months in 2009 and early 2010, but the region was hardly influenced by the Great Recession and has continued to add workers at a brisk pace. Dallas was the first of the competitors that felt the effects of the Great Recession to recover, driven by strength in the energy sector. Metro Denver and Salt Lake City recovered all jobs lost at roughly the same time in early 2013 and have been on a similar growth path since. Recovery in Portland and Atlanta occurred about a year later, whereas Phoenix did not reach pre‐recession employment until late in 2015. The stage of the business cycle in Metro Denver compared with the competitor locations also influences the relative comparison of other economic indicators such as unemployment rates, average annual wage increases, and housing prices.




Results of the most recent Manpower Employment Outlook Survey for the Denver‐Aurora‐Lakewood MSA show a strong employment outlook for the first quarter of 2016. Hiring prospects rose 3 percentage points in the first quarter of 2016 compared with the prior year and rose 4 percentage points from the prior quarter. The first quarter hiring level of 23 percent was among the highest first quarter hiring levels since 2008. Through 2015, Metro Denver reported stronger hiring prospects compared with the national average, signaling that Metro Denver companies have a more positive outlook in the local business environment than the national average.

Job growth in 2015 pushed down the unemployment rate in Metro Denver to 3.1 percent in October, the lowest rate since November 2000. While unemployment increased slightly in November, the rate remains at levels not seen since 2001. As the area continues to attract new companies, draw in talented workers, and promote entrepreneurship, Metro Denver will experience steady job growth and a lower unemployment rate than the U.S. and Colorado. The Metro Denver unemployment rate averaged 3.8 percent in 2015, equaling the rate achieved in 2007. Labor conditions are expected to continue to tighten to just 3.5 percent unemployment in 2016.

Of Metro Denver’s main competitors, Atlanta, Portland, and Phoenix reported unemployment rates that were above the Metro Denver rate and the national rate in 2014. During the recession, these three cities had the highest unemployment rates at their peaks when compared with the other competitors, with Portland reaching 10.9 percent unemployment in 2009 and Atlanta reaching 10.3 percent in 2010. The recovery from such high unemployment rates will take longer than areas that peaked at lower unemployment rates like Salt Lake City, which peaked at 7.7 percent in 2010. Dallas reported an unemployment rate of 5 percent

in 2014, only 0.2 percentage points higher than Metro Denver. Dallas and Metro Denver followed similar paths of unemployment between 2008 and 2014, putting them on similar recovery paths. Salt Lake City and Austin reported unemployment rates that were lower than Metro Denver.

Industry Overviews

Industry employment data is grouped according to North American Industry Classification System (NAICS) codes. This coding structure includes 20 detailed industry sectors that are combined to form 11 “supersectors.” This section describes business activity in Metro Denver according to these supersectors.

1Q 4Q 3Q 2Q 1Q

2016 2015 2015 2015 2015

% Hiring 23% 19% 26% 23% 20%% Laying Off 4% 2% 1% 1% 6%% No Change 70% 76% 73% 71% 72%% Unsure 3% 3% 0% 5% 2%

U.S.

% Hiring 20% 21% 24% 22% 19%% Laying Off 6% 6% 4% 4% 6%% No Change 72% 71% 70% 72% 73%% Unsure 2% 2% 2% 2% 2%

Metro Denver Employment Outlook SurveyDenver‐Aurora‐

Lakewood MSA

Source: Manpower Inc.




Metro Denver’s largest industry supersectors are professional and business services, government, and wholesale and retail trade. The three supersectors that added the most jobs in 2015 were professional and business services (+10,100 jobs), education and health services (+8,800 jobs), and natural resources and construction (+5,600 jobs). Ten of the 11 supersectors recorded employment growth between 2014 and 2015, with information posting a small loss. The natural resources and construction supersector and the education and health services supersector reported the largest over‐the‐year employment growth.

Natural Resources & Construction


Natural Resources & Mining: Metro Denver’s urban geography makes for a relatively small concentration of natural resources employment, just 1 percent of total industry employment. The region is home to corporate, regional, and satellite offices for several energy and mining companies. The majority of Metro Denver’s natural resources employment is concentrated in oil and gas extraction companies and support industries.

Despite volatility in the oil and gas industry, oil production rose in Colorado through 2015, with oil production between January and October of 2015 up 29 percent compared with the same period the previous year. Oil producing states continue to reach new levels of oil production due to improved drilling technologies and productivity growth. According to the U.S. Energy Information Administration (EIA), Colorado supplied about three out of every 100 barrels of U.S. crude oil output in 2014. Fossil fuel employment in Metro Denver is concentrated in the City and County of Denver and Adams County, with 66.3 percent and 12.1 percent of total employment, respectively. The remaining five counties represent the remaining 22.6 percent of employment. Colorado has only two operating oil refineries; both are located in Commerce City.

National oil prices, as measured by the spot price of a gallon of West Texas Intermediate Crude (WTI), fell 65 percent between June 2014 and December 2015 to $37 per barrel, price levels not seen since the beginning of 2004. Colorado oil prices, as measured by the first purchase price of a gallon of Colorado Crude Oil, fell 57 percent between June 2014 and October 2015, reaching $40 per barrel. After averaging $49 per barrel in 2015, the EIA estimates that the WTI price will average just $38 per barrel in 2016. Due to the low price of oil, many Colorado oil companies laid off employees throughout the beginning of 2015 and reduced exploration activities.




While the decline in oil prices has negatively affected employment and exploration, companies are becoming more productive by only running wells with the highest production levels. Generally declining oil prices are good for the nation as a whole as consumers have more money for alternative purchases and business expenses decline. However, the country’s primary oil‐producing states may be negatively affected due to lower employment and reduced oil industry multiplier impacts. The decline in the price of oil is the major driver for slower employment growth in the natural resources and construction supersector.

While oil production is a leader in the natural resources supersector, mining also has a significant presence in the state. There are considerable estimated recoverable coal reserves throughout Colorado, with nearly half of Colorado coal being mined for domestic consumption used for power generation in the state. However, there has been a strong push towards renewable energy, and many coal companies throughout the state have suffered as a result.

Construction (Residential): Metro Denver’s housing market made national headlines throughout 2015 as the market tightened to record low levels. With an improved economy and more confident consumers, demand is at record high levels but residential housing development has not kept up with the pace. The disequilibrium in supply and demand has pushed inventory levels for existing home sales to some of the lowest levels on record and pushed sales prices to the highest levels on record. The median home price in the Denver‐Aurora‐Lakewood MSA rose nearly 12 percent between the third quarters of 2014 and 2015, while the Boulder MSA recorded a 6.4 percent increase during the same period.

Many factors contributed to the strong demand in the residential housing market including in‐migration, low mortgage interest rates, and high consumer confidence. Net migration represented over 60 percent of total population growth in Metro Denver in 2015, with total net migration reaching nearly 31,000 people. Metro Denver is expected to add an additional 160,000 people to its population between 2016 and 2020 through migration alone. Mortgage rates maintained historically low levels in 2015, averaging 3.85 percent, down 0.32 percentage points from the 2014 rate.

Residential construction increased significantly between 2010 and 2013, adding over 44,600 units to the market during the period. Although there was increased construction activity during the period, it was still not on par with the historical average. After a 13.5 percent increase in new home construction in 2013, new residential units permitted fell 0.2 percent in 2014. Residential construction has picked up, but the pace is not fast enough to free up demand pressure on housing prices. Construction companies continue to face a lack of available skilled labor and rising development costs, which have restricted new construction activity. Demand is expected to be strong though 2016 as consumers respond to low mortgage rates, rising employment, and increasing wages. The number of new residential units permitted will increase by 3.8 percent in 2016, a slightly slower pace than the 6.2 percent growth rate achieved in 2015.

