Policy Watch National. Local

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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-Broomfield 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 Business Insider ranked the nation s top economies and Colorado ranked in first place. The ranking considered eight indicators consisting of unemployment, the number of non-farm payroll jobs, gross domestic product, average wages, the working age population, the value of international exports, housing prices, and auto sales. The company stated that Colorado rated in the top 10 states on five of the indicators and in the top 15 on the three remaining indicators. They also stated that the state s economy is highly diversified with a strong aerospace sector and significant federal investment. The Inc list of the nation s fastest-growing companies for 2014 included 122 Colorado companies, with one in the top 20 and 13 in the top 500. All 14 companies in the top 500 are located in Metro Denver. The top-ranked company was Boulder-based MinuteKey, which ranked 11th with a 2014 revenue level of $15.8 million, a three-year growth rate of 14,588 percent. LED Supply in Lakewood ranked 165th with revenue growth of 2,474 percent, Clean Energy Collective in Boulder was 194th with growth of 2,717 percent, and Tax Guard in Boulder ranked 207th with 2,141 percent revenue growth. Denver also ranked as the 10th best city for fast-growth companies based on the 2014 Inc companies list. Forbes released their list of the most innovative companies in the world and Chipotle Mexican Grill Inc. was the only Colorado company on the list at number 20. The magazine ranked companies based on the difference between their market capitalization and a net present value of cash flows from existing businesses or what Forbes calls the innovation premium. Salesforce.com, a San Francisco-based company, was ranked number one, followed by Alexion Pharmaceuticals (Connecticut) and ARM Holdings (United Kingdom). CBRE Global Research and Consulting released their U.S. Tech-Twenty: Measuring Office Market Impact report, a report that tracks high-tech employment and office market conditions in 20 tech-oriented office markets across the country. The company ranked Denver 11th out of the top 20 U.S. markets for high-tech job growth, with a 13.3 percent increase between 2011 and 2013, and posted a 12.7 percent growth in office rents between the second quarters of 2012 and CBRE spokespersons stated that Denver is predicted to be one of the places where technology s future will take shape. Colorado ranked ninth, tied with Arkansas and Louisiana, in the nation for construction job creation. The Associated General Contractors of America rated the top states for construction job growth. The report stated that Colorado created 7,700 construction jobs between July 2013 and 2014, an increase of 6 percent. Nevada ranked number one, with an additional 7,500 jobs or an increase of 13.4 percent during the same period. College Factual released their list of the top 281 engineering schools in the country, ranking the Colorado School of Mines first. The company considered criteria such as graduate earnings, major focus, accreditation, and overall college quality. According to the report, engineering is the most popular field of study at the Colorado School of Mines and posted the top spot on the ranking because of reasonable tuition and high student outcomes. The Georgia Institute of Technology ranked second and the Missouri University of Science and Technology ranked third. According to a ranking by Best College Reviews, Boulder is the number one college town in the country. The company ranked the top 50 best college towns in the nation based on livability, student-to-resident ratio, cultural offerings, school presence, and large employers. The report stated that Boulder ranked high because of a high walkability score Metro Denver Economic Development Corporation September 3, 2014 Page 1

