MonthlyEconomicIndicators. October2016. Monthlyanalysis of18keyeconomic indicatorsin MetroDenver. EnergeticBodies.EnergeticMinds.

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1 MonthlyEconomicIndicators October EnergeticBodies.EnergeticMinds. Monthlyanalysis of18keyeconomic indicatorsin MetroDenver

2 The Monthly Economic Indicators is a comprehensive analysis of economic conditions in the seven-county Metro Denver area, or the region comprised of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, and Jefferson Counties. There are two metropolitan statistical areas (MSAs) located within the Metro Denver region: the Boulder MSA (Boulder County) and the Denver-Aurora-Lakewood MSA (the Denver MSA) (Adams, Arapahoe, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson, and Park Counties). This report presents recent data and long-term trends for the seven-county region, MSAs, or counties, depending on availability. The analysis includes four sections: labor force and employment, the consumer sector, residential real estate, and commercial real estate. Notable Rankings Forbes released a list of U.S. cities creating the most finance jobs and the Denver-Aurora-Lakewood metropolitan statistical areas (MSA) ranked 12th. The magazine compiled the ranking by looking at employment growth in 366 MSAs for which BLS has complete data going back to 2005, weighting growth over the short-, medium-, and long-term in that span, and factoring in momentum whether growth is slowing or accelerating. The magazine stated that in the Denver-Aurora-Lakewood MSA financial services employment reached 104,400 workers, representing 7.4 percent of the area s workforce, and recorded a near 15 percent increase in employment between 2010 and The Denver/Boulder commercial biotech office market was ranked 13th in the nation in a report by JLL Life Sciences. The report ranked cities based on life science employment, employment growth, venture capital funding, and National Institutes of Health funding. The group reported that nearly all sectors of the life sciences industry are growing in Denver, most notable in the pharmaceuticals sector. The Boston area was ranked first and the San Francisco area was ranked second. JLL released its High Tech Outlook report and ranked Denver 23rd and Boulder 25th for their tech office markets. The report ranked cities based on economic momentum, talent pool, innovation, and cost. The group reported that Denver s highly educated workforce is a magnet that serves the seemingly insatiable appetite for skilled tech workers. Boulder was said to have more than 100,000 square feet of furnished tech space available for sublease, providing opportunity for startups and small companies to settle near similar businesses at a discounted price. SmartAsset released their annual Best College Value report and the Colorado School of Mines was ranked the sixthbest value in the nation. The ranking was compiled based on criteria including average scholarships and grants, starting salary upon graduation, tuition, and living costs. The company reported that the college had an affordability index of and an average starting salary for graduates of $65,500. The Massachusetts Institute of Technology ranked first. U.S. News & World Report released its annual ranking of the top national universities, with the Colorado School of Mines ranked the highest in Colorado at 82nd. The University of Denver and the University of Colorado Boulder also made the top 100 colleges list, ranking 86th and 92nd, respectively. Colorado State University ranked 129th and the University of Colorado Denver ranked 197th. A separate ranking of smaller universities in the western region showed Regis University as 23rd and the University of Colorado-Colorado Springs as 39th. CoreLogic released analysis showing that the Denver-Aurora-Lakewood MSA has the second lowest percentage of homes with negative equity of major U.S. markets. The Denver-Aurora-Lakewood MSA recorded 1.5 percent of homes with negative equity, representing less than 10,000 homes. The San Francisco MSA was the only metropolitan area with a lower portion of negative equity than Denver with 0.6 percent of homes. Denver ranked ninth of the top ten metropolitan areas with the largest share of large homes by Lawnstarter. The company analyzed U.S. Census Bureau data from the 2015 American Community Survey, which asks respondents to count the number of rooms in their homes. The company stated that 43.2 percent of owner-occupied homes in Denver had eight or more rooms compared with 30.2 percent nationally. The cities with the largest portion of large homes were Provo, Ogden, and Salt Lake City, Utah. Popular Mechanics released their list of the 20 most impressive airports in the world and Denver International Airport made the list. The company drew attention to the fact that DEN is the largest airport by land area in the U.S. and Metro Denver Economic Development Corporation October 4, Page 1

3 highlighted its underground tunnel system to move baggage to its 1.5-million-square-foot terminal. The report also mentioned that the airport has the nation s second-tallest control tower and the nation s longest runway. Other U.S. airports on the list included Hartsfield-Jackson Atlanta International Airport and O Hare International Airport. The Reason Foundation released the 22nd Annual Highway Report and ranked Colorado 35th in the nation for overall highway performance and cost-effectiveness. Colorado s rank was down two positions from the prior year. The study is based on spending and performance data that state highway agencies provided to the federal government for 2013, as well as 2014 congestion data from the Texas A&M Transportation Institute. Of the study s components, the state ranked 22nd for fatalities, 15th for deficient bridges, 33rd for metropolitan area congestion, and 33rd for total spending per mile. Thrillist ranked the 50 states for their beauty and Colorado ranked fifth. The company stated that Colorado has more than 50 peaks higher than 14,000 feet, more than triple the rest of the lower 48 combined. They also noted the state s mountain lakes and some of the most underrated beachfront on the planet. The top ranked state was California followed by Hawaii, Alaska, and Utah. Arcadis, a Highlands Ranch-based engineering company, ranked Denver as the world s 49th-most sustainable city and the sixth-most sustainable city in the U.S. The company ranked cities on criteria including income inequality, crime, affordability, energy consumption, drinking water, green space, and transportation. Zurich was ranked the world s most sustainable city and New York City was ranked most sustainable in the U.S. Other Notable Rankings Colorado was ranked the leanest state in the nation in 2015 by the Centers for Disease Control and Prevention. Denver was ranked the sixth-best city with the highest annual growth in job interest among millennials by LinkedIn. Timeout, an online platform for recommendations and reviews, ranked Denver the fifth-best city to live. Highlands Ranch was ranked the seventh-happiest community in the nation by Zippia. Denver was ranked the 15th-best city to raise a family by WalletHub. Policy Watch Local The City and County of Denver approved the city s first affordable-housing fund. The fund is aimed at raising $150 million over the next decade from property taxes and new development impact fees. Officials stated the plan will subsidize the preservation or building of 6,000 income-qualified housing units. In its first year in 2017, the half-mill property tax hike is expected to produce $6.5 million and development fees will generate $3.5 million as projects go through permitting. The program will also receive a one-time payment of $5 million from the city s general fund. National Economic Overview The U.S. Bureau of Economic Analysis (BEA) released the third estimate of real gross domestic product (GDP) for the second quarter of. The estimate showed that GDP increased at an annual rate of 1.4 percent through the second quarter, which was 0.6 percentage points above the first quarter rate of 0.8 percent. The third estimate is based on more complete source data than was available for the second estimate. The increase in GDP reflected positive contributions from personal consumption expenditures, nonresidential fixed investment, and exports. The advanced estimate of third quarter GDP will be released October 28. The September conference of the Federal Open Market Committee (FOMC) reported that the labor market continued to strengthen and the growth of economic activity picked up from the modest pace seen in the first half of the year. The committee stated that while the unemployment rate was little changed in recent months, job gains have been solid on average. Further, household spending has been growing strongly, but business fixed investment has been soft. Inflation Metro Denver Economic Development Corporation October 4, Page 2