The number of single‐family attached units permitted was up 10.1 percent between 2014 and 2015. Metro‐wide apartment rental rates reached an average of $1,292 during the fourth quarter, a 10.5 percent increase over‐




the‐year and the highest level since the data series started in 1981. Record high rental rates typically push renters to purchase condominiums and townhomes, providing first‐time homeowners a lower monthly house payment. However, limited new single‐family attached construction means it is difficult for potential buyers to find units in their desired price range.

The number of multi‐family units permitted decreased 4.3 percent in 2015 and will contract an additional 5 percent in 2016. Nonetheless, multi‐family construction represents 43 percent of the new units built, significantly higher than the 35 plus‐year average of multi‐family units representing roughly one‐quarter of construction. The slower multi‐family construction activity reflects a switch towards single‐family residential developments as people move from renting to owning. Apartment construction has been fueled by an apartment vacancy rate averaging about 5.3 percent in 2015.

Single‐family detached permits were up 16 percent in 2015 and are expected to increase an additional 10 percent in 2016.

Construction (Commercial): All four commercial property types recorded improvements in 2015, reporting record low vacancy rates and record high average lease rates. Construction activity over the last several years was quite slow and allowed for the continued decline in vacancy rates, but current conditions have spurred strong build‐to‐suit activity and speculative development.

Office space vacancy in 2015 was consistently below historic averages. In the fourth quarter of 2015, the vacancy rate fell 0.8 percentage points over‐the‐year to 9.4 percent. This was the lowest level since the third quarter of 2000 when the rate was 8.6 percent. The average lease rate rose 5.1 percent to $24.42 per square foot. Newly completed office construction in Metro Denver reached 2.08 million square feet, the highest level since the fourth quarter of 2008. Further, there was about 3.2 million square feet of office space

under construction during the fourth quarter of 2015, over 300,000 square feet more than the prior year. Some of the year’s most notable completed construction projects included the 45,000‐square‐foot AMG National Trust Bank headquarters, the 120,000‐square‐foot Terumo BCT headquarters, the 242,800‐square‐foot Triangle Building, and the 274,280‐square‐foot CoBank Center.

The industrial market reported the lowest vacancy rate in more than 15 years. During the fourth quarter of 2015, the vacancy rate fell to 3.2 percent. The higher demand for space pushed up the average lease rate to $7.04 per square foot in the fourth quarter, which was 17 percent higher than one year ago. Nearly 3 million square feet of space was under construction in Metro Denver in the fourth quarter, with 1.4 million square feet of space completed during 2015. Analysts expect that demand for industrial space will continue to exceed supply for the near term and it will remain a seller’s market in upcoming quarters. They also expect more sellers to enter the market to take advantage of top‐end pricing and compressed cap rates.

4Q 2015 4Q 2014

Office

Vacancy Rate 9.4% 10.2%

Average Lease Rate $24.42 $23.23

New Construction (YTD, mill ions sq.ft.) 2.08 1.16

Industrial




Flex




Retail



New Construction (YTD, mill ions sq.ft.) 1.16 0.59Note: Vacancy and lease rates are for direct space only. All lease rates are per

square foot; office lease rate is full service and all other lease rates are triple‐net.

Source: CoStar Realty Information, Inc.

Metro Denver Commercial Real Estate Fundamentals




Consumer confidence in the Mountain Region, which includes Colorado, rose to the highest levels since before the Great Recession and consumers in the region were more optimistic than the national average. Retail sales continued to improve at a moderate pace in response to increased consumer demand in 2015. The fourth quarter retail vacancy rate fell 0.2 percentage points to 5 percent compared with last year at this time. The fourth quarter vacancy rate was the lowest level since at least 2006. The average lease rate was up 1.7 percent over‐the‐year to $16.00 per square foot. According to analysts, development in the Metro Denver retail market will be strongly tied to the growth of the area’s housing market; as residential supply increases in suburban markets, retailers will be drawn to the strengthening ancillary submarkets. About 1.2 million square feet of new space was completed in 2015, with 40 of the 66 buildings completed spanning less than 10,000 square feet. An additional 936,500 square feet of retail space was under construction at the end of 2015.

Construction (Infrastructure, Public/Nonprofit): Infrastructure construction in Metro Denver will continue at a brisk pace through 2016. Major projects through the Regional Transportation District’s (RTD) FasTracks program will be opening in 2016. The U.S. 36 Bus Rapid Transit service opened in January 2016. The highly anticipated University of Colorado A Line (formerly the East Rail Line) to Denver International Airport (DEN), which will connect Denver Union Station to the newly completed Westin Hotel in 37 minutes, is set to open in April 2016. The new rail line spans 23 miles, has eight light rail stations, and six park‐n‐rides. Three additional rail lines will also be opening in 2016, including a segment of the B Line to Westminster (summer), the G Line to Arvada and Wheat Ridge (fall), and the R line along the I‐225 corridor (winter). Construction will also continue on the North Metro Rail Line, expected to open in 2018, and the Southeast Rail Line extension to be completed in 2019.

Overall, the construction sector will continue to expand as new multi‐year nonresidential projects are brought into the pipeline, such as the Gaylord Hotel in Aurora and the renovation of the National Western Complex, and demand for residential development remains high. Employment levels are expected to increase through 2016, but access to skilled labor will be difficult for construction companies. However, the skills needed in the oil and gas industry are often transferable to construction. Therefore, there may be opportunity to pick up workers as the oil and gas industry continues to rework itself.

Manufacturing


The manufacturing sector includes producers of nondurable goods—such as food and beverages, pharmaceuticals, and apparel—and durable goods including machinery, computers and electronics, and furniture. Metro Denver’s manufacturing sector expanded by about 2,500 workers in 2015.

The seven‐county Metro Denver region represents about 62 percent of Colorado’s manufacturing employment. Metro Denver’s largest subsectors in terms of employment are food manufacturing, fabricated metal products, and transportation equipment.




Employment in several manufacturing subsectors in the Metro Denver region expanded in 2015, in particular durable goods producers. Employment in Metro Denver’s fabricated metals, transportation equipment, and wood products manufacturing subsectors increased in 2015 and these subsectors should continue to record employment growth through 2016. Robust construction activity will continue to boost employment in the nonmetallic minerals, fabricated metals, wood products, and furniture manufacturing subsectors, affecting industries such as cement and concrete, structural metal products, millwork, cabinets, and flooring. Producers of nondurable goods, which represent about 37 percent of total manufacturing employment, such as food products, beverage manufacturers, and chemical products will also expand during the period. While employment growth is expected in 2016, the manufacturing sector continues to struggle with access to qualified workers, such as welders and precision craft workers, which will temper growth.

The performance of aerospace companies has a large influence on manufacturing activity in Metro Denver. Aerospace companies are represented in the region’s transportation equipment, computer and electronic products, fabricated metals, and machinery manufacturing subsectors. Aerospace employment slightly contracted nationally over the past five years, but Metro Denver recorded a slight increase in employment. Metro Denver aerospace contractors achieved many milestones in 2015 including 100 consecutive, successful rocket launches by United Launch Alliance, the competed assembly of NOAA’s Geostationary Operational Environmental Satellite‐R (GOES‐R) weather satellites by Lockheed Martin, and the successful completion of Critical Design Review of the Tropospheric Emissions: Monitoring of Pollution (TEMPO) instrument, developed by Ball Aerospace. In 2016, Sierra Nevada expects to conduct suborbital and orbital flight tests for the Dream Chaser® spacecraft and Lockheed Martin Space Systems expects to complete testing of the Orion Multi‐Purpose Crew Vehicle. In addition, expansion of aerospace companies as large projects develop into new phases may give a boost to manufacturers in the region.