3 with access to hundreds of miles of bike paths, an outstanding public transit system, and Pearl Street Mall. Boulder was said to have the perfect mix of student life and post graduate livability. Fort Collins ranked 14th on the list. NerdWallet conducted a study on the top 10 up-and-coming cities within Colorado with more than 20,000 residents; seven of the top ten cities were located in Metro Denver. The cities were ranked on factors including job growth, income growth, and population growth. In order from third place to ninth place, the cities were Columbine, Northglenn, Denver, Wheat Ridge, Castle Rock, Littleton, and Aurora. The study found that eight of the cities saw income increase more than 10 percent from 2009 to WalletHub rated the top 300 largest U.S. cities for first-time homebuyers and ranked two Colorado cities in the top 10. Centennial ranked eighth and Thornton ranked ninth in the nation. The ranking considered the affordability of homes and the conditions of the real estate market and community. More specifically, the criteria included the median income, median home values, price-to-rent ratio, crime rates, and relative recession recovery. Longmont, Fort Collins, Arvada, Westminster, Greeley, and Aurora also ranked within the top 35 cities for homebuyers. Movoto Real Estate released a list of the 10 best counties in America, ranking Douglas County second. According to the report, Douglas County recorded the lowest poverty rate (2 percent of families) on the list with the highest high school graduation rate (97.2 percent). The ranking considered indicators such as unemployment rates, median household income, median rent, and median home price. Loudoun County, Va. ranked number one on the list due to a high ranking of median rent and median household income. According to the Time magazine s new book, Healthiest Places to live: Lessons from the Top Spots for Fitness, Denver and Boulder were ranked as the sixth healthiest place to live in the country. The report stated that Colorado ranked first by the Kaiser Family Foundation in 2011 for percentage of adults who participated in moderate or vigorous activity and a 2012 CDC report stated that Colorado has the lowest percentage of obese residents of any state in the nation. Honolulu, Hawaii was ranked first and San Francisco Bay Area, Calif. was ranked second. The online business event management company Cvent Inc. announced their annual ranking of the best cities for business meetings. The company ranked Denver as the 14th best city, one place below the previous year s ranking. The report stated that Denver has 95 meeting hotels, the lowest level of the top 15 cities, with nearly 19,200 sleeping rooms for meetings, the lowest level of rooms in the top 15 except for Miami (18,400 rooms). Denver s advantages for business meetings included a state-of-the-art convention center, central location, and a walkable downtown district with many attractions. According to The Daily Meal, five Denver breweries are among the top 50 in the nation. Oskar Blues Brewery ranked ninth followed by Avery Brewing Company (12th), Epic Brewing Company (16th, which has operations in both Salt Lake City and Denver), Great Divide Brewing Company (18th), and Crooked Stave (32nd). The company considered craft breweries that were nominated by their panel of craft beer experts, breweries that offered a range of great beers rather than a single standout beer, followed by a vote of the public. Policy Watch National Local The Federal National Mortgage Association, known as Fannie Mae, imposed a new rule that will make it more difficult for potential homebuyers who have had a past short sale to purchase a home. The organization announced it would extend the mandated waiting period to qualify for a conventional home loan after a short sale from two years to four years. The rule has exceptions for those who can prove the short sale occurred because of extenuating circumstances such as the result of a lost job or wages, a catastrophic event, or circumstances beyond the borrower s control. The rule was designed to help prevent the events that led up to the Great Recession from happening again. The Centennial City Council announced that the tax exemption for business personal property was increased to $100,000. The tax includes any items that are removable or moveable such as equipment, light fixtures, and furniture. Metro Denver Economic Development Corporation September 3, 2014 Page 2

4 The council stated that the change in policy is to ease financial burdens for existing companies and to attract new businesses into the area. An analyst from the city s finance department stated that the city normally takes in $1.1 million in business personal property tax revenues every year but with the new policy, the city will forgo $220,000 in revenue. It was also stated that 91 percent of the businesses in Centennial would not have to pay the tax next year because of the change. As a comparison, the surrounding communities have tax exemptions of $10,000 to $20,000. Denver s City Council approved a measure that will make changes to the inclusionary housing ordinance starting December 