4 continued to run below the committee s longer-run objective of 2 percent, partly reflecting declines in energy prices and in prices of non-energy imports. With these indicators in mind, the FOMC decided to maintain a target range for the federal funds rate at 0.25 to 0.5 percent. The next committee meeting will be held on November 2. Economic Indexes & Notable Data Releases National & International The U.S. trade deficit was $39.5 billion in July, down $5.2 billion from the June deficit of $44.7 billion (revised). Imports decreased to $225.8 billion, falling $1.8 billion between June and July, and exports rose $3.4 billion to $186.3 billion. The goods and services deficit increased $1 billion compared with the three months ending July Exports were $6.7 billion lower between the three months ending in July 2015 and, while imports declined $5.7 billion during the same period. The Conference Board Leading Economic Index for the U.S. decreased in August to 124.1, falling 0.2 percent between July and August. Economists at the Conference Board reported that while the index declined in August, its trend still points to moderate economic growth in the months ahead. Although strengths and weaknesses among the leading indicators are roughly balanced, positive contributions from the financial indicators were more than offset by weakening of nonfinancial indicators, such as leading indicators of labor markets, suggesting some risks to growth persistence. The Institute for Supply Management s Purchasing Managers Index contracted in August, following five consecutive months of expansion, as measured by a value over 50. The index fell to 49.4 percent in August, a 3.2 percentage point decrease from the previous month s level. Of the 18 manufacturing industries tracked in the index, six industries reported growth. The New Orders Index decreased 7.8 percentage points over-the-month to 49.1 percent and the Production Index decreased 5.8 percentage points during the same period. The Inventories Index reported the smallest decline over-the-month, falling 0.5 percentage points. Survey respondents across multiple industries reported slowing business conditions in August. Respondents in the transportation equipment industry reported business conditions are generally flat, while respondents in the plastics and rubber products industry reported difficulty finding production associates leading to a great deal of overtime. The Institute for Supply Management s Non-Manufacturing Index decreased 4.1 percentage points in August to 51.4 percent, compared with the July level of 55.5 percent. The August index marked the 79th consecutive month of growth, as measured by a value over 50. The index tracks 18 non-manufacturing industries and 11 industries reported growth between July and August. The Inventory Sentiment Index recorded the largest over-the-month increase, rising 1 percentage point to 64 percent, followed by the Supplier Deliveries Index (+0.5 percentage points). The New Export Orders Index recorded the largest decline over-the-month, falling 9 percentage points to 46.5 percent. Survey respondents in the accommodation and food services industry stated that business conditions were relatively stable in August and public administration industry respondents said business was stable with some increase in construction activity. According to Aon Hewitt, a human resources consultancy, employers are not likely to put more money into raises and bonuses next year. The company released their annual U.S. Salary Increase Survey that predicts that base salaries and bonuses for U.S. workers will not change in 2017, despite a better job market this year. The consultancy surveyed 1,074 companies and found that the percentage of payroll budgets that companies plan to spend on bonuses will be flat from the previous year, with 12.8 percent of corporate payroll budgets going to variable pay. Further, raises will also be relatively unchanged, with increases forecast at 3 percent. The U.S. Census Bureau reported that the incomes of Americans increased 5.2 percent in 2015, the first significant boost to middle-class pay since the end of the Great Recession and the fastest increase ever recorded by the federal government. The bureau also reported that there were 43.1 million Americans in poverty in 2015 and the poverty rate fell 1.2 percentage points over-the-year, the largest decline since About 9 percent of Americans were without health insurance in 2015, down 1.3 percentage points from the prior year. Metro Denver Economic Development Corporation October 4, Page 3

5 Local The Leeds Business Confidence Index reported a less positive outlook for the fourth quarter of. The index value of 53 for the fourth quarter of was down 1.6 percentage points from the previous quarter and fell 0.5 points from the previous year s level. Of the index components, overall expectations for the state economy rose from 57.4 in the third quarter of to 57.5 in the fourth quarter of. Expectations for profits and sales declined, with the profits index falling 4.7 points over-the-quarter to 52.2 and the sales index decreasing 3.3 points over-the-quarter to According to the report, the index was in positive territory (above 50), but was held back by negative national expectations. Survey respondents were most optimistic about the state economy and sales expectations, which had been in negative territory (below 50) for three consecutive quarters. The Governor s Office of State Planning and Budgeting and the Legislative Council released their forecasts for the state budget and predicted that the state will have a deficit of $227 million and $330 million in the current fiscal year, respectively. The deficit will cause the Governor to consider spending cuts as his fiscal year budget proposal is prepared, as tax revenues continue to fall short of previous expectations. According to the Colorado Insurance Commission, individual health insurance premiums will increase by more than 20 percent in Colorado in Insurers are pulling out of the market or greatly scaling back their offerings to state residents who do not receive their insurance through their employer. Small group policies will have premium increases of about 2.1 percent. The commission stated the increase in prices is most related to continuing increases in healthcare costs charged by hospitals, primary care providers, pharmaceutical companies, medical device firms, and other providers. UnitedHealthcare and Humana Insurance will no longer offer individual plans next year, Anthem Blue Cross and Blue Shield of Colorado is ending its preferred-provider organization (PPO) individual plans and Rocky Mountain Health Plans stopped selling individual policies everywhere but Mesa County. Those combined moves will require 92,000 Coloradans to shop for new insurance next year. According to the U.S. Bureau of Economic Analysis (BEA), real gross domestic product (GDP) in the Denver-Aurora- Lakewood MSA reached $178.4 billion in 2015, making it the 18th largest economy of the 382 MSAs. Real GDP increased 4 percent in 2015, the 51st-fastest growth rate. The New York-Newark-Jersey City MSA is the country s largest economy at $1.4 trillion. The Midland, Texas MSA grew at the fastest pace of 9.4 percent. Analysis of the U.S. Census Bureau s 2015 American Community Survey shows that Coloradans earned more money in 2015 with declining poverty rates, but paid more in rent. The data showed that the state s poverty rate fell to 11.5 percent in 2015 from 12 percent in Further, the Colorado poverty rate is back to the 2008 level and was 3.2 percentage points below the U.S. average. The median household income in Colorado rose 4.3 percent over-the-year to $63,910 and the level was about $8,130 above the U.S. median. The 2015 median rent was $1,111 per month, up 8.9 percent from 2014, more than double the increase in household incomes. The data showed that since 2007, median monthly rent in Colorado was up 41 percent, while median household income was up only 15.8 percent during the same period. Labor Force and Employment Employment in Metro Denver rose 3.2 percent between August 2015 and, or an additional 51,100 jobs during the period. The employment growth consisted of a 3.2 percent increase in the Denver-Aurora-Lakewood MSA, or an additional 45,600 jobs, and a 3.1 percent increase in the Boulder MSA, representing 5,500 jobs. The natural resources and construction supersector reported the largest percentage increase over-the-year in employment, rising 11.7 percent, and created the most jobs during the period (11,900 jobs). The leisure and hospitality supersector also recorded significant growth over-the-year, rising 6.4 percent or 11,700 jobs. The government sector recorded the third-largest percentage increase of the 11 sectors, rising 3.7 percent between August 2015 and. Financial activities and the wholesale and retail trade supersectors recorded the smallest increases in employment over-the-year, rising 0.5 percent and 0.7 percent, respectively. The information sector recorded no change in employment during the period. Metro Denver Economic Development Corporation October 4, Page 4