Fabricated metals is not only one of the largest subsectors in the region, it had been one of the fastest growing subsectors in Colorado and Metro Denver. Demand in this subsector currently is challenged by the sluggish global economy and strong U.S. dollar. However, strength in industries using fabricated metals components domestically will offset the weaknesses so that employment gains in the subsector should continue into 2016. Nontraditional, renewable energy development also supported employment growth in the fabricated metals subsector. Vestas Wind Systems has been a world leader for new wind turbine installations, and in 2015 announced plans to hire at least 750 new workers at its Brighton and Windsor facilities. The company also plans to expand its Windsor plant by 100,000 square feet and add two more production lines. Overall, the fabricated metals subsector is expected to grow throughout 2016.




Wholesale & Retail Trade


As consumer spending represents about 70 percent of all economic activity, consumer behavior has a large influence on how well the economy performs. Consumer confidence for the nation and the Mountain Region, which includes Colorado, maintained levels in 2015 not posted since late 2007. Consumer confidence in the Mountain Region rose significantly in 2015, rising 12.3 percent between December 2014 and 2015.

Retail sales have steadily increased in Metro Denver since 2010. Between 2010 and 2012, retail sales were bolstered by economic stimulus programs, such as “cash for clunkers,” and by pent‐up demand for big‐ticket items from the Great Recession. Metro Denver retail sales rose 5.2 percent in 2013 and 7.9 percent in 2014. The Metro Denver economy has outperformed the nation on several measures including employment and housing, leading to higher consumer spending in the local economy. Because the region recovered faster than the nation, consumer spending increased rapidly in 2014 as consumers started to feel more confident about employment and income.

As the economy continues on an expansionary path and income levels rise, consumer spending will shift towards big‐ticket items and items that had previously been deferred due to financial constraints. Metro Denver’s housing market is among the hottest in the nation and with home purchases comes furniture and home furnishings, appliances, and electronics purchases. The historically low gasoline prices have not only increased discretionary spending, but have pushed new vehicle sales to all‐time highs. Retail trade sales are expected to increase at a slower pace than 2014, with sales rising 5.7 percent in 2015 and 6.7 percent in 2016, but sales growth will be slightly above the 20‐year trend of 4.6 percent.

With low gas prices, a booming housing market, and strong employment growth, the wholesale and retail trade supersector should experience moderate growth in 2015. The biggest risks to growth in the sectors are a slowdown in the housing market or a rebound in gasoline prices, both of which are unlikely in the coming year. The supersector added about 5,500 jobs in 2015, a 2.5 percent growth rate over 2014 employment. The growth rate in 2016 will be 2.4 percent.

Transportation, Warehousing, and Utilities


Employment in transportation, warehousing, and utilities declined because of the Great Recession, but has recorded strong growth over the last few years. The sector recorded employment growth of 2.7 percent in 2012, 5.1 percent in 2013, and 3.7 percent in 2014. Jobs in this supersector include aviation, trucking, storage and warehouse facilities, taxis, rail transportation, and utilities companies. Employment in this sector is expected to grow at a slower pace in 2015 and 2016 than in recent years, increasing 2.7 percent and 2.3 percent, respectively.




As the fifth‐busiest airport in the country, Denver International Airport (DEN) set multiple records for passenger traffic in 2015. October 2015 was the busiest October on record for the airport, with over 4.8 million passengers traveling through the airport. Passenger traffic between January and November 2015 reached a record 49.4 million passengers, which was higher (+0.7 percent) than the same period of 2014. United Airlines plans to consolidate its three pilot training locations in Denver, where all of United’s 12,000 pilots will complete training. Frontier Airlines plans to nearly double the size of its existing aircraft fleet over the next five years. DEN will add nonstop service between Denver and Munich on Lufthansa beginning in May 2016 and nonstop service between Montreal, Canada on Air Canada in June 2016. DEN opened the $544 million Westin Hotel and Transit Center in November, which features 519‐rooms and 37,500 square feet of meeting space that can accommodate up to 2,500 people.

Remaining portions of the supersector have added workers at a consistent pace. The utilities sector continues to expand in response to population gains. Warehousing and motor freight transportation companies are also increasing consistently due to steady consumer demand. The challenge for the warehousing operations is to find available space as the industrial vacancy rate remains at record low levels.

Information

Employment: ‐0.1 percent in 2015(e); +0.4 percent in 2016(f).

With the advancement of technology and consumers turning to digital media from print media, the information sector has had little to no employment growth since the early 2000s. Information is increasingly available free online and through other electronic services. Without the need for traditional publishing jobs, producers of newspapers, periodicals, and books are struggling to stay afloat, resulting in job losses. Further, the other main subsector of telecommunications has been challenged by changing market strategies and consumer preferences. Between 2001 and 2012, 2007 was the only year that the information sector recorded an increase in employment, rising just 0.8 percent. Employment increased slightly in 2013 and 2014, adding about 1,170 jobs during the two‐year period. Despite slight employment growth in the most recent years, information employment contracted 0.1 percent or 100 jobs in 2015. However, employment growth is expected in 2016, with information employment rising 0.4 percent or 200 jobs.

Metro Denver’s businesses use digital technologies to enhance services, maximize efficiency, and expand information technology networks to better service their customers and streamline operations. Businesses in Metro Denver rely on fast download and upload speeds to compete in the digital economy, which focuses the region on expanding wireless broadband access and new mobile technologies. The region’s focus on transportation alternatives, combined with significant corporate headquarters and advanced telecommunications infrastructure, provide an ideal environment for teleworking. In fact, Colorado has the highest percentage of telecommuters in the nation. About 6.9 percent of Colorado residents telecommute full time, outpacing the national average by 2.6 percentage points, according to a FlexJobs' 2015 report analyzing U.S. Census data.

A number of telecommunications and broadcasting companies made plans to expand their services and work forces in Metro Denver. Some of the most notable included:

Alphabet Inc., Google’s new parent company, broke ground on its 4.3‐acre campus in Boulder, which includes three, 100,000‐square‐foot buildings. Construction began on Phase 1 of the Boulder Campus, which includes the first two buildings and is slated to open in early 2017. Phase 1 will accommodate up to 1,000 people and Phase 2 will add space for 500 employees.

Comcast Corp. leased 300,000 square feet of office space in Centennial to create a campus environment for their western U.S. division. The company will hire 300 or more employees for the new location. Comcast




also opened a 22,000‐square‐foot location in downtown Denver for about 200 employees, adding to the 400 Comcast workers in Denver.

Charter Communications Inc. completed its $25.5 million research and development facility in Douglas County. The 85,000‐square‐foot facility includes office space and a state‐of‐the‐art data center, and will house 55 employees earning an average salary of $92,727.

Financial Activities


The financial activities supersector has a significant presence in Metro Denver as the region serves as the major financial center between Los Angeles and Chicago. The region’s locational assets and competitive environment attract several Forbes Global 2000, Fortune 500, and Inc. 500 Fastest Growing companies. The financial activities supersector expanded in 2015, at a pace more than double the long‐term average of 1.3 percent. The supersector will be bolstered by an expanding economy that will support financial services, insurance, and real estate employment. At the end of 2015, the Federal Reserve raised interest rates for the first time since 2008. An increase in the federal funds rate directly causes an increase in the prime rate that serves as the base for many business and consumer loans. Industry employment may change as businesses and consumers choose not to take out loans due to higher interest rates, potentially causing a decrease in demand for employees in the industry. However, the recent increase in the federal funds rate was small and the impact on employment is yet to be seen.