1. The law, which was originally passed in 2002, was designed to attract more low-cost housing by incentivizing the construction of housing units for moderate-income residents. The ordinance requires that 10 percent of the units in apartment complexes with over 30 units be affordable to individuals who make 80 percent of the area s median income. Areas with the highest median for-sale prices will have cash-in-lieu payments of 70 percent of the sales price, while the areas with the lowest median for-sales price will have cash-in-lieu payments of 25 percent of the sales price. Builders are also eligible for cash incentives for building affordable units under the new changes to the law. National Economic Overview The U.S. Bureau of Economic Analysis (BEA) released the second estimate of real gross domestic product (GDP) for the second quarter of The estimate showed that GDP increased at an annual rate of 4.2 percent through the second quarter, up from the second quarter advanced estimate of 4 percent. The second estimate represents a more complete source data than the available data for the advanced estimate. The positive second quarter GDP growth is attributed to increases in personal consumption expenditures, private inventory investment, exports, nonresidential investment, state and local government spending, and residential fixed investment. The upward revision of the second quarter GDP estimate was due to a larger than previously expected increase in nonresidential fixed investment. The third estimate of second quarter 2014 GDP will be released September 26. The July conference of the Federal Open Market Committee (FOMC) reported that economic activity in the second quarter rebounded due to improved labor market conditions and the unemployment rate continuing to decline. The committee stated that there is evidence that labor resources remain significantly underutilized, household spending is starting to increase, the housing market recovery is slow, and that fiscal policy is restraining economic growth but the restraint is beginning to reduce. The report also stated that the committee expects economic activity to expand at a moderate pace with labor market indicators and inflation moving towards the long-term levels consistent with the Federal Reserve s dual mandate. The FOMC did not revise current monetary policy, but will continue to monitor and assess economic indicators for further policy adjustments. The next committee meeting will be held on September 17th. Economic Indexes & Notable Data Releases National & International The U.S. trade deficit fell to $41.5 billion in June, down 7.2 percent from the May deficit of $44.7 billion (revised). Imports decreased to $237.4 billion, falling $2.9 billion between May and June, and exports rose $0.3 billion to $195.9 billion. The over-the-month decline in imports is attributed to decreases in consumer goods ($1.3 billion), automotive vehicles, parts, and engines ($1.1 billion), industrial supplies and materials ($0.5 billion), and capital goods ($0.3 billion). The growth in exports between May and June reflected increases in other goods ($0.5 billion) and foods, feeds, and beverages ($0.3 billion). The Conference Board Leading Economic Index for the U.S. increased through July to 103.3, rising 0.9 percent between June and July. The index growth through July was at a quicker rate than the two previous months, with May and June both reporting growth of 0.6 percent. Economists at the Conference Board reported that though the housing sector has been the weakest component of the economy throughout the year, the sharp increase in building permits helped growth in the index. They also stated that though retail sales were substandard, hiring and industrial activity improved through July. Metro Denver Economic Development Corporation September 3, 2014 Page 3

5 The Institute for Supply Management s Purchasing Managers Index rose 1.8 percentage points to 57.1 percent in July, compared with the June level of 55.3 percent. The July index level marked the 14th consecutive month of expansion, as measured by a value greater than 50. Of the 18 manufacturing industries tracked in the index, 17 industries reported growth in manufacturing. The New Orders Index recorded an increase of 4.5 percentage points over-the-month to 63.4 percent. Survey respondents stated that they are optimistic for the rest of the year and that overall business conditions are good. The Institute for Supply Management s Non-Manufacturing Index increased 2.7 percentage points in July to 58.7 percent, compared