6 Colorado employment rose 2.8 percent in August compared with the previous year s level, adding 71,000 new jobs over the same period. National employment levels increased 1.7 percent over-the-year, with the addition of 2.45 million jobs. Nonfarm Wage & Salary Employment (000s, not seasonally adjusted) Month of Month of Month of Year-to- Date Average Year-to- Date Average Year-to- Date Average Annual Growth Rate Annual Growth Rate Aug-16 (p) Jul-16 (r) Aug % Change Total 11-County Metro Denver* 1, , , , , % 1.8% 2.0% Denver-Aurora-Lakewood MSA 1, , , , , % 1.7% 2.1% Boulder MSA % 2.8% 1.5% Natural Resources & Construction % -0.5% 4.1% Manufacturing % 2.2% -0.4% Wholesale & Retail Trade % 1.5% 1.4% Transp., Warehousing & Utilities % -0.7% 0.0% Information % 0.0% -1.2% Financial Activities % -0.2% 0.8% Professional & Business Services % 3.9% 4.1% Education & Health Services % 3.6% 2.9% Leisure & Hospitality % 3.3% 2.9% Other Services % 1.7% 2.1% Government % 0.1% 1.3% Federal Gov't % -3.0% -1.8% State Gov't % 3.1% 1.0% Local Gov't % -0.3% 2.2% Colorado 2, , , , , % 1.6% 2.4% United States 144, , , , , % 1.2% 1.8% *Includes the Denver-Aurora-Lakewood MSA (Adams, Arapahoe, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson, and Park Counties) and the Boulder MSA (Boulder County). Source: Colorado Department of Labor and Employment, Labor Market Information. (p) =preliminary (r) =revised Metro Denver Industry Cluster Headlines Broadcasting and Telecommunications CenturyLink announced plans to cut more than 3,000 jobs from its nationwide workforce, representing about 7 to 8 percent of employees. The company stated they plan to first reduce employment on a voluntary basis, offering severance packages. The layoffs are expects to be complete by December 16. The effect on the Colorado workforce is uncertain. Energy Cleantech Envision Energy, a China-based wind turbine and energy-management software developer, relocated its Boulder workforce to a larger space. The company has 12 employees in Boulder and plans to add a few employees by the end of the year. Financial Services Janus Capital Group Inc. will merge with London-based Henderson Group plc to create a new company called Janus Henderson Global Investors plc. The new company s international headquarters will be located in London. The Metro Denver Economic Development Corporation October 4, Page 5

7 combined company will employ 2,300 people in 23 locations worldwide, with about $320 billion of assets under management and a market capitalization of about $6 billion. IT-Software Cuttlesoft, a Florida-based tech startup company specializing in IT and software services, plans to open a second location in lower downtown Denver. The company stated they wanted to expand in a location with a robust tech presence. GoSpotCheck, a web and mobile app developer, secured $16.5 million in venture capital funding. The company plans to use the money to improve its designs, expand office space, and hire 30 additional employees by the end of the year. Dizzion, a downtown Denver-based virtual desktop startup, secured $6.4 million in funding. The company has 30 employees currently, but plans to more than double its workforce in and again in Amazon Web Services, a local division of the Seattle-based online retailer, opened a tech office in Broomfield. The company is hiring software engineers at the location. Other Industry Headlines Missouri-based Bass Pro Shops acquired Nebraska-based Cabela s for $5.5 billion. The combined companies plan to keep some operations in Sidney and Lincoln, Nebraska, but the impact on employment at both companies is not yet known. Colorado has two Bass Pro Shops locations and two Cabela s locations. Texas-based McLane Foodservice Inc. acquired 20 acres near Denver International Airport with plans to employ 240 workers in a 250,000-square-foot facility in the Nexus at DIA development. The company plans to occupy the building in mid The company provides grocery and food services to convenience stores, mass merchants, drug stores, and chain restaurants. Toastmasters, a nonprofit group that helps people improve their public speaking skills, plans to relocate its headquarters from Orange County, California to Denver. The group has more than 345,000 members in 16,000 clubs across 142 countries. The company is expected to relocate in UPS announced plans to hire 1,600 seasonal and permanent employees in Metro Denver as part of a nationwide push to hire 95,000 workers. Jobs include drivers, driver-helpers, package handlers, and part-time supervisors. Air Liquide, a French industrial gases company, announced plans to close its Longmont facility and divest its U.S. assets. The plant closed October 1 and 22 employees were laid off. The company recently acquired its North American rival Airgas and many of its locations are being consolidated. PricewaterhouseCoopers announced plans to double employment at its Denver office over the next five years from the current level of 550 workers. The company stated that they continue to look at how they can expand service delivery to clients and to companies in the market so they can bring additional services. MassRoots Inc., a cannabis-centric technology and social media company, announced it cut 14 of its 33 full-time jobs. The company reported they are confident that they will have positive cash flow by the end of the year and expect strong potential for long-term growth. Employment Outlook The Manpower Employment Outlook Survey expects fourth quarter hiring in the Denver-Aurora MSA to increase from the prior quarter s level, with the percentage of companies expecting to expand their employment levels rising 3 percentage points to 28 percent. The percentage of companies planning to decrease employment levels rose 3 percentage points from the third quarter, with 6 percent of companies planning to reduce employment levels. The majority of companies intend to maintain staff levels through the fourth quarter of the year, but the level fell 4 percentage points overthe-quarter to 65 percent. The survey reported that sectors with the best job outlooks were construction, nondurable goods manufacturing, transportation and utilities, wholesale and retail trade, information, leisure and hospitality, and other Metro Denver Economic Development Corporation October 4, Page 6

8 services. Employers in professional and business services, education and health services, and financial activities plan to maintain staffing levels. Employment Outlook Survey Quarter 4 Quarter 3 Quarter 4 YTD YTD Ann Avg Denver-Aurora-Broomfield MSA Percent of Companies Hiring 28% 25% 19% 25% 22% 18% Percent of Companies Laying Off 6% 3% 2% 4% 3% 8% Percent of Companies No Change 65% 69% 76% 70% 73% 70% Percent of Companies Unsure 1% 3% 3% 2% 3% 5% United States Percent of Companies Hiring 22% 23% 21% 22% 22% 17% Percent of Companies Laying Off 6% 5% 6% 5% 5% 13% Percent of Companies No Change 69% 71% 71% 71% 72% 69% Percent of Companies Unsure 3% 1% 2% 2% 2% 4% Source: Manpower Inc. Hiring expectations in the U.S. fell slightly through the fourth quarter of compared with the prior quarter. The percentage of employers planning to increase employment levels fell 1 percentage point to 22 percent between the third and fourth quarters of. The percentage of companies planning to reduce employment levels rose 1 percentage point over-the-quarter, with 6 percent of companies planning to lay off employees. The percentage of companies planning to maintain staffing levels (69 percent) fell 2 percentage points from the prior quarter s level and the prior year s level. The survey analysts stated employers are optimistic, though hesitant, with their hiring intentions. While employers are looking to grow their workforces, many are challenged to find candidates with the right skills. As the hiring outlook continues to improve, attracting and retaining skilled workers will become even more difficult. Unemployment The unemployment rate throughout the Metro Denver area decreased between July and August, falling 0.3 percentage points to a 3.1 percent unemployment rate. The Metro Denver unemployment rate was also 0.2 percentage points below the August 2015 level of 3.3 percent. All seven Metro Denver counties reported decreases in the unemployment rate between July and August, and either decreased or remained flat compared with August Adams County recorded the largest over-the-year decrease in the unemployment rate, falling 0.3 percentage points to 3.6 percent. The City and County of Denver and Arapahoe County recorded a 0.2 percentage point decline over-the-year, while Boulder, Douglas, and Jefferson counties recorded a 0.1 percentage point decline. The City and County of Broomfield recorded no change in unemployment over-the-year. Colorado s unemployment rate fell 0.2 percentage points over-the-year to 3.3 percent during the month of August. The national unemployment rate of 5 percent in August was 0.2 percentage points below the prior year s level and 0.1 percentage points below the previous month s level. Metro Denver Economic Development Corporation October 4, Page 7