Metro Denver is a major national hub for investment companies and other financial institutions. Several announcements in the industry point to sustained growth for the coming years. Major employment announcements included:

Fidelity Investments will expand its Greenwood Village workforce by 300 employees by 2018. The company acquired 30,000 square feet of office space, which will be added to its existing 100,000‐square‐foot space, and will invest $5 million to expand its facility.

Transamerica Corp. moved from the Denver Tech Center to downtown Denver. The relocation will double the size of the company’s Denver office space and double the size of its local workforce to 650 employees.

OnDeck Capital Inc., a New York‐based financial services company, leased 72,000 square feet of space in downtown Denver. The company plans to add 400 high‐paying jobs over the next 8 years.

FirstBank will add 127,000 square feet of space to its Jefferson County headquarters and will add about 250 positions to its main campus. When the addition is completed, there will be about 900 employees working in Jefferson County with another 70 employees added in the next year.

San Francisco‐based PENSCO Trust Co. relocated its trust company charter to Denver. The move expanded the company’s service hours and more than doubled the company’s size. With 130 employees in Denver, Colorado represents the company’s largest employee base.

With these announcements, the financial activities supersector could potentially add jobs over the next several years and employment should continue to expand by 3 percent in 2015 and 2016.

Professional & Business Services


Professional and business services is Metro Denver’s largest supersector by employment, and it contains a diverse group of companies. Some provide expert services including engineering, accounting, legal, and design




while others act as consultants, staffing companies, and groundskeepers. The professional and business services supersector is comprised of three sectors: administrative and waste services (37 percent), management of companies (12 percent), and professional and technical services (51 percent).

The strong growth in professional and business services bodes well for overall economic growth. Many companies will outsource various business services prior to increasing their own staff. Therefore, growth in this supersector tends to precede and accompany overall employment growth. The expected addition of 10,100 jobs in professional and business services in 2015 represents 21 percent of the total employment increase in Metro Denver.

Computer systems design and software engineers are a major expanding component of the professional and technical services sector. Metro Denver is a global hub of innovation and entrepreneurship, attracting technology and information companies and a talented IT workforce. Denver was ranked the best place for business and careers by Forbes and was ranked as having the fifth‐most startup activity by the Ewing Marion Kauffman Foundation. Additionally, Area Development magazine found the Denver‐Aurora MSA to be the best city for economic and job growth and WalletHub found the Denver‐Aurora MSA to be the fourth best place for STEM professionals. Many IT companies announced expansions that will increase employment for 2016. For example, Gusto, formerly ZenPayroll, Inc., opened a Denver office and plans to hire 100 people. Businesssolver plans to hire 100 IT professionals and customer service representatives, and TransFirst LLC plans to hire 100 employees at its Broomfield and Aurora locations. Recurly Inc. opened an office in Boulder and plans to hire 30 employees.

Employment in the supersector grew 3.7 percent in 2015 and should expand by an additional 3.9 percent in 2016.

Education & Health Services


The education and health services supersector reported significant growth through 2015 as it has each year since at least 1991. Demand for healthcare services will rise in coming years due to the demographic shift of an aging population and an increase in insured persons due to the Affordable Care Act. However, private education (public education is included in the government sector) will be influenced by two counter‐veiling pressures. Private higher education, ranging from technical schools to four‐year universities, typically runs countercyclical to the economy. Private K‐12 schools experience growth as family income increases.

The education sector—comprised of private education institutions, companies engaged in online learning services, and other educational support—continues to grow. As the job market becomes more favorable to workers and the competition for employment lessens, demand for additional degrees or advanced education will fall. However, the decline in demand for higher education will be offset by companies that encourage additional certifications, workers entering trades that require specialized education, and increasing demand for private K‐12 schools as families become more financially stable.

Metro Denver is a leading healthcare and wellness hub and receives support from cutting‐edge research and development facilities, unmatched talent, and state‐of‐the‐art amenities. The end of 2014 marked the first full year since the implementation of the Affordable Care Act and the Colorado health insurance landscape rapidly changed as a result, with an estimated 500,000 Coloradans expected to gain insurance. Aside from policy changes, the aging population significantly contributed to the rising demand for healthcare services. Colorado’s 65 and older population is projected to double to 1.1 million by 2025, increasing the demand for hospital and nursing care, medical services, and long‐term and at‐home services. Other contributing factors to growth in the




healthcare services sector include the improving digital healthcare infrastructure and new developments in integrated healthcare.

With the rapidly expanding healthcare sector, construction of new healthcare facilities in the Metro Denver region remained active in 2015 and projects are expected to continue through 2016. Some of the most notable projects include:

UCHealth is building the $125 million Longs Peak Hospital in Longmont, slated for completion in late 2016.

SCL Health plans to build a 60,000‐square‐foot community hospital and medical office facility in Northglenn, slated for completion in the fall of 2016.

DaVita HealthCare Partners Inc. plans a $190 million headquarters, slated for completion in October 2018.

Centura Health opened its $177 million St. Anthony North Health campus in Westminster.

Boulder Community Health and the University of Colorado opened the CU Sports Medicine and Performance Center at Folsom Field.

Overall, healthcare employment growth is expected to be strong through 2016 as the area’s healthcare providers adjust to community oriented healthcare facilities that provide local care as demand for services increases and health technology continues to advance to new levels.

Leisure & Hospitality


The leisure and hospitality supersector includes two sectors. The arts, entertainment, and recreation sector includes resorts and ski areas, museums, and other cultural and sports facilities. The other sector, accommodation and food services, includes hotels, restaurants, caterers, and other related businesses.

Colorado’s world‐class ski resorts attract visitors from around the country and contribute significantly to the state’s leisure and hospitality supersector. Colorado Ski Country USA (CSCUSA) announced that skier visits for the 2014/2015 ski season reached over 19.6 million, down 0.3 percent compared with the 2013/2014 season. However, the season’s skier visits total was 6.5 percent higher than the five‐year average, despite snow totals that were 36 percent below the 10‐year average during the core ski season. Company analysts stated that the resorts benefited from ongoing Improvement in the state and national economy and travel sector, strong season pass sales, strong early season travel bookings, and a snow advantage relative to resorts west of Colorado. CSCUSA and Vail Resorts released a study that found Colorado’s ski industry generates $4.8 billion in annual economic impact. The study also found that skiing and snowboarding supports 46,000 year‐round jobs in the recreation, lodging, retail, and food service industries.

The Metro Denver hotel occupancy rate averaged 75.9 percent in 2015, essentially the same as the 2014 average of 75.8 percent. The average room rate in 2015 was $133.65 per night, an increase of 7.5 percent over the 2014 average of $124.37 per night. Metro Denver hotel occupancy rates




reported mixed trends in 2015, with occupancy rates declining over‐the‐year in eight of the 13 submarkets. While 2015 monthly occupancy rates did not improve consistently as they did in 2014, the market finished the year slightly stronger overall.

Commercial hotel development was robust in 2015, with over 5,600 new hotel rooms in the current pipeline according to HVS Global Hospitality Services. Some of the most notable hotel announcements included:

White Lodging broke ground on the 491‐room, 18‐story duel‐branded AC Hotel by Marriot and Starwood‐branded Le Meridian Hotel in downtown Denver. The project is slated for completion in early 2017.

The first duel‐branded Hyatt Place and Hyatt House hotel under one roof in the United States opened in Denver. The 21‐story, 361‐room hotel features a shared “bar‐centric” around‐the‐clock food and drinks area, segregated breakfast areas, and shared meeting space totaling about 4,000 square feet. The average room rate falls between $249 and $289 per night.

Focus Property Group broke ground on the $75 million, 222‐room Hilton Garden Inn—Denver Union Station. The property will incorporate Hose House No. 1, Denver’s oldest fire station, and the 12‐story hotel is slated for completion in the first quarter of 2017.