with the June level of 56.0 percent. The July index was the highest reading since the beginning of the index in January The index tracks 18 non-manufacturing industries and 16 industries reported growth between June and July. The New Exports Orders Index rose 3.7 percentage points over-the-month to 64.9 percent, reporting the third month of growth. Survey respondents stated their companies are expecting continued growth through the second half of the year and that business was strong through the summer after a weak spring. Local The Leeds Business Confidence Index reported positive expectations for the third quarter of 2014, posting a slight increase from 61 to 61.2 over-the-quarter. The increase in the index marks the 11th consecutive quarter of positive expectations. Survey respondents reported a 1 percentage point increase in capital expenditures and a 0.8 percentage point decline in the state economic outlook. The index reported that the state economic outlook maintained higher positive expectations than the national economic outlook, a 37-quarter trend. According to the 2015 Colorado Manufactures Directory published by Manufacturers News Inc., Colorado manufacturers created 2,191 jobs during the 2014 fiscal year. The increase in manufacturing employment represents a 1.3 percent increase between June 2013 and 2014, marking the fourth consecutive year of manufacturing growth. The national manufacturing levels increased at a rate of 1.1 percent during the same period. The report also stated that Colorado has 6,352 manufacturers employing nearly 213,500 workers, while manufacturers in Denver employ nearly 41,800 workers. Denver s manufacturing employment levels were 1.7 percent higher over-the-year. Food products reported the state s highest employment levels, while the oil and gas industry reported a 17 percent increase in employment. The Colorado Innovation Network released The State of Innovation: Colorado 2014 Report, detailing the state s economic growth in innovation. The report compares Colorado to nine other states through growth in talent, ideas, capital, and entrepreneurship throughout each state. According to the release, Colorado remained a leader in attracting Small Business Innovation Research grants and Small Business Technology Transfer grants for the past five years, but the amount of venture capital investment in Colorado declined between 2012 and The report indicated that although the state has experienced rapid employment growth, Colorado needs to attract more early stage angel and venture capital investment for starts ups in order to remain competitive and foster innovation. The Health Research Institute of PricewaterhouseCoopers released a preliminary analysis of 2015 individual market rates for health insurance premiums. According to the analysis, Colorado could see an average health insurance premium increase of 3.6 percent next year. Some carriers in Colorado reported a 22 percent decline in rates, while one company reported a 35 percent increase. The company also stated that between 1991 and 2009, personal healthcare costs in Colorado rose 7.3 percent. The average premium in Colorado, without a subsidy, is expected to be $411 per month in Labor Force and Employment Employment in Metro Denver increased 3.3 percent between July 2013 and 2014, creating an additional 48,100 jobs during the period. The Denver-Aurora MSA reported an increase of 3.2 percent, creating 41,900 additional jobs, during the same period. Employment in the Boulder MSA rose 3.6 percent in July compared with the previous year, representing 6,200 jobs. The natural resources and construction supersector reported the largest percent increase over-the-year in employment, rising 5.8 percent and adding 5,100 jobs. The professional and business services supersector created 14,100 jobs and Metro Denver Economic Development Corporation September 3, 2014 Page 4