9 Labor Force Statistics (000s, not seasonally adjusted civilian labor force) August (p) YTD AVG 2015 YTD AVG Labor Unemployment Labor Unemploy- Labor Unemploy- Ann Avg Unemploy- Ann Avg Unemploy- Force Rate Force ment Rate Force ment Rate ment Rate ment Rate Metro Denver 1, % 1, % 1, % 8.1% 4.3% Adams County % % % 9.9% 4.8% Arapahoe County % % % 8.3% 4.3% Boulder County % % % 6.5% 3.7% Broomfield County % % % 7.0% 4.3% Denver County % % % 8.6% 4.8% Douglas County % % % 6.4% 3.6% Jefferson County % % % 8.0% 4.2% Colorado 2, % 2, % 2, % 8.4% 4.3% United States 159, % 159, % 157, % 8.9% 4.6% Source: Colorado Department of Labor and Employment, Labor Market Information. (p) =preliminary August unemployment insurance claims increased in Metro Denver, rising 3.8 percent between July and August. However, the August level was 7.8 percent lower than the year-ago level. Claims throughout Colorado also increased over-the-month, rising 4.8 percent, but were 8.2 percent lower than the previous year s level. Weekly First-Time Unemployment Insurance Claims Month of Month of Month of YTD Avg YTD Avg YTD Avg Ann Avg Ann Avg Aug-16 Jul-16 Aug % Change Metro Denver 1,079 1,039 1,170 1,224 1, % 1,789 1,161 Colorado 1,934 1,845 2,106 2,364 2, % 3,357 2,115 Note: Reference week data includes the 19th day of the month for all months except November and December, which include the 12th day of the month. Source: Colorado Department of Labor and Employment, Labor Market Information. Consumer Sector Sentiment & Spending The Consumer Confidence Index for the U.S. rose in September, reporting a level of from the revised August level of 101.8, a 2.3 percent increase over-the-month. The national index for September was 1.5 percent higher the September 2015 level. Analysts at The Conference Board stated that between August and September, the Present Situation Index rose 2.6 percent to and the Expectations Index rose 2 percent to They also reported that consumer confidence rose for the second consecutive month and September was its highest level since the recession. Consumers assessment of present-day conditions improved, primarily due to a more positive view of the labor market. Further, consumers were more upbeat about the short-term employment outlook, but somewhat neutral about business conditions and income prospects. Overall, consumers continue to rate current conditions favorably and foresee moderate economic expansion in the months ahead. Colorado is included in the Mountain Region Index and the area reported a decrease in consumer confidence between August and September. The index fell to 106 in September from the August revised level of 110.3, decreasing 3.9 percent over-the-month. The index fell 5.4 percent over-the-year. For the Mountain Region, the Present Situation Index fell 10.4 percent to in September from in August (revised), while the Expectations Index increased 3 percent to 92 from 89.3 in August (revised). Metro Denver Economic Development Corporation October 4, Page 8

10 Consumer Confidence Index Month of Month of Month of YTD Avg YTD Avg YTD Avg Ann Avg Ann Avg Sep-16 (p) Aug-16 (r) Sep % Change Mountain % United States % Source: The Conference Board. (p) = preliminary (r) = revised National retail sales increased 1.9 percent between August 2015 and. Retail sales reached over $456 billion in August, up about $8.5 billion from the 2015 level of $447.8 billion. Motor vehicle sales rose 1.4 percent over-the-year to $92.9 billion and collected an additional $1.3 billion in sales during the period. The building materials sector reported an increase of 2.2 percent between August 2015 and, 2.4 percentage points below the prior year s growth of 4.6 percent. Gasoline sales fell 9.5 percent over-the-year, collecting $3.5 billion less than the previous year. The over-the-year decline in gasoline sales in August marked the 27th consecutive month of over-the-year declines. Core retail sales, which excludes motor vehicle, building material, and gasoline sales, recorded a 3.5 percent increase over-the-year. According to analysis by AlixPartners, forecasters estimate that retail sales for the holiday season will increase between 3.3 and 4 percent compared with the prior year. Analysts noted that the economy has broadly continued to improve and that should encourage people to shop. Further, several big retailers already announced hiring plans for temporary workers during the holiday season, but they are not much higher than the holiday hiring levels of The company reported that many of these larger retailers are looking to hire people in their distribution warehouses, rather than in the retail stores. They report that this indicates retailers expect online purchases to be the key driver of sales growth, not stores. According to the Colorado Department of Revenue, marijuana sales reached a record high in July, recording nearly $122.7 million of medical and recreational sales. Marijuana sales were up 27 percent from the July 2015 level. Medical sales accounted for about $38.9 million and recreational sales accounted for $83.8 million in July. Analysts stated the increase in sales is likely attributed to a summertime sales spike. The state s marijuana industry generated $720.4 million in sales through the first seven months of the year compared with $538 million during the same period the prior year. Through the first seven months of, recreational and medical accounted for about $465 million and $255.4 million, respectively. Retail sales in Metro Denver increased 1.3 percent between February 2015 and. Retail sales for February totaled $7.4 billion, an absolute increase of about $95 million compared with the February 2015 total of over $7.3 billion. Four of the seven Metro Denver counties reported year-over-year increases, with Douglas County (+29.2 percent) and Adams County (+2.1 percent) recording the largest increases. The City and County of Broomfield and Jefferson County also recorded growth in retail sales over-the-year, rising 1.9 percent and 1.1 percent, respectively. The largest decline in retail sales between February 2015 and was in Boulder County, falling 4.6 percent, followed by the City and County of Denver (-2.8 percent) and Arapahoe County (-2.3 percent). Six of the seven counties in Metro Denver recorded declines in sales between January and February, with Douglas County (+9 percent) recording the only increase in sales over-the-month. Retail sales in Colorado were unchanged over-the-year, recording nearly $12.4 billion in retail sales in February, but retail sales were 1.6 percent lower over-the-month. Metro Denver Economic Development Corporation October 4, Page 9

11 Total Retail Sales ($000s) Month of Month of Month of YTD Total YTD Total YTD Total Annual Growth Annual Growth Feb-16 Jan-16 Feb % Change Total Metro Denver 7,440,821 7,526,929 7,345,759 14,967,750 15,400, % 6.4% 9.8% Adams County 1,478,241 1,508,804 1,447,453 2,987,045 2,967, % 10.4% 13.0% Arapahoe County 1,428,805 1,442,657 1,462,199 2,871,462 3,081, % 3.1% 8.5% Boulder County 616, , ,273 1,292,809 1,377, % 8.2% 6.6% Broomfield County 155, , , , , % 0.2% 7.6% Denver County 1,872,968 1,887,623 1,927,396 3,760,591 3,974, % 1.9% 15.5% Douglas County 735, , ,983 1,409,817 1,218, % 17.0% 5.0% Jefferson County 1,154,043 1,175,758 1,141,207 2,329,801 2,471, % 8.2% 3.9% Colorado 12,375,305 12,581,790 12,371,256 24,957,095 25,944, % 7.0% 9.9% Source: Colorado Department of Revenue. According to the U.S. Bureau of Labor Statistics, the U.S. Consumer Price Index (CPI) increased 1.1 percent between August 2015 and. The increase in the overall CPI between August 2015 and was attributed to a 4.9 percent increase in medical care, a 2.6 percent increase in housing, and a 2.1 percent increase in other goods and services. There were also increases over-the-year in the education and communication index (+0.7 percent), the recreation index (+0.9 percent), food and beverage (+0.1 percent), and apparel (+0.3 percent). The transportation index declined 4 percent over-the-year, reflecting low motor fuel prices. The core CPI which excludes food and energy costs increased 2.3 percent between August 2015 and. According to the AAA Daily Fuel Gauge Report, the national average fuel price for September decreased 0.1 percent from August to $2.22 per gallon. The September average fuel price was 3.1 percent lower than the prior year s level ($2.29 per gallon). Metro Denver reported a 1.8 percent decrease in the average fuel price between August and September. The average fuel price of $2.18 per gallon for September in Metro Denver was $0.04 lower than the national average. The area reported average fuel prices that were 11.1 percent lower in September than the previous year s level. Stock Market Two of the four stock market indices improved between August and September and three of four recorded increases between September 2015 and. The Bloomberg Colorado index rose 1.5 percent over-the-month to 519.5, but was 6.5 percent below the prior year s level. The DJIA recorded the largest over-the-month decrease, falling 0.5 percent, but rose 12.4 percent over-the-year, the smallest increase of the indices. The S&P 500 decreased 0.1 percent between August and September, but rose 12.9 percent over-the-year. The NASDAQ rose 1.9 percent over-the-month to 5,312 and rose 15 percent over-the-year. Stock Market Indexes Month of Month of Month of YTD Return YTD Return Ann Avg Return Ann Avg Return Sep-16 Aug-16 Sep Bloomberg Colorado % -7.6% -3.6% 17.3% S&P 500 2, , , % -6.7% 0.0% 13.6% NASDAQ 5, , , % -2.3% -1.8% 9.5% DJIA (Dow Jones) 18, , , % -8.7% 5.5% 16.3% Travel & Tourism Sources: Bloomberg.com; Yahoo! Finance. According to data from the U.S. Census Bureau s 2015 American Community Survey, about 43 percent of workers in the Denver-Aurora-Lakewood MSA spent 30 or more minutes on their commute in Nationwide, about 37 percent of Metro Denver Economic Development Corporation October 4, Page 10