BMC Investments and Sage Hospitality broke ground on a $70 million, 155‐room hotel in Cherry Creek that will include 6,000 square feet of retail and restaurant space. The hotel is expected to open in April 2016.

The ART hotel opened in June at 1201 Broadway in Denver. The new luxury hotel, located in the Golden Triangle, costs about $350 per night. The 165‐room hotel stands nine stories tall and includes a first‐floor art gallery with pieces from 30 to 40 national artists, a restaurant, and lounge.

Hotels, restaurants, and other attractions and events in Metro Denver were awarded numerous accolades in 2015. The national and global attention that these establishments and events receive will continue to pique interest from tourists and locals. Among the awards were hotels recognized by Travel + Leisure as some of the top 100 in the world, CNN ranked Denver the best beer city in America, and Huffington Post ranked Denver the fifth must‐visit city in the country. Events such as the National Western Stock Show, the Cinco de Mayo Festival, Denver Comic Con, the USA Pro Challenge, and the Great American Beer Festival contribute positive economic impacts and attract thousands of tourists to the area each year.

Overall, employment in the leisure and hospitality supersector increased by 2.9 percent in 2015 and is expected to increase 2.9 percent in 2016.

Other Services


The other services sector is a diverse group of repair and maintenance businesses, beauty salons, grant making organizations, and a variety of other companies. These businesses largely rely on discretionary spending, which has improved with rising consumer confidence and a more favorable job market.

The demand for repair and maintenance on automotive, commercial machinery, electronic equipment, and household goods has declined as consumers purchase new models of goods that do not require as much maintenance as older models. Repairs have also declined because businesses in the sector face competition from retail companies outside this category that offer the same services. However, the demand for personal services such as hair and skin care is on the rise as the aging population provides a larger customer base for these services.

As the overall economy and household discretionary income increase, other services employment will rise by 2.5 percent in 2016, a slightly lower rate of growth than experienced in 2015.




Government


The government is Metro Denver’s third‐largest supersector by employment, representing 14.5 percent of total nonfarm employment. This sector is comprised of federal (13.5 percent), state (25.4 percent), and local workers (61.1 percent) and includes a variety of services ranging from public safety and community development to national security and public education. Sustained economic growth and increases in tax collections supported 2.1 percent employment growth in Metro Denver’s government supersector in 2015. Employment growth will continue in 2016, increasing at a slower pace of 1.7 percent.

Public education services are included in the government supersector, with educational services employment representing 65 percent of state government employment and about 55 percent of local government employment. Population growth will increase demand for K‐12 public education and school districts will be able to collect additional property taxes due to rising property values and additional construction activity. According to the Colorado Legislative Council, the total local share for school finances is projected to increase by $143.2 million in fiscal year 2015‐16 compared with the previous fiscal year. In fiscal year 2015‐16, property taxes for school finance are estimated to total just under $2 billion, a 7.6 percent increase over the prior year’s level. With the passage of Amendment 64, legalizing the recreational use of marijuana, a 15 percent excise tax on recreational marijuana was approved for the Building Excellent Schools Today (BEST) fund. The BEST fund is a grant program that focuses on helping public schools with many capital construction needs, from new roofs and boilers to major renovations and new schools. During fiscal year 2014‐15, the marijuana excise tax generated nearly $24 million for the fund.

The federal government continues to face budgetary problems, which could affect employment growth throughout Metro Denver in both the short‐term and the long‐term. The main driver of the budgetary problems is the retiring baby boomers. As the population ages and life expectancy increases, the cost for federal programs such as Social Security, Medicare, and Medicaid is increasing quickly. Nonetheless, Metro Denver has a strong concentration of federal government employment located in federal field offices, national laboratories, and military installations. Overall, federal employment will rise in 2015 and 2016, increasing 0.6 percent and 0.8 percent, respectively.

Since the Great Recession, the state government has reported employment growth supported by strong revenue collections throughout Colorado. However, the constitutional spending constraint known as the Taxpayers Bill of Rights (TABOR) limits the growth in revenue to no more than the sum of the rate of the state’s population growth plus inflation in the previous calendar year. Revenue collected above the TABOR limit, subject to the Referendum C cap approved by voters in 2005, must be returned to taxpayers unless voters decide the state can retain the revenue. TABOR revenue exceeded the Referendum C cap during fiscal year 2014‐15, so the state will be refunding money to the taxpayers through sales tax refunds and earned income tax credits. State revenue is not expected to surpass the TABOR limit in fiscal year 2015‐16, but is projected to surpass the limit in FY 2016‐17 and FY 2017‐18. The lack of flexibility in the state budget can hamper the pace of growth in the upcoming years. Despite the budgetary constraints, employment in the state government is expected to increase slightly in both 2015 and 2016, rising 1.8 percent and 1 percent, respectively.




Metro Denver’s local government employment represents about 61 percent of total government employment in the area. Local governments including cities, counties, school districts, and special districts depend heavily on property taxes, sales and use taxes, fees, and intergovernmental revenue sources. The Colorado Division of Property Taxation announced residential and business property values rose significantly over the last few years. The assessed residential property values rose 1.4 percent statewide between 2013 and 2014. During the same period, assessed commercial property values rose 0.3 percent, farmland values rose 1.8 percent, and industrial property values rose 2.6 percent. Oil and gas property represents about 12 percent of the overall assessed property tax base and increased 26.5 percent between 2013 and 2014. The majority of revenue collected by city governments comes from sales and use taxes, so city budgets should expand during 2016 with consumer spending and confidence on the rise. Local government employment increased 2.5 percent in 2015 and is expected to increase 2.2 percent in 2016.

Industry Clusters

The prior section described Metro Denver’s employment base according to the federally defined NAICS codes, resulting in 11 supersectors. This section summarizes the nine industry clusters that form the basis of the region’s economic development strategy and are of critical importance to Metro Denver’s national recruitment and business retention and expansion efforts. Industry clusters are geographic concentrations of interconnected companies and institutions in a particular field, bringing companies together across the supersectors. Detailed information on each industry cluster may be found at www.metrodenver.org/industries/overview/.

Aerospace: Colorado has the nation’s second‐largest aerospace economy and receives support from four military commands, eight major space contractors, and more than 400 aerospace companies and suppliers. Metro Denver is home to several collaborative projects including Mars Atmospheric and Volatile EvolutioN (MAVEN), a prime example of Colorado’s leadership in space exploration with the entire mission and spacecraft being built and launched by Colorado organizations including Lockheed Martin Space Systems, University of Colorado Boulder’s Laboratory for Atmospheric Space Physics, and Harris Corporation (formerly Exelis). Aerospace companies in Metro Denver employ 77 percent of the state’s total aerospace workers.

Aviation: Metro Denver’s diverse system of airports, including Denver International Airport (DEN), serve as vital links for businesses needing to deliver their goods and services to the global marketplace. DEN is the nation’s fifth‐busiest airport with over 1,500 flight operations and nearly 146,500 passengers every 24 hours. DEN celebrated 20 years of service in 2015. Passengers can reach more than 170 domestic destinations and 21 international destinations in nine countries with nonstop service from DEN. Aviation facilities and related companies in Metro Denver employ over 72 percent of the state’s total aviation workers.

Beverage Production: The region is a leader in beverage production, which is concentrated along the Front Range. The region is home to one of the nation’s largest herbal‐tea manufacturers, Celestial Seasonings, and includes both large and small breweries, sports and soft drink manufacturers, and numerous wineries and distilleries. Colorado is home to more than 10 percent of the nation’s craft breweries and the state is ranked




first in the nation for output per capita. Craft breweries contributed $1.15 billion to the state’s economy in 2014. The beverage production cluster employs nearly 6,870 workers in Metro Denver, representing 68 percent of the cluster’s employment in Colorado.