6 increased employment by 5.3 percent during the same period. The increase in employment in the professional and business services sector represented 29 percent of the total over-the-year job growth. Three of the 11 supersectors reported employment declines over-the-year, with the information sector (-2.5 percent) reporting the largest decline, followed by other services (-0.2 percent) and financial activities (-0.1 percent). Colorado employment rose 2.9 percent in July compared with the previous year s level, adding 69,300 new jobs over the same period. National employment levels increased 1.9 percent over-the-year, with the addition of 2.6 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 Jul-14(p) June-14 Jul % Change Total 11-County Metro Denver* 1, , , , , % -4.3% 0.8% Denver-Aurora MSA 1, , , , , % -4.3% 0.8% Boulder-Longmont MSA % -4.7% 0.9% Natural Resources & Construction % -16.3% -0.7% Manufacturing % -10.2% -0.4% Wholesale & Retail Trade % -5.7% -0.1% Transp., Warehousing & Utilities % -6.2% 0.5% Information % -4.5% -5.4% Financial Activities % -4.4% -0.1% Professional & Business Services % -6.2% 3.5% Education & Health Services % 3.0% 3.2% Leisure & Hospitality % -3.4% 2.6% Other Services % -1.8% 1.7% Government % 1.5% -0.2% Federal Gov't % 0.6% -1.6% State Gov't % 4.0% 0.4% Local Gov't % 0.8% 0.0% Colorado 2, , , , , % -4.5% 1.2% United States 138, , , , , % -4.3% 1.1% *Includes the Denver-Aurora-Broomfield MSA (Adams, Arapahoe, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson, and Park Counties) and the Boulder-Longmont MSA (Boulder County). Source: Colorado Department of Labor and Employment, Labor Market Information. (p) =preliminary Metro Denver Industry Cluster Headlines Aerospace DigitalGlobe, a commercial high-resolution Earth observation and advanced geospatial solutions company, launched WorldView-3, an advanced super-spectral, high-resolution commercial satellite. The launch of WorldView-3 will extend the company s commanding technology lead and help their customers see through smoke, look beneath the ocean s surface, and determine the mineral and moisture content of the earth below. It will be the first satellite to provide multiple shortwave infrared bands, for imaging through haze, fog, dust, smoke, and other airborne particles. The satellite is also one of the only to have CAVIS, a cloud, aerosol, water vapor, ice, and snow atmospheric correction instrument. The satellite and CAVIS were built by Ball Aerospace, Exelis built the payload, and United Launch Atlas V, provided by Lockheed Martin Commercial Launch Services, delivered the satellite to orbit. Metro Denver Economic Development Corporation September 3, 2014 Page 5

7 Aviation Bioscience Fossil Fuels United Airlines announced it would extend its lease with Denver International Airport (DIA) through DIA officials stated that the lease agreement would save airlines serving Denver nearly $45 million per year through the airport s debt restructuring, while United will save $35 million. Surefire Medical, Inc., a commercial stage medical device company, will expand its Westminster manufacturing and headquarter operations to a 20,840-square-foot facility. The company will add 39 high-paying jobs to the area over the next five years. The company will make a $3.9 million new capital investment and expects to see a decline in some of their expenses with the expansion. WPX Energy, a Colorado-based natural gas producer, and TRDC LLC, a subsidiary of Houston-based G2X Energy Inc., announced plans to develop jointly WPX Energy s Trail Ridge properties in the Colorado Piceance Basin. TRDC will pay about $40 million in cash for 49 percent working interest in 100 existing and producing wells in the area. TRDC also committed $170 million to assist WPX Energy in paying for drilling in nearly 400 wells in the future. The companies expect that the joint development will boost natural gas drilling on the Western Slope. Financial Services Bank of America announced plans to open three retail branches in Colorado this year. The first full-service branch will open at 100 Fillmore Street in Cherry Creek by the end of the year. The full service branch will offer standard banking services as well as Merrill Lynch financial advisors. There will be two traditional banking branches opening next year, one at 28th and Pearl Streets in Boulder and one at Hepburn Street and North Highlands Ranch Parkway in Highlands Ranch. Healthcare and Wellness Boulder Brands Inc., a health and wellness food company, announced plans to expand the size of its downtown Boulder corporate headquarters, more than doubling the current location by adding 25,000 square feet. The company will move to empty floors of the existing building, expanding the company s footprint from 18,000 square feet to 43,000 square feet. The expansion will allow for an additional 50 employees and an innovation kitchen that will allow for new idea development, quality control, and education and training. Other Business and Employment Headlines Wibby Brewing Company will locate its business to the former Butterball turkey plant in downtown Longmont. The 8,300-square-foot building will be remodeled to include a 2,000-square-foot taproom and an outdoor