12 commuters spent 30 minutes or more commuting to work. The survey shows that 15 percent of workers in the Denver- Aurora-Lakewood MSA spent 40 to 59 minutes commuting, while 8 percent spent an hour or more commuting. The average hotel occupancy rate in Metro Denver fell 1.5 percentage points to 86.2 percent occupancy in August compared with the July level. However, the August level was 0.9 percentage points higher than the previous year s level. The average room rate for August was $ per night, 1 percent lower than the July level, but 7.1 percent higher overthe-year. Metro Denver Hotel Statistics Month of Month of Month of YTD Avg YTD Avg YTD Avg Annual Annual Aug-16 Jul-16 Aug % Change Percent of Hotel Rooms Occupied 86.2% 87.7% 85.3% 77.1% 78.4% -1.7% 66.8% 66.4% Average Hotel Room Rate $ $ $ $ $ % $ $ Source: Rocky Mountain Lodging Report. Spokespeople for Denver International Airport (DEN) reported that nearly 5.5 million passengers passed through the airport in July, increasing 9.1 percent from the 5 million passengers the previous year. The increase reflected an additional 455,240 passengers through the airport during the period. The airport recorded over 33 million passengers during the first seven months of, an increase of 7.2 percent compared with the same period the previous year. Number of Airline Passengers Residential Real Estate Denver International Airport Passengers Month of Month of Month of YTD Total YTD Total YTD Total Annual Annual Jul-16 Jun-16 Jul % Change ,474,503 5,208,947 5,019,260 33,011,136 30,791, % 52,849,132 47,325,016 Source: Denver International Airport, Traffic Statistics. The Denver Office of Economic Development proposed a plan to build a transit-oriented condominium development at 41st Avenue and Inca Street. Confluence Cos., the project developer, plans to include 250 units, but could increase the total to 300 units. There would be a mix of rental and for-sale units and 21 percent would be designated as affordable housing. The units that are not income-restricted will be priced around $330,000. The Denver Housing Authority plans to build a 176-unit apartment building at the corner of Colfax Avenue and Perry Street near Denver s Sloan s Lake neighborhood. The plans call for a subsidized apartment building on top of a 30,000- square-foot ground floor medical services center. The medical center includes outlets for primary patient care, urgent care, geriatric care, and dialysis. The building will be a split-level, seven- and five-story building that includes one- and two-bedroom units. There will also be a 46,000-square-foot underground parking garage. Developers plan to build 29 micro-apartments in Curtis Park. The project will include two buildings, one with 17 units and another with 12 units. The apartments will be about 320 square feet. The project will have 20 parking spaces, a rooftop deck, bike storage, and a laundry room. Home Resales Existing home sales in Metro Denver decreased between June and July, falling 8.9 percent to 5,886 homes sold during the month. Further, home sales were 16.6 percent lower between July 2015 and. Unsold homes on the market were unchanged between July 2015 and, but were nearly 10 percent higher over-the-month. The average sales price for single-family homes rose 12.7 percent over-the-year to $455,350, while the average sales price of condominiums ($260,550) increased 9.1 percent during the same period. Between July 2015 and, the single-family market added about $51,440 to the average sales price, while the condominium market added about $21,630 to the average sales price. Metro Denver Economic Development Corporation October 4, Page 11

13 Previously-Owned Home Sales Activity Month of Month of Month of YTD Total YTD Total YTD Total Ann Total Ann Total Jul-16 Jun-16 Jul % Change Home Sales (Closed) 5,886 6,458 7,057 33,952 35, % 38,105 50,244 Unsold Homes on Market 7,468 6,796 7,470 7,468 7, % 16,187 28,789 Average Sales Price-Single Family $455,353 $453,204 $403,913 $433,106 $397, % $279,858 $317,115 Average Sales Price-Condo $260,549 $253,821 $238,923 $249,484 $227, % $159,141 $188,745 Median Sales Price-Single Family $379,500 $380,000 $340,000 $230,000 $249,900 Median Sales Price-Condo $230,000 $225,000 $202,000 $124,900 $157,000 Source: Colorado Comps LLC; Denver Metro Association of Realtors; REcolorado. The National Association of Realtors (NAR) released the August analysis of U.S. existing-home sales. Existing home sales decreased 0.9 percent between July and August to 5.33 million homes sold annually and recorded the second consecutive month of over-the-year declines. The housing inventory in August fell 3.3 percent over-the-month, representing a 4.6- month supply, and was 10.1 percent lower over-the-year. NAR economists said recent job growth is not yielding higher home sales, even though healthy labor markets in most of the country should be creating a sustained demand for home purchases. However, there is no question that after peaking in June, sales in a majority of the country have inched backwards because inventory is not picking up to tame price growth and replace what is being quickly sold. Further, hopes of a meaningful sales breakthrough as a result of this summer s historically low mortgage rates failed to materialize because supply and affordability restrictions continue to keep too many would-be buyers on the sidelines. Home Prices NAR data shows the August median existing-home sales price across the U.S. was $240,200, an over-the-year increase of 5.1 percent. Median housing prices increased over-the-year in all four regions. The West reported the largest increase between August 2015 and, rising 9.2 percent to a median home price of $347,400. The Midwest ($190,700) and the South ($209,700) also reported significant growth in the median home price over-the-year, rising 5.5 percent and 6.7 percent, respectively. The Northeast reported the smallest increase in the median home price between August 2015 and, rising 0.8 percent to $274,100. Median Sales Price of Existing Single-Family Homes ($000s) Quarter 2 Quarter 1 Quarter 2 YTD Avg YTD Avg YTD Avg Median Median (p) (r) % Change Boulder MSA $549.6 $479.7 $463.7 $514.7 $ % $358.1 $348.4 Denver-Aurora MSA $394.4 $369.0 $362.9 $381.7 $ % $232.4 $247.1 United States $240.7 $217.2 $229.4 $229.0 $ % $173.1 $219.0 Source: National Association of REALTORS. (p) =preliminary (r) =revised A separate NAR report revealed that median home prices throughout the Metro Denver area increased significantly between the first and second quarters of. The Boulder MSA reported a 14.6 percent increase ($549,600) in home prices during the second quarter of compared with the previous quarter. Boulder home prices were also 18.5 percent higher than the second quarter of The Denver-Aurora MSA also reported an increase in home prices, recording a 6.9 percent increase in prices over-the-quarter to $394,400. Between the second quarters of 2015 and, the Denver- Aurora MSA recorded an 8.7 percent increase in the median sales price. The national median sales price rose 10.8 percent over-the-quarter to $240,700 and was 4.9 percent higher than the previous year s level. Of the 178 MSAs included in the second quarter report, the Boulder MSA reported the sixth highest median price and the Denver-Aurora MSA median price was the 14th highest. The Boulder MSA recorded the largest over-the-year increase in the median home price. According to the S&P/Case-Shiller home price index, Denver housing prices continued to increase in July. The Denver index was in July, a 0.9 percent increase over-the-month. Prices in 19 of the 20 cities tracked by the index increased overthe-month and all 20 cities recorded increases over-the-year. Denver s home prices in July were 9.4 percent higher than the prior year s level, recording the third largest over-the-year increase of the 20 cities. Portland (+12.4 percent) and Metro Denver Economic Development Corporation October 4, Page 12