Bioscience: The 578‐acre Fitzsimons Innovation Campus and the adjacent Anschutz Medical Campus are the center of Colorado’s bioscience community and represent one of the largest bioscience developments in the country. The area is the life science center for the Rocky Mountain region, with support from cutting‐edge research and incubator facilities, scientific talent, and services to the region’s base of medical devices, diagnostics, biotechnology, and pharmaceuticals businesses. There are about 12,650 bioscience employees in Metro Denver, representing 72 percent of the state’s bioscience employment.

Broadcasting & Telecommunications: This industry cluster includes companies that help deliver voice, data, and video to end users, services that are essential in today’s business environment. Metro Denver is the largest region in the United States to offer one‐bounce satellite uplinks to six of seven continents in the same business day due to its unique geographic location in the Mountain time zone. Further, the region is the birthplace of the cable TV industry, and is home to a significant concentration of brand name broadcasting and telecomm companies. Companies in Metro Denver employ 83 percent of the state’s total broadcasting and telecommunications workers.

Energy: Metro Denver is a leader in the energy industry with both fossil fuels and cleantech together employing over 40,320 people at 2,690 companies. Growth and innovation in fossil fuels activity and cleantech energy development is supported by significant intellectual capital, world‐class research institutions, a business‐friendly environment, and industry collaboration. About 54 percent of the state’s total energy employment is located in Metro Denver.

Financial Services: With an employment base of more than 88,200 employees, Metro Denver is the major financial center between Los Angeles and Chicago. Downtown Denver’s financial district along 17th Street is known as the “Wall Street of the West.” The region’s central location with global access helps financial services companies, which include those providing banking and finance services, insurance, and investments, expand their competitive edge and capitalize on a highly skilled workforce, pro‐business environment, low costs, and world‐class infrastructure. Companies and organizations in Metro Denver employ 72 percent of the state’s financial services workers.

Healthcare & Wellness: Metro Denver is a leading healthcare and wellness center for the Rocky Mountain West and its reputation for healthy living and an active lifestyle continually attracts premier businesses and jobs. In fact, Metro Denver is one of the fittest populations in the country. The region is a premier healthcare and wellness hub supported by cutting‐edge research and development facilities, unparalleled talent, and technological advancement. With nearly 176,500 healthcare and wellness workers at more than 16,750 companies across the region, healthcare and wellness is the region’s largest cluster in terms of employment. About 63 percent of the state’s healthcare and wellness employees work in Metro Denver.

Information Technology ‐ Software: The region is a hotbed of innovation activity, fueled by a talented IT workforce, modern infrastructure, and an entrepreneurial spirit. The region’s collaborative culture, business‐friendly environment, and cutting‐edge workforce attract startups and entrepreneurs. According to the 2015 Kauffman Index of Entrepreneurial Activity, Metro Denver had the fifth‐highest startup activity, with 177.8 startups less than a year old and 370 new business owners per 100,000 adults. Nearly 75 percent of the state’s IT‐software employees work in Metro Denver, totaling over 45,200 workers.




Income

Metro Denver is a high‐income area compared to the competitor locations and the U.S. According to data from the American Community Survey, the median household income in Metro Denver was $66,870 in 2014, the highest of all of the competitors and $13,210 higher than the national median. All of the competitor cities except Phoenix also have median household incomes that are higher than the nation. Between 2011 and 2014, the national median household income increased an average of 2 percent per year, while Metro Denver recorded an average annual increase of 4.1 percent during the same period. All the competitor locations reported slower growth than Metro Denver, ranging from 2.2 percent per year in Atlanta and Phoenix to 3.9 percent per year in Austin.

There were 1.05 million households in Metro Denver in 2014. Based on the Brookings Institution definition of middle‐income households being those with incomes that are between 75 percent and 125 percent of the median household income, roughly 23 percent of Metro Denver’s households are middle income. Households in the middle‐income category earned between $50,150 and $83,590 per year in 2014, compared with $41,170 and $68,620 per year in 2005.

Metro Denver’s middle‐income category was larger than the national middle‐income category by 2 percentage points during 2014. Middle‐income households in Phoenix, Portland, and Austin also represent about 23 percent of households, while Salt Lake City

AreaTotal

Households

Median

Household

Income Lower Income* Middle IncomeŦ

Upper Income

United States 117,259,427 $53,657 37.8% 21.3% 40.9%

Atlanta 1,981,447 $56,166 36.9% 22.4% 40.7%

Austin 703,976 $63,603 37.6% 22.7% 39.7%

Dallas 2,445,239 $59,530 38.2% 21.4% 40.4%

Metro Denver 1,054,371 $66,870 37.2% 23.2% 39.5%

Phoenix 1,590,240 $53,365 37.0% 22.8% 40.2%

Portland 894,801 $60,248 37.6% 22.9% 39.6%

Salt Lake City 376,913 $62,642 35.4% 25.2% 39.4%

Percentage of Total Households

Households and Income Category Distribution (2014)

* Households Earning Less than 75% of Median Income. ŦHouseholds Earning between 75% and 100% of Area Median Income.

Households earning more than 125% of Area Median Income.

Source: U.S. Census Bureau, American Community Survey.




(25 percent) has a larger percentage of households in the middle‐income category and Atlanta (22 percent) and Dallas (21 percent) have smaller shares of middle‐income households.

Similar to the national situation, changes in the distribution of income are slight over time. Metro Denver’s middle‐income category was largest in 2005, 2006, and 2007, when 24 percent of households fell into this category. The middle‐income category contracted during the recession as people lost employment and income, which likely moved them into the lower income category. However, the middle‐income category has included 23 percent of households since 2008, except for a slight contraction to 22 percent in 2010 and 2013. The upper‐income category has represented about 40 percent of households since 2008.

When considering the absolute change in households over the last ten years, the data shows the upper‐income and lower‐income categories have increased at roughly the same pace. The number of households in Metro Denver increased by 129,100 from 2005 to 2014, a 14 percent increase. Of these households, 54,000 were added to the upper‐income category (+14.9 percent) and 51,300 were added to the lower‐income category (+15 percent). The middle‐income category added about 23,800 households, a 10.8 percent increase.

Another measure of income comes from the U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages, and shows the average annual salary for Metro Denver in 2014 ($58,640) increased 3.8 percent compared with 2013 ($56,510). This growth rate was significantly faster than the previous year, when the average annual salary increased just 0.3 percent between 2012 and 2013, which was the slowest over‐the‐year growth since at least 2004. The U.S. average annual salary increased 3.1 percent between 2013 and 2014 to $51,360, but was only 88 percent of the Metro Denver annual salary. The data do not indicate whether the

changes are due to increased hours of work versus higher paying jobs.

Of the competitor cities, Metro Denver and Dallas ($56,370) reported the highest average annual salary in 2014, while Phoenix ($49,040) and Salt Lake City ($48,170) reported the lowest wages. For all areas, wage growth was stronger in 2014 than 2013. Metro Denver recorded the strongest increase in the average annual salary from 2013 to 2014, increasing by 3.8 percent. Similar to Metro Denver, the Austin ($54,190) average annual salary increased 3.7 percent and Dallas posted a 3.5 percent increase. The

average annual salary in Phoenix increased the slowest at 2.2 percent, with Atlanta ($54,100) posting a 2.9 percent growth rate.

Population

Population: 3.06 million in 2015(e) (+1.7 percent); 3.12 million in 2016(f) (+1.8 percent).