patio space. The company expects to open by early JobAdder, an Australian-based online platform for recruitment professionals, is relocating its U.S. operations from San Francisco to downtown Denver. The company leased a 9,500-square-foot space located at 1500 Wynkoop Street and has hired 15 staff member, with plans to hire an additional 15 in the next year. Spencer Ogden, a London-based international energy recruitment company, announced the opening of a Denver office located in lower Downtown in October. The company selected Denver as one of three new office locations in the United States and stated the company located here to capitalize on the oil and gas industry boom in the region. Employment Outlook The Manpower Employment Outlook Survey expects third quarter hiring in the Denver-Aurora-Broomfield MSA to grow at a brisk pace. The percentage of companies hiring increased 6 percentage points between the second and third quarter, with Metro Denver Economic Development Corporation September 3, 2014 Page 6

8 26 percent of companies expanding their employment levels. This was the highest percent of companies planning to hire since the fourth quarter of The percentage of companies planning to decrease employment levels rose over-thequarter, increasing 3 percentage points to 8 percent. The majority of companies intend to maintain staff levels through the third quarter of the year, though the level fell 8 percentage points over-the-quarter to 64 percent. The survey reported that sectors with the best job outlooks are construction, goods manufacturing, and information, while financial activities plans to reduce staffing levels. Employment Outlook Survey Quarter 3 Quarter 2 Quarter 3 YTD YTD Ann Avg Denver-Aurora-Broomfield MSA Percent of Companies Hiring 26% 20% 23% 21% 22% 11% Percent of Companies Laying Off 8% 5% 5% 5% 6% 12% Percent of Companies No Change 64% 72% 70% 71% 68% 74% Percent of Companies Unsure 2% 3% 2% 2% 3% 3% United States Percent of Companies Hiring 22% 19% 22% 19% 19% 15% Percent of Companies Laying Off 4% 4% 6% 5% 6% 14% Percent of Companies No Change 71% 73% 70% 72% 72% 68% Percent of Companies Unsure 3% 4% 2% 3% 3% 5% Source: Manpower Inc. Hiring expectations in the U.S. increased slightly through the third quarter of The percentage of employers planning to increase employment levels rose 3 percentage points between the second and third quarter surveys, with 22 percent planning to hire more employees. Companies planning to decrease employment levels was unchanged from the prior quarter but was 2 percentage points lower than the previous year. The percentage of companies planning to maintain staffing levels (71 percent) fell 2 percentage points from the previous quarter but rose 1 percentage point from the prior year. The survey stated that hiring expectations nationwide are strongest in the mining, wholesale and retail trade, and leisure and hospitality sectors. Unemployment Labor Force Statistics (000s, not seasonally adjusted civilian labor force) July YTD Avg 2013 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, % 8.2% 5.8% Adams County % % % 9.4% 6.5% Arapahoe County % % % 8.1% 5.7% Boulder County % % % 6.8% 4.9% Broomfield County % % % 7.7% 5.8% Denver County % % % 9.0% 6.6% Douglas County % % % 6.9% 4.7% Jefferson County % % % 7.9% 5.4% Colorado 2, % 2, % 2, % 8.1% 5.6% United States 157, % 155, % 155, % 9.3% 5.5% Source: Colorado Department of Labor and Employment, Labor Market Information. (p) =preliminary Metro Denver Economic Development Corporation September 3, 2014 Page 7

9 The unemployment rate throughout the seven counties in the Metro Denver area continued to improve between July 2013 and 2014, though levels were mostly unchanged from the prior month. The Metro Denver unemployment rate remained unchanged from the June level of 5.1 percent, but fell 1.4 percentage points over-the-year. Adams County continued to report the largest decline in unemployment over-the-year, falling 1.7 percentage points to 5.7 percent. The City and County of Denver (5.4 percent), Arapahoe County (5.3 percent), and Jefferson County (5.0 percent) also reported unemployment rates above 5 percent. Boulder County reported the lowest unemployment rate of the seven counties, falling 1.1 percentage points between July 2013 and 2014 to 4.3 percent. Colorado reported an unemployment rate of 5.3 percent during the month of July, a 0.1 percentage point decline over-the-month and 1.5 percentage point decline over-the-year. The national unemployment rate increased to 6.5 percent in July compared with June, but