14 Seattle (+11.1 percent) recorded the largest over-the-year increases, while Washington, DC (+1.5 percent) continued to report the smallest increase. The national home price index rose 4.8 percent between July 2015 and. Analysts for the index reported that both the housing sector and the economy continue to expand with home prices continuing to rise at about a 5 percent annual rate. Further, the index is within 0.6 percent of the record high set in July 2006 and seven of the 20 cities have already set new record highs. The 10-city, 20- city, and National indices have been rising at about 5 percent per year over the last 24 months. Given that overall inflation is a bit below 2 percent, the pace is probably not sustainable over the long term. The run-up to the financial crisis was marked with both rising home prices and rapid growth in mortgage debt. Currently, outstanding mortgage debt on one-to-four-family homes is 12.6 percent below the peak seen in the first quarter of 2008 and up less than 2 percent in the last four quarters. Foreclosures Metro Denver recorded a 4.3 percent decrease in foreclosures in August compared with the previous year, but a 30 percent increase over the previous month, representing 62 additional foreclosures. Adams and Arapahoe counties reported the largest decreases in foreclosures over-the-year, falling 6.7 percent and 34.6 percent, respectively. Jefferson County reported the smallest over-the-year decrease (-4.7 percent) in foreclosures, falling to 41 foreclosures in August from 43 foreclosures in August Six of the seven counties reported increases in foreclosures between July and August, ranging from 23.1 percent in the City and County of Denver to percent in Boulder County. Arapahoe County recorded the only over-the-month decline in foreclosures, falling 3.8 percent to 51 foreclosures. Real Estate Foreclosures Month of Month of Month of YTD Total YTD Total YTD Total Annual Total Annual Total Aug-16 Jul-16 Aug % Change Total Metro Denver* ,170 2, % 16,708 18,958 Adams County % 3,553 4,330 Arapahoe County % 3,959 4,719 Boulder County % Broomfield County % Denver County % 3,434 4,696 Douglas County % 1,781 1,258 Jefferson County % 2,856 2,971 *The total number of election and demand setups (initial filings) received by county public trustees. Filings may be subsequently cured or withdrawn. Sources: County public trustees. RealtyTrac released the foreclosure report for the third quarter of, stating that nearly 1.4 million U.S. residential properties were vacant as of the end of the quarter. The number of vacant properties was down 3 percent from the prior quarter and down 9 percent from the prior year. These vacant properties represented 1.6 percent of all residential properties. The report showed that 18,304 residential properties actively in the foreclosure process were vacant at the end of the quarter, representing 4.7 percent of all residential properties in the U.S. were in foreclosure. Analysts stated that a strong seller s market along with political pressure has likely motivated lenders to complete the foreclosure process over the past year on many vacant properties that were lingering in foreclosure limbo for years. While that reduced the number Metro Denver Economic Development Corporation October 4, Page 13

15 of vacant properties in the foreclosure process so called zombie foreclosures, it has also resulted in a corresponding rise in the number of vacant bank-owned homes. They also stated that assuming that the foreclosing lenders are maintaining these properties and paying property taxes, they pose less of a threat to neighborhood quality than zombie foreclosures, but they still represent latent inventory in an inventory-starved housing market. New Homes The National Association of Realtors reported that Denver is one of the top-ten markets nationwide for markets that are in dire need of more single-family housing starts. The company stated that Denver needs 67,403 new building permits to get back to a historically normal home building pace. The association stated that historically one singlefamily home is need for every 1.6 new jobs added to the economy, but Denver has only added 24,353 homes to house workers taking 145,892 new positions over the past three years, a ratio of about 1 home for every six jobs. Analysts for the company stated Denver s job market is solid and is thereby boosting housing demand. However, due to grossly insufficient new home construction, the inventory level has dropped to unhealthy levels. Further, inadequate singlefamily home construction since the Great Recession has had a detrimental impact on the housing market by accelerating price growth and making it very difficult for prospective buyers to find an affordable home, especially young adults. The Census Bureau report on new home sales after adjustment for seasonal trends stated that national home sales decreased in August to 609,000 annual sales from the revised July level of 659,000 annual sales. The August home sales level was 7.6 percent below July, but 20.6 percent above the previous year s level. Three of the four regions reported over-the-month decreases in home sales. The Northeast reported the largest over-the-month decrease in sales, falling 34.3 percent to 23,000 sales, followed by the South, which recorded a 12.3 percent decrease in sales. Sales in the Midwest (81,000 sales) fell 2.4 percent over-the-month, while sales in the West rose 8 percent compared with the prior month. The South reported the smallest over-the-year increase in sales, rising 15.9 percent to 343,000 sales. The Midwest (+39.7 percent) and the West (+35 percent) recorded increases in home sales between August 2015 and, while the Northeast (-25.8 percent) recorded a decline. The National Association of Homebuilders (NAHB)/Wells Fargo Housing Market Index (HMI) increased 6 points to a level of 65 in September. NAHB spokespersons reported that as household incomes rise, builders in many markets across the nation are reporting they are seeing more serious buyers, a positive sign that the housing market continues to move forward. Further, the single-family market continues to make gradual gains and they expect the upward momentum to build throughout the remainder of the year and into According to the Census Bureau, the seasonally adjusted annual number of nationwide residential building permits rose 0.7 percent between July and August (1.15 million permits), but was 1.2 percent below August There was a 3.5 percent increase in single-family detached units over-the-month and a 13.8 percent increase in single-family attached units, while permits of multi-family units fell 5.2 percent during the period. Single-family detached permits (+3.7 percent) and singlefamily attached units (+10 percent) rose over-the-year, but multi-family permits fell 10.1 percent during the period. The Midwest (194,000 permits) reported the only over-the-year increase in permits, rising 9.6 percent. The Northeast (-3.6 percent), the South (-1.7 percent), and the West (-5.9 percent) recorded declines in home sales during the period. Metro Denver Economic Development Corporation October 4, Page 14

16 Residential building permits for the Metro Denver area increased in August compared with the prior year. Metro Denver reported a 7 percent increase in total permits issued between August 2015 and, with 105 additional permits issued. The over-the-year increase in total permits was attributed to a 23.7 percent increase in single-family detached permits. The single-family attached and multi-family markets recorded over-the-year decreases in permits, falling 20 percent and 14.1 percent, respectively. Compared with July, permits in August in Metro Denver rose 9.7 percent with 142 additional permits. The single-family attached market reported the only over-the-month decrease, falling 81.8 percent, while the single-family detached market (+13.3 percent) and the multi-family market (+11.1 percent) increased over-the-month. Residential Building Permits Month of Month of Month of YTD Total YTD Total YTD Total Total Total Aug-16 Jul-16 Aug % Change Single-Family Detached Units 1, ,359 6, % 3,885 12,938 Single-Family Attached Units % Multi-Family Units ,118 4, % 3,005 4,769 Total Units 1,608 1,466 1,503 13,724 11, % 7,199 18,135 Apartment Rental Market Source: U.S. Census Bureau. The Denver Metro Apartment Vacancy and Rent Survey for the second quarter of reported declining vacancy, recording continued tightening in the apartment market. The Metro Denver apartment vacancy rate fell 0.7 percentage points to 5.4 percent from the first quarter of level. However, the vacancy rate was 0.9 percentage points above the prior year. This was the highest second quarter vacancy rate for Metro Denver since the second quarter 2010 when the level was 6.1 percent. Vacancy rates ranged from 4.1 percent in Jefferson County to 7.7 percent in Douglas County. Douglas County reported the largest over-the-year increase, rising 4.3 percentage points, and the only increase over-the-quarter was in Adams County (+1.7 percentage points). Apartment Statistics Quarter 2 Quarter 1 Quarter 2 YTD Average YTD Average YTD Average Annual Average Annual Average % Change Apartment Vacancy Rate 5.4% 6.1% 4.5% 5.8% 4.7% 5.2% 7.0% Average Monthly Rental Rate (all units) $1,371 $1,315 $1,265 $1,343 $1, % $932 $850 Source: Denver Metro Apartment Vacancy and Rent Survey. The average monthly rental rate of apartments in Metro Denver increased during the second quarter of. The second quarter average rental rate in Metro Denver ($1,371) was $56 or 4.2 percent higher than the previous quarter s level. This rate was also 8.4 percent higher than the second quarter of 2015, representing an increase of $106 in average monthly rental rates over-the-year. The average rental rate ranged from $1,299 in Arapahoe County to $1,543 in Douglas County. All six submarkets reported over-the-quarter increases in the average rental rates, ranging from 1.9 percent in Jefferson County to 5.1 percent in Arapahoe County. Adams County recorded the largest increase in the average monthly rental rate between the second quarters of 2015 and, rising 11.6 percent, while Douglas County (+3.7 percent) recorded the smallest increase during the period. Commercial Real Estate Conor Commercial Real Estate and WHI Real Estate Partners L.P. purchased 26-acres of land in Westminster to build 324,000 square feet of industrial space. The companies will build four speculative industrial buildings at West 120th Avenue and Huron Street. The Park 12 Hundred Tech Center will consist of a 172,200-square-foot building, a 35,000- square-foot building, and two 58,500-square-foot buildings. The completed project is expected January Metro Denver Economic Development Corporation October 4, Page 15

