Littleton Economic Report: 3rd Quarter 2018

Prepared by: City of Littleton, Economic Development Department

July 9, 2018

Commercial Real Estate Definitions

Vacancy Rate After determining the markets mean vacancy rate from 2006 Q1-2018 Q2, it can be concluded that the normal, or equilibrium, vacancy rate for the City of Littleton is 6.2%. Vacancy higher than 6.2% will cause the rental rate to decrease and vacancy lower than 6.2% will cause the rental rate to increase. When applying the information specifically to Littleton, it can be assumed that in the long run, the rent should decrease while the vacancy rate should increase as we move towards that equilibrium. Net absorption is defined as the net change in occupied space over a given period of time. A high absorption rate signals high demand of commercial real estate while a low absorption rate signals low demand for commercial real estate. Construction deliveries are defined as the square footage of buildings that completed construction during a specified period of time. For Sale Total SF is the square footage of all the properties being marketed as for sale in the CoStar database. It is important to emphasize that some properties are privately marketed and are not accounted for by this chart. Asking Price Per SF is directly influenced by the vacancy rate. Consistent with supply and demand theory, as supply falls (vacancy rate falls); upward pressure is put on prices. Under Construction is the total square footage of buildings being developed, assembled, built, or constructed. A building is considered to be under construction from the time it starts foundation work until it receives a completion certificate. The Occupancy Rate is a measurement of the total amount of occupied space divided by the total amount of existing inventory. The Percent Leased Rate is a measurement of the total amount of leased space divided by the total amount of existing inventory. The primary difference between the two measures is “occupied space” necessitates physical occupancy, while “leased space” includes space that is not currently occupied. Source: http://www.costar.co.uk/Costar/KnowledgeCentre/PDF/CoStarUKSuite-Analytics-Definitions.pdf

Commercial Property Under Construction

Source: CoStar

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Commercial Property Absorption, Deliveries, Vacancy

Source: CoStar

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Commercial Property For Sale – Total SF

Source: CoStar

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Commercial Property Occupancy & Percent Leased

Source: CoStar

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Littleton Economic Report: 3rd Quarter 2018

Job and employment trends (source: US. Dept. of Labor, most recent data May 2018)

Unemployment Counts (Bureau of Labor Statistics)

Labor force (Bureau of Labor Statistics)

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Annual Percent Unemployment Rate (Bureau of Labor Statistics)

0

2

4

6

8

10

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

0

500

1000

1500

2000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

21000

22000

23000

24000

25000

26000

27000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Job and employment trends (source: QCEW/US Census):

Businesses and employment by industry

Inflow/outflow job counts 2015 (where people live and work)

Source: US Census, 2018

Littleton Economic Report: 3rd Quarter 2018

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Source: QCEW 2017, Q4

Economic Trends Five States To Watch: Texas, Florida, Indiana, Colorado And Alabama Colorado shot up five places to No. 8 as more CEOs grow to appreciate the vibe there: It ranked No. 1 in living environment in the 2018 Chief Executive survey. And the state is becoming a leading cluster for digital businesses. Recondo Technology, which writes cloud-based healthcare software, is part of the state’s “health innovation ecosystem” that includes a regional cluster of startups, tech companies and major healthcare organizations. “That has made Colorado a healthtech powerhouse,” says Jay Deady, CEO of the Denver-area company. “And we’re taking full advantage of the talented labor pool and positive economic outlook.”

__________________________________ Colorado Companies to Watch, the state-wide organization whose mission is recognizing entrepreneurial, Colorado-based businesses with 6 to 99 employees, celebrated its decennial class of fifty honorees with a gala at the Denver Marriott Tech Center June 22, 2018. Among the 2018 winning companies was Littleton’s Crazy Scrubs, Inc., located at 151 West Mineral Avenue in the Safeway shopping center. Opening their doors in 1994, owners Scott and Sandi Richter re-imagined previously staid blue, green and brown hospital scrubs as cheerfully colorful garments made from wildly patterned fabrics. First selling to Littleton doctors and nurses, Crazy Scrubs caught on quickly as medical personnel saw the positive effect happy patterns had on anxious patients. Now boasting a network of thousands of wholesale accounts worldwide, the company gives back by supporting more than 100 medical missions around the globe. A visit to the Crazy Scrubs corporate office shows photos of clinicians wearing the scrubs in Tanzania, Kenya, Haiti, the Philippines, Mexico, China, Cambodia and India. American surgeons working globally say Crazy Scrubs help bridge the language barrier. Two years ago the company began Ripcord Brands, a new division which is Amazon’s leading seller of medical apparel and one of the online behemoth’s highest-rated and fastest growing companies. Congratulations to Crazy Scrubs!

________________________________ The Return of the Brick-and-Mortar Store Commercial rents are falling, just as ad rates and shipping costs make e-commerce prohibitive.

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Economic Trends, continued US Shopping Center Demand Falls to Six-Year Low as Net Absorption Declines and Store Closures Pile Up CoStar analyst calls end to retail's recovery US retail space net absorption dropped to 11 million square feet in the first quarter, a level not seen since 2012, and the retail vacancy rate held steady at 4.6%, according to CoStar's First-Quarter 2018 State of the US Retail Market report. Ryan McCullough, senior managing consultant for CoStar Portfolio Strategy, says the pace of the recovery has slowed to the point where "we can actually call an end to the recovery.“

__________________________________ Arbor Outlook: Malls give way as shopping moves back to Main Street …Many municipalities are attempting to revive their downtown and inner city regions with new, walker friendly retail developments, often placed adjacent to apartments and lofts. The irony is obvious, as the trend comes full circle. The advent of suburban malls hastened the decline of our inner city shopping districts. Now, the return to walking retail in downtown areas is rendering the suburban mall obsolete.

__________________________________ The Supreme Court delivered a major victory to the retail real estate industry on Thursday, ruling that states can require most online retailers to collect and remit sales taxes. This overturns an earlier decision holding that companies lacking a physical presence in the state could not be required to do so.

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Looking toward the future: Scenario comparison

The following illustrates a comparison of four different scenarios and the impact they have on city services, revenues, etc.

Single family Apartments Commercial office Commercial retail

Total acres 30 acres 30 acres 30 acres 30 acres

Sample area extrapolation is based upon

based on Euclid area based on Aspen Grove

apartments area based on Dry Creek Cir.

Area based on Aspen Grove

Lifestyle Center

Number of homes (extrapolated)

122 units 518 units 0 0

Number of retail (extrapolated)

0 0 0 49 units

Number of offices (extrapolated)

0 0 82 units 0

Property tax revenue $9319 $53,721 $67,399 $87,895

Use tax revenue Negligible Negligible --- ---

Use/Retail tax revenue

Negligible Negligible $575,969 $1,530,054

City costs $216,108 $216,108 $216,108 $216,108

Net revenue -$206,789 $-162,387 $427,260 $1,401,841

Notes: 1) This data is an extrapolation based on sample areas and includes a simplified view of city

cost/benefits per 30 acre property 2) ‘City costs’ is an per acre average based on general fund expenditures for 2018

Littleton Economic Report: 3rd Quarter 2018

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