The seven‐county Metro Denver area is now home to over 3 million people. Metro Denver’s population growth averaged 1.7 percent per year between 2005 and 2015, maintaining a stable growth rate through most of the recent recession and recovery due to strong positive net migration. Forecasters with the Colorado State Demography Office expect the region’s population growth rate will increase slightly to 1.8 percent in 2016, which would be significantly faster than the projected U.S. growth rate of 0.8 percent in 2016. Population




growth in the region is expected to average 1.6 percent growth through 2025.The state demographer expects population growth between 2015 and 2016 will be fastest in the City and County of Broomfield (+2.7 percent), Adams County (+2.2 percent), the City and County of Denver (+2 percent), and Douglas County (+2 percent). Growth will also be relatively rapid in Weld County (+3.6 percent), which lies northeast of the seven‐county Metro Denver region.

Population growth depends on two components—natural increase and net migration. Natural increase is the difference between births and deaths, and it tends to change only gradually as the population ages. Net migration reflects the number of people moving into the area minus the number leaving, which tends to be more volatile as economic cycles, housing costs, and other less‐predictable factors influence population mobility. Natural increase accounted for approximately 46 percent of population growth on average between 2005 and 2015. While birth rates declined during the Great Recession, they are expected to return to prerecession levels in the next three years. Net migration in Metro Denver accounted for more than 70 percent of total Colorado migration between 2011 and 2014, an above average trend that is not expected to remain into the future. Demographic forecasts anticipate that the Metro Denver area will return to its historical trend in 2016, capturing 54 percent of Colorado’s net migration.

Dallas, Phoenix, and Atlanta all have larger populations than Metro Denver, while Austin, Portland, and Salt Lake City are smaller population centers. Austin reported the fastest population growth of the seven competitor cities, rising 3 percent between 2013 and 2014. About 69 percent of Austin’s population growth during the period was attributed to net migration, which was also the largest portion of population growth among the competitor cities. Salt Lake City reported the slowest population growth, rising 1 percent in 2014, but this was attributed to natural increase because the city experienced net out‐migration during the period. Dallas, Denver, and Phoenix each reported population growth of 1.9 percent in 2014, while Portland (+1.4 percent) and Atlanta (+1.6 percent) grew at a slower pace. Each of the cities had population growth that was faster than the national average of 0.7 percent between 2013 and 2014.

Residential Real Estate

Home sales: 55,509 in 2015 (+2.7 percent); 56,619 in 2016(f) (+2.0 percent).

Metro Denver home sales increased in 2015, rising 2.7 percent over 2014 home sales. Demand for homes reached record levels due to strong population growth and faster household formation. While demand remains high, low inventory and rapidly rising prices will continue to challenge home sales during 2016.




Metro Denver added nearly 31,000 people to the area through in‐migration in 2015. With high levels of in‐migration and existing residents making the leap to own rather than rent, housing inventory fell to record low levels. The area averaged 5,750 resale listings each month in 2015, representing a little more than a one‐month supply.

At the end of 2015, only 4,380 homes were available for sale, a 7 percent decline compared to the same period in 2014. While current inventories are constrained, there were over 17,900 residential construction permits issued in Metro Denver in 2015. The Metro Denver residential market will welcome many new units through 2016 and this should alleviate some of the pent up demand for housing, leading to increased sales activity.

Home Prices

Home prices in Metro Denver rose significantly in 2015 as housing inventory fell to record lows. The median home price in Metro Denver increased 11.9 percent over‐the‐year in the third quarter of 2015 to $353,000, compared with the U.S. median of $229,000. The median home price in Metro Denver has increased year‐over‐year at a double digit pace since the second quarter of 2012. The median home price is expected to continue to rise through 2016 as low inventory and strong in‐migration continue to drive up prices. The Metro Denver median annual home price will appreciate 12.7 percent in 2015 to $349,700, compared with the national increase of 6.1 percent to $221,500.

As of the third quarter 2015, Denver has the highest median home price compared with its competitor cities. Home prices ranged from $178,900 in Atlanta to $319,300 in Portland. Atlanta, Dallas, and Phoenix had median home prices that were below the national average during the period.

According to the S&P Case‐Shiller index, home prices in Denver have increased year‐over‐year for 46 consecutive months or since January 2012. Further, Denver recorded at least a 10 percent over‐the‐year growth rate in every month of 2015 except for January. Housing prices in Metro Denver are among the fastest growing in the country and was only one of four cities in the 20‐city index to surpass its pre‐recession peak. Of the competitor cities, Portland and Dallas have also surpassed their prerecession peaks.




Foreclosures

Foreclosures in Metro Denver were down 34.3 percent in 2015 compared with 2014. According to experts, tight underwriting standards paired with improved economic and housing market fundamentals have pushed new mortgage delinquencies to 15‐year‐lows nationwide. Analysts at CoreLogic stated that Colorado had one of the lowest foreclosure inventory rates in the country at 0.4 percent in November. The low rate shows the strength of the local economy, through a strong job market and employees with job security. Foreclosures are expected to decline 3.5 percent in 2016 to less than 3,400 foreclosure filings.

Metro Denver Economy Summary

Metro Denver experienced job growth in each supersector except information in 2015, leading to a gain of 48,400 jobs across the seven‐county area. This employment growth rate of 3.2 percent was well above the nation and the state. In 2016, job gains will continue to be broad‐based. Two of the three supersectors that added the most jobs in 2015–professional and business services, education and health services, and natural resources and construction–are likely to maintain this position in 2016. The natural resources and construction supersector is likely to be replaced by the wholesale and retail trade supersector as the third‐fastest growing segment of the economy. The unemployment rate in Metro Denver is expected to average about 3.5 percent in 2016, representing extremely tight labor market conditions.

With limited supply in the residential real estate market and above average population growth, home prices will continue to rise and construction activity will continue at a quick pace. Multi‐family construction represented 43 percent of the new units built in 2015, higher than the 35 plus‐year average of multi‐family units representing roughly one‐quarter of construction. Single‐family detached construction has been slow over the past few years, but construction will start to pick up as developers find new areas for large, planned communities. Single‐family detached permits represented 54 percent of building permits in 2015, an increase of 4.6 percentage points over the prior year’s level. With rising apartment rental rates, individuals are regarding home ownership as a more viable option.

Metro Denver’s expanding economy will continue to be supported by a strong entrepreneurial environment, business friendly policies, and a talented workforce. The region will be constrained by a tight residential housing market, but commercial construction will continue at levels at or above historical averages. With a strong employment situation and positive business investment, Metro Denver is poised to achieve new economic milestones in 2016.