17 World Trade Center Denver plans to build a new campus in Denver s River North District, with construction beginning the fourth quarter of In the first phase of development, estimated to cost $175 to $200 million, plans call for about 200,000 square feet of traditional office space and 50,000 square feet of collaborative/co-working space in one building. A second building will consist of a 30,000- to 40,000-square-foot conference center and a 200-room businessfriendly hotel. Zeppelin Development s Taxi project in Denver s River North neighborhood will expand by 140,000 square feet. The company will add $50 million of office space called Flight that already has a primary tenant, Boa Technology Inc., which designs and manufactures a dial closure system for sports footwear. The expansion is expected to be complete in September The Denver Housing Authority plans to build a new 10-story headquarters building near the 10th and Osage light rail station. Shaw Construction will be the project developer and estimated the project would cost $17.67 million. The design calls for 50,888 square feet of office space and a 1,850-square-foot lobby with ground floor retail. The University of Colorado Denver broke ground on a $42.4 million Wellness Center that is being built by Saunders Construction. The 92,000-square-foot center will include student lounges, spaces to study, gaming rooms, and a health clinic. The building will be built on an existing parking lot at the intersection of Speer Boulevard and Auraria Parkway. Office Market The Metro Denver office market reported declines in the vacancy rate and increases in the average lease rate through the third quarter of. According to CoStar, the direct vacancy rate fell 0.6 percentage points over-the-year to 9.2 percent vacancy. The third quarter direct vacancy rate was the lowest third quarter vacancy rate since the third quarter of 2001 when the vacancy rate was 8.6 percent. The average lease rate rose 3.8 percent during the third quarter compared with the previous year s level. The average lease rate gained $0.91 per square foot between the third quarters of 2015 and. Existing square footage in the office market increased 1.9 million square feet in 36 buildings during the same period. There was strong office property construction and projects completed to date during the third quarter of. There was over 980,000 square feet of space completed across 23 buildings through the third quarter of. Completed office buildings during the quarter included the 175,755-square-foot Pearl West office building in Boulder, the 63,000-square-foot Wencel Building in Boulder, and 98,980 square feet of space at the Office at Arista Place in Broomfield. There was over 4.84 million square feet of space under construction during the third quarter of, a 71 percent increase from the prior year. Of this space, over 3.5 million square feet of space was under construction in the City and County of Denver, the largest amount of space of the seven counties at 73 percent of total Metro Denver construction. Office Market Statistics Quarter 3 Quarter 2 Quarter 3 Quarter 3 Quarter 3 Quarter Number of Buildings 6,084 6,074 6,048 6,024 5,999 5,982 Existing Square Feet (millions) Vacant Square Feet (direct, millions) Vacancy Rate (direct) 9.2% 9.1% 9.8% 10.3% 11.2% 12.3% Vacancy Rate (with sublet) 10.0% 9.7% 10.4% 10.8% 11.6% 12.6% Avg. Lease Rate (direct, per sq. foot, full service) $24.99 $25.02 $24.08 $23.04 $21.90 $20.57 New Construction Completed (year-to-date) 0.98 MSF, 0.46 MSF, 1.34 MSF, 0.98 MSF, 0.80 MSF, 0.83 MSF, Currently Under Construction 23 Bldgs 4.84 MSF, 36 Bldgs 10 Bldgs 3.95 MSF, 34 Bldgs 18 Bldgs 2.83 MSF, 29 Bldgs Source: CoStar Realty Information, Inc. MSF=Million Square Feet 18 Bldgs 1.81 MSF, 19 Bldgs 11 Bldgs 1.26 MSF, 17 Bldgs 7 Bldgs 0.95 MSF, 9 Bldgs Metro Denver Economic Development Corporation October 4, Page 16

18 Industrial & Flex Market CoStar Realty data revealed that the industrial market recorded increases in the vacancy rate and the average lease rate during the third quarter of compared with the prior year. The third quarter direct vacancy rate of 3.4 percent was 0.7 percentage points higher than the prior year and 0.1 percentage points above the second quarter of. The average lease rate rose 6.3 percent between the third quarters of 2015 and, adding $0.43 per square foot to the average lease rate. However, there was a 2.8 percent decrease over-the-quarter in the average lease rate. The industrial market added 3 million square feet of rentable space in 24 buildings between the third quarters of 2015 and. There were 19 industrial buildings completed through the third quarter of, including a 101,000-square-foot building at the Highfield Business Park in Douglas County, a 357,560-square-foot warehouse distribution building in Aurora, and 60,000 square feet in two buildings at the Webley Business Park building in Adams County. There were 34 buildings with over 3.8 million square feet of space under construction during the period. Industrial Market Statistics Quarter 3 Quarter 2 Quarter 3 Quarter 3 Quarter 3 Quarter Number of Buildings 6,935 6,928 6,911 6,901 6,877 6,866 Existing Square Feet (millions) Vacant Square Feet (direct, millions) Vacancy Rate (direct) 3.4% 3.3% 2.7% 3.7% 4.5% 5.8% Vacancy Rate (with sublet) 3.7% 3.5% 2.9% 3.9% 4.8% 6.3% Avg. Lease Rate (direct, per square foot, NNN) $7.26 $7.47 $6.83 $5.72 $4.92 $4.65 New Construction Completed (year-to-date) 2.71 MSF, 2.07 MSF, 1.24 MSF, 2.13 MSF, 0.89 MSF, 0.27 MSF, Currently Under Construction 19 Bldgs 3.82 MSF, 34 Bldgs 11 Bldgs 3.46 MSF, 23 Bldgs 4 Bldgs 1.57 MSF, 8 Bldgs Source: CoStar Realty Information, Inc. MSF=Million Square Feet 19 Bldgs 1.77 MSF, 8 Bldgs 4 Bldgs 0.63 MSF, 7 Bldgs 6 Bldgs 0.60 MSF, 7 Bldgs The Metro Denver flex market recorded improvements through the third quarter of the year. The direct vacancy rate for flex space fell 0.2 percentage points to 7.3 percent between the third quarters of 2015 and, the lowest third quarter rate since the data has been collected. The average lease rate rose 1.1 percent over-the-quarter to $10.91 per square foot. The third quarter lease rate was also 6.2 percent higher than the prior year s level and added $0.64 per square foot. There was about 133,650 square feet of new space completed through the third quarter of, consisting of a 35,000- square-foot flex building in Boulder, a 33,500-square-foot flex building in Jefferson County, a 10,190-square-foot flex building in Boulder, and a 54,960-square-foot building in Adams County. There was 355,500 square feet of flex space in seven buildings under construction during the third quarter of the year, including an 83,290-square-foot building at the Prairie Business Center in Boulder and a 110,520-square-foot building at the Corporate Center in Jefferson County. Metro Denver Economic Development Corporation October 4, Page 17