the unemployment rate was 1.2 percentage points below the previous year. Weekly First-Time Unemployment Insurance Claims Month of Month of Month of YTD Avg YTD Avg YTD Avg Ann Avg July-14 June-14 July % Change 2009 Metro Denver 1,284 1,197 1,531 1,407 1, % 2,541 Colorado 2,236 2,178 2,725 2,622 3, % 4,752 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. July unemployment insurance claims increased in Metro Denver, rising 7.3 percent between June and July. However, the July level was 16.1 percent lower than the year-ago level. Claims throughout Colorado also reported an over-the-month increase, rising 2.7 percent, but were nearly 18 percent below the previous year s level. Consumer Sector Sentiment & Spending The Consumer Confidence Index for the U.S. rose through August, reporting a level of 92.4 from the revised July level of 90.3, an increase of 2.3 percent over-the-month. The national index for August 2014 was also 13 percent above the August 2013 level. Analysts at The Conference Board stated the Present Situations Index rose to 94.6, while the Expectations Index fell to 90.9 in August. They also reported that the consumer confidence improved but, compared with July, survey respondents were marginally less optimistic about the short-term outlook due to concern about earnings. Colorado is included in the Mountain Region Index and the area reported a decline in consumer confidence. The index fell to 86.1 in August from the July revised level of 91.3, decreasing 5.7 percent over-the-month. The index was also 1.7 percent lower in August 2014 compared with a year prior. Consumer Confidence Index Month of Month of Month of YTD Avg YTD Avg YTD Avg Ann Avg Ann Avg Aug-14 Jul-14 Aug % Change Mountain % United States % Source: The Conference Board. (p) = preliminary National retail sales through July continued to rise compared with the previous year s level, with overall retail sales rising 3.8 percent during the period, but the growth rate was down from the revised June level of 4.1 percent. Motor vehicle sales continued to grow, with a 6.3 percent increase in sales between July 2014 and July The building materials sector reported a 5 percent increase over-the-year, down 1.5 percentage points from the June revised growth of 6.5 percent. Gasoline sales declined in July 2014 compared with the previous year, recording a 0.8 percent decrease in sales, but sales were 0.1 percent higher in July than June. Core retail sales, which excludes motor vehicle, building material, and gasoline sales, reported a slight increase of 0.1 percent in July compared with June. Metro Denver Economic Development Corporation September 3, 2014 Page 8

10 Despite a slower rate of growth in national retail sales through July, the National Retail Federation (NRF) remains optimistic about retail sales growth through the end of the year. According to the NRF, the slower rate of growth in retail sales was attributed to a lack of spending on items such as furniture, home furnishings, and electronics. NRF spokespersons stated that they believe the economy and consumers are heading in the right direction due to continued stability in positive income, employment, and consumer confidence. They also stated that consumers are displaying behavior consistent with choosing to make purchases based on wants and needs. Total Retail Sales ($000s) Month of Month of Month of YTD Total YTD Total YTD Total Annual Growth Annual Growth Mar-14 Feb-14 Mar % Change Total Metro Denver 9,724,475 7,220,531 9,207,980 24,207,313 23,368, % -11.6% 7.4% Adams County 2,005,432 1,599,795 1,791,948 5,237,718 4,871, % -17.4% 11.7% Arapahoe County 1,952,806 1,395,151 1,916,378 4,709,746 4,702, % -8.2% 2.6% Boulder County 956, , ,657 2,204,950 2,148, % -9.1% 2.1% Broomfield County 217, , , , , % -8.3% 49.4% Denver County 2,341,788 1,782,197 2,238,003 5,972,889 5,779, % -13.5% 8.1% Douglas County 726, , ,194 1,868,201 1,787, % -5.7% 16.9% Jefferson County 1,523,775 1,108,249 1,448,994 3,704,965 3,593, % -10.5% 3.8% Colorado 16,359,258 12,112,998 15,114,846 40,582,393 38,417, % -12.2% 7.8% Source: Colorado Department of Revenue. Metro Denver retail sales increased through March 2014, reporting a strong recovery from slow retail sales growth in the beginning of the first quarter. Metro Denver retail sales increased 5.6 percent over-the-year, with total retail sales reaching $9.7 billion in March. Each of the seven Metro Denver counties reported over-the-year increases as well as over-the-month growth. The largest increase in retail sales between March 2013 and 2014 was in Adams