DATA APPENDIX

Metro Denver Economic Development Corporation | February 2016 | Page 39

Data Appendix

'05 '06 '07 '08 '09 '10 "11 "12e "13f

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 (e) 2016 (f)

NATIONAL INDICATORS

Population (Thousands) 298,380 301,231 304,094 306,772 309,347 311,719 314,103 316,427 318,907 321,419 323,996

Real GDP (Bil l ions) $14,234.2 $14,613.8 $14,873.7 $14,830.4 $14,418.7 $14,783.8 $15,020.6 $15,354.6 $15,583.3 $15,961.7 $16,365.2

Real GDP Growth Rate 2.7% 1.8% ‐0.3% ‐2.8% 2.5% 1.6% 2.2% 1.5% 2.4% 2.5% 2.6%

Employment Growth Rate 1.8% 1.1% ‐0.6% ‐4.3% ‐0.7% 1.2% 1.7% 1.7% 1.9% 2.1% 1.9%

Unemployment Rate 4.6% 4.6% 5.8% 9.3% 9.6% 8.9% 8.1% 7.4% 6.2% 5.3% 5.0%

Inflation Rate 3.2% 2.8% 3.8% ‐0.4% 1.6% 3.2% 2.1% 1.5% 1.6% 0.1% 1.7%

Personal Income Growth Rate 7.3% 5.4% 4.1% ‐3.3% 3.1% 6.2% 5.1% 1.2% 4.4% 4.5% 4.8%

Prime Rate 8.0% 8.1% 5.1% 3.3% 3.3% 3.3% 3.3% 3.3% 3.3% 3.3% 3.8%

COLORADO INDICATORS

Population (Thousands) 4,745.7 4,821.8 4,901.9 4,976.9 5,050.3 5,120.2 5,192.0 5,271.0 5,353.5 5,443.6 5,538.6

Net Migration 42,896 35,000 40,469 36,267 37,526 35,998 39,816 47,896 50,778 57,840 62,118

Employment Growth Rate 2.4% 2.3% 0.8% ‐4.5% ‐1.0% 1.6% 2.4% 3.0% 3.3% 2.9% 2.6%


Denver‐Boulder‐Greeley Inflation Rate 3.6% 2.2% 3.9% ‐0.6% 1.9% 3.7% 1.9% 2.8% 2.8% 1.2% 2.3%

Personal Income Growth Rate 7.3% 5.7% 5.1% ‐3.3% 2.4% 7.4% 6.1% 2.3% 6.2% 5.0% 5.3%

Retail Trade Sales Growth Rate 7.6% 7.0% ‐0.6% ‐11.3% 5.5% 8.1% 5.9% 5.0% 7.2% 4.8% 5.4%

Housing Permits Growth Rate ‐16.4% ‐23.2% ‐35.5% ‐50.8% 23.9% 16.5% 72.6% 18.1% 4.2% 5.0% 12.5%

METRO DENVER INDICATORS

Population (Thousands) 2,626.2 2,670.0 2,716.8 2,762.2 2,797.9 2,847.9 2,899.1 2,954.7 3,011.5 3,062.5 3,116.4

Net Migration 18,864 18,704 22,326 21,639 13,892 29,147 31,811 36,271 37,095 30,864 33,521

Employment Growth Rate 2.0% 2.1% 1.0% ‐4.3% ‐0.5% 1.8% 2.9% 3.6% 3.6% 3.2% 2.9%

Non‐Agricultural Employment (Thousands)

TOTAL 1,377.4 1,407.0 1,420.5 1,359.2 1,352.8 1,377.7 1,417.2 1,467.8 1,520.0 1,568.4 1,613.9

Natural Resources & Construction 100.3 98.8 97.3 81.4 74.1 73.7 77.5 85.0 95.4 101.0 105.2

Manufacturing 90.8 89.5 87.4 78.5 76.4 78.1 79.8 81.1 82.7 85.2 86.7

Wholesale & Retail Trade 211.2 215.6 215.9 203.5 202.3 205.4 209.9 215.4 220.8 226.4 231.8

Transp., Warehousing & Util ities 50.9 52.3 52.4 49.1 47.3 47.0 48.3 50.7 52.6 54.0 55.3

Information 56.5 56.9 56.0 53.5 52.2 52.1 51.6 52.4 52.8 52.7 52.9

Financial Activities 108.0 107.3 104.9 100.2 98.0 97.8 99.8 103.4 105.1 108.3 111.5

Professional & Business Services 229.5 242.5 247.7 232.3 232.7 241.8 254.1 265.1 274.3 284.4 295.5

Educational & Health Services 141.4 146.9 153.3 157.9 162.6 168.5 174.7 182.0 190.7 199.4 207.6

Leisure & Hospital ity 141.9 145.6 147.7 142.7 144.5 149.2 154.3 160.4 167.0 171.9 176.9

Other Services 51.3 52.3 53.7 52.7 52.7 53.6 55.1 56.3 58.3 60.2 61.7

Government 195.8 199.3 204.5 207.5 210.1 210.4 212.2 216.1 220.4 224.9 228.7


Retail Trade Sales Growth Rate 7.5% 6.5% ‐0.8% ‐11.3% 5.2% 6.8% 7.3% 5.2% 7.9% 5.7% 6.7%

New Residential Units 18,135 14,392 9,557 4,288 5,554 7,199 14,925 16,940 16,910 17,954 18,639

CURRENT AND HISTORIC ECONOMIC INDICATORS

Sources: Board of Governors of the Federal Reserve System; Colorado Department of Labor & Employment, Labor Market Information; Colorado Department of Revenue; Colorado Division of Local Government;

U.S. Bureau of Labor Statistics; U.S. Bureau of Economic Analysis; U.S. Census Bureau.

REFERENCES


References

Area Development Magazine. “Shale Oil & Gas Development Changing the Way the Nation Does Business.” January 8, 2016. www.areadevelopment.com

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Colorado Division of Local Government, State Demography Office. www.colorado.gov

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Colorado Health Institute. “A Half‐Million Newly Insured: Is Colorado Ready?” December 1, 2011. www.coloradohealthinstitute.org

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CoStar Realty Information, Inc. www.costar.com

REFERENCES


References

Denver Business Journal. Various articles. www.denverbusinessjournal.com

Denver International Airport. Finance and Administration Department. www.flydenver.com

The Denver Post. Various articles. www.denverpost.com

DTZ. Various quarterly market reports. 2015

Ewing Marion Kauffman Foundation. Kauffman Index of Entrepreneurial Activity. April 2014. www.kauffman.org

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Forbes. “The Best States for Business and Careers 2015.” October 21, 2015. www.forbes.com.

Forbes. “Denver leads the 2015 best places for business and careers.” July 29, 2015. www.forbes.com

Forbes. “America’s Fastest‐Growing Cities 2015.” January 27, 2015. www.forbes.com

Freddie Mac. Cash‐Out Refinance Report, 3Q2015. November 2015. www.freddiemac.com

Gallup. “Little Change in Percentage of Americas Who Own Stock.” April 22, 2015. www.gallup.com

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HVS. 4th Annual HVS Hotel Market Connections. www.hvs.com

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International Monetary Fund. World Economic Outlook: Update. January 2016. www.imf.org

Investopedia. “Best U.S. Cities to Become an Entrepreneur.” February 20, 2015. www.investopedia.com

Kiplinger. “10 States with the fastest job growth.” July 2015. www.kiplinger.com

Manpower Inc. www.manpowergroup.com

Metro Denver Economic Development Corporation. 2015 Industry Cluster Study. www.metrodenver.org.

Metro Denver public trustees (various).

The Milken Institute. 2014 Best‐Performing Cities Index. January 8, 2015. www.best‐cities.org

Moody’s Analytics. “U.S. Macro Outlook 2015: The Case for a Rate Hike (This Week).” September 14, 2015.

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Newmark Grubb Knight Frank. 2015

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REFERENCES


References

Pew Charitable Trusts. “The Shrinking Middle Class, Mapped State by State.” March 19, 2015. http://www.pewtrusts.org/en/research‐and‐analysis/blogs/stateline/2015/3/19/the‐shrinking‐middle‐class‐mapped‐state‐by‐state

RealtyTrac. “Boomerang Buyers are Back.” May 4, 2015.

REcolorado. www.recolorado.com

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U.S. Department of Commerce, Bureau of Economic Analysis. www.bea.gov

U.S. Department of Commerce, Bureau of the Census. www.census.gov

U.S. Department of Energy, Energy Information Administration. www.eia.gov

U.S. Department of Labor, Bureau of Labor Statistics. www.bls.gov

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U.S. Government Accountability Office. www.gao.gov

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REFERENCES

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10184 West Belleview Avenue Suite 100 Littleton, Colorado 80127 www.DevelopmentResearch.net 303.991.0070

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