19 Flex Space Statistics Quarter 3 Quarter 2 Quarter 3 Quarter 3 Quarter 3 Quarter Number of Buildings 1,469 1,468 1,462 1,456 1,449 1,444 Existing Square Feet (millions) Vacant Square Feet (direct, millions) Vacancy Rate (direct) 7.3% 7.5% 7.5% 8.2% 11.1% 12.2% Vacancy Rate (with sublet) 7.7% 7.5% 8.7% 9.6% 12.6% 13.5% Avg. Lease Rate (direct, per square foot, NNN) $10.91 $10.79 $10.27 $9.59 $9.20 $8.62 New Construction Completed (year-to-date) 0.13 MSF, 0.10 MSF, 0.33 MSF, 0.37 MSF, 0.10 MSF, 0.12 MSF, Currently Under Construction Retail Market 4 Bldgs 0.36 MSF, 7 Bldgs 3 Bldgs 0.31 MSF, 7 Bldgs 3 Bldgs 0 MSF, 0 Bldgs Source: CoStar Realty Information, Inc. MSF=Million Square Feet 6 Bldgs 0.53 MSF, 6 Bldgs 3 Bldgs 0.07 MSF, 2 Bldgs 2 Bldgs 0.20 MSF, 2 Bldgs The retail market in Metro Denver continued to tighten through the third quarter of. The direct vacancy rate decreased 0.4 percentage points between the third quarters of 2015 and and was 0.1 percentage points below the second quarter level. The third quarter direct vacancy rate was the lowest third quarter level since data records dating back to the third quarter of The average lease rate for retail space decreased 0.6 percent over-the-quarter, but rose 3.8 percent over-the-year, adding $0.60 per square foot over-the-year. The retail market added 1.7 million square feet of rentable space in 102 buildings between the third quarters of 2015 and. Through the third quarter of the year, the Metro Denver retail market completed 63 projects and 25 projects were 10,000 square feet or larger. These 25 projects accounted for over 713,410 square feet of completed space, or about 77 percent of total completed space. The largest project completed was the 136,400-square-foot Sam s Club at the Village at the Peaks in Boulder County. Boulder and Douglas counties recorded the largest amounts of retail space completed through the third quarter, reporting 214,250 square feet and 243,050 square feet of space completed, respectively. There were 59 buildings under construction during the third quarter of, totaling over 1.6 million square feet. Twenty-nine of the buildings under construction were 10,000 square feet or larger, spanning a total of nearly 1.5 million square feet or 90.5 percent of total retail space under construction. Retail Market Statistics Quarter 3 Quarter 2 Quarter 3 Quarter 3 Quarter 3 Quarter Number of Buildings 11,864 11,846 11,762 11,701 11,617 11,529 Existing Square Feet (millions) Vacant Square Feet (direct, millions) Vacancy Rate (direct) 4.6% 4.7% 5.0% 5.4% 6.0% 6.5% Vacancy Rate (with sublet) 4.8% 4.9% 5.1% 5.6% 6.2% 6.7% Avg. Lease Rate (direct, per square foot, NNN) $16.33 $16.43 $15.73 $15.71 $15.34 $14.79 New Construction Completed (year-to-date) 0.93 MSF, 0.64 MSF, 0.54 MSF, 0.36 MSF, 0.98 MSF, 0.25 MSF, Currently Under Construction 63 Bldgs 1.64 MSF, 59 Bldgs 44 Bldgs 1.04 MSF, 45 Bldgs 32 Bldgs 0.99 MSF, 47 Bldgs Source: CoStar Realty Information, Inc. MSF=Million Square Feet 43 Bldgs 0.19 MSF, 16 Bldgs 53 Bldgs 0.42 MSF, 28 Bldgs 22 Bldgs 0.65 MSF, 31 Bldgs Metro Denver Economic Development Corporation October 4, Page 18

20 Monthly/Quarterly Direction Year-Over-Year Direction Year-to-Date Direction Positive Changes 8 of of of , ,900 Nonfarm Employment Employment unchanged from Employment up 3.2% from YTD employment up 3.1% Growth July to Aug. Aug to through Aug. 28% 28% 25% Companies expecting to add Companies expecting to add % Companies Hiring workers rose 3 percentage workers rose 9 percentage YTD average up 3 percentage (Denver Area) points from 3Q to 4Q points from 4Q 2015 to 4Q points compared with 2015 Unemployment Rate Initial Unemployment Insurance Claims Total Retail Sales Mountain Region Consumer Confidence Index Hotel Occupancy DIA Passengers Bloomberg Colorado Index Dow Jones Industrial Average Home Sales (closed) Median Home Price (Denver-Aurora MSA) Foreclosures Residential Building Permits (Total) 3.1% -0.2 percentage points 3.3% Unemployment was down 0.3 percentage points from July to Aug. Unemployment rate down from Aug to Down from 2015 YTD average of 3.9% 3.8% -7.8% -3.3% Claims increased from July to Aug. Claims decreased from Aug to YTD average claims decreased through Aug. -1.1% 1.3% -2.8% Metro sales decreased from Metro sales up from Feb. YTD sales down through Feb. Jan. to Feb to % Index down 3.9% from Aug. to Index down from Sept YTD average down 9.3% Sept. to through Sept. 86.2% 0.9 percentage points 77.1% Decreased 1.5 percentage Occupancy increased from YTD occupancy down 1.7 points from July to Aug. Aug to percent from last year 5.1% 9.1% 7.2% Passengers up from June to July Passengers up from July 2015 YTD passengers increased to through July % 4.5% Index up 1.5% from Aug. to Index down from Sept YTD return through Sept. Sept. to 18, % 5.1% Index down 0.5% from Aug. to Index up from Sept to YTD return through Sept. Sept. 5, % 33,952 Sales down 8.9% from June to Sales down from July 2015 to YTD sales down 4.9% through July July $394, % $381,700 Up 6.9% from 1Q to 2Q Price up from 2Q 2015 to 2Q YTD price 8.9% higher through 2Q % 2,170 Up 30% from July to Aug. Down from Aug to Down 11% YTD through Aug. 1, % 13,724 Permits increased 9.7% from Permits up from Aug to YTD permits up 16% through July to Aug. Aug. Metro Denver Economic Development Corporation October 4, Page 19

21 Apartment Vacancy Rate Office Vacancy Rate (with Sublet) Industrial Vacancy Rate (with Sublet) Retail Space Vacancy Rate (with Sublet) 5.4% 0.9 percentage points 5.8% Vacancy decreased 0.7 YTD average up 1.1 Vacancy increased from 2Q percentage points from 1Q percentage points from last 2015 to 2Q to 2Q year 10.0% -0.4 percentage points -0.4 percentage points Vacancy rate up 0.3 percentage points from 2Q to 3Q 3Q vacancy rate down from 10.4% one year ago 3Q vacancy rate down from 10.4% one year ago 3.7% +0.8 percentage points +0.8 percentage points Vacancy rate up 0.2 percentage points from 2Q to 3Q 3Q vacancy up from 2.9% one year ago 3Q vacancy up from 2.9% one year ago 4.8% -0.3 percentage points -0.3 percentage points Vacancy rate down 0.1 percentage point from 2Q to 3Q 3Q vacancy rate down from 5.1% one year ago 3Q vacancy rate down from 5.1% one year ago Metro Denver Economic Development Corporation October 4, Page 20

22 Economic and Demographic Research Industry Studies Fiscal and Economic Impact Analysis Real Estate Economics West Belleview Avenue Suite 100 Littleton, Colorado