County, where sales rose 11.9 percent to $2 billion. Boulder County and the City and County of Broomfield reported the greatest over-the-month increases in sales, rising 53 percent and 50 percent, respectively. The remaining five counties each reported over-themonth growth greater than 25 percent from February to March. Retail sales in Colorado were 8.2 percent higher in March 2014 than March According to the U.S. Bureau of Labor Statistics, the U.S. Consumer Price Index (CPI) was roughly unchanged between June and July, with no change in both the core which excludes food and energy costs and the overall CPI measures. Both the overall CPI and the core CPI reported over-the-year growth in prices, rising 2 percent and 1.9 percent, respectively. The Denver-Boulder-Greeley CPI level was released for the first six months of the year reporting strong growth in prices. Comparing the first half of 2013 with the first half of 2014, prices rose at a rate of 2.9 percent, the highest inflation rate for the first six months of the year since 2011 (3.8 percent). According to the AAA Daily Fuel Gauge Report, the national average fuel price for August decreased 2.2 percent from July to $3.43 per gallon. The August average fuel price was 4.5 percent lower than the prior year s level ($3.59 per gallon). Metro Denver reported a 1 percent increase in the average fuel price between July and August. The average fuel price of $3.61 per gallon for August in Metro Denver was $0.18 higher than the national average. The area reported average fuel prices 2.4 percent higher in August 2014 than the previous year s level. Stock Market With expectations for the busiest Labor Day weekend since 2008, the stock market ended August with positive investment. Three of the four stock market indexes reported rising trends through August compared with July. The Bloomberg Colorado index reported the only over-the-month decrease, falling 1 percent to The NASDAQ (4,580.3) reported the largest increase over-the-month, rising 4.8 percentage points. The S&P 500 and the DJIA reported increases in August compared with July, rising 3.8 percent and 3.2 percent, respectively. All four indexes reported levels for August 2014 that were higher than the August 2013 levels. Metro Denver Economic Development Corporation September 3, 2014 Page 9

11 Stock Market Indexes Month of Month of Month of YTD Return YTD Return Ann Avg Return Ann Avg Return Aug-14 Jul-14 Aug Bloomberg Colorado % 13.3% 46.2% 17.7% S&P 500 2, , , % 14.5% 23.5% 9.0% NASDAQ 4, , , % 18.9% 43.9% 8.6% DJIA (Dow Jones) 17, , , % 13.0% 18.8% 3.1% Travel & Tourism Sources: Bloomberg.com; Yahoo! Finance. The average hotel occupancy rate in Metro Denver rose 2.8 percentage points to 89.2 percent occupancy in July compared with the June level. The July level was 4.6 percentage points higher than the previous year. The average room rate for July was $ per night, 0.7 percent lower than the June level but 12 percent higher over-the-year. Metro Denver Hotel Statistics Month of Month of Month of YTD Avg YTD Avg YTD Avg Annual Annual Jul-14 Jun-14 Jul % Change Percent of Hotel Rooms Occupied 89.2% 86.4% 84.6% 76.6% 70.5% 8.7% 59.0% 61.9% Average Hotel Room Rate $ $ $ $ $ % $ $84.42 Source: Rocky Mountain Lodging Report. Spokespeople for Denver International Airport (DIA) reported that 5.1 million passengers passed through the airport in July, increasing 4.9 percent from the 4.8 million passengers in June. The July 2014 level was 2.2 percent higher than the July 2013 level, recording an additional 109,155 passengers through the airport. 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-14 Jun-14 Jul % Change ,068,232 4,830,401 4,959,077 31,004,575 30,355, % 50,167,485 42,275,913 Source: Denver International Airport, Traffic Statistics. The Denver Tech Center will soon include 408 garden-style apartments, located at 7573 East Technology Way. The multi-million dollar development, called Pearl, is being constructed by Carmel Partners directly adjacent to Interstates 25 and 225 and is about a half mile from the Belleview Light Rail Station. Amenities at the development will include a clubhouse, fitness center, pool, and a putting green. The company expects the first units to be available in December. Property developer Taylor Morrison began work on Willowcroft Manor in Columbine Valley. The development will include 41 luxury ranch-style homes, with three finished homes expected by the end of the year. The company will offer four different floor plans ranging from 2,100 to 2,800 square feet and include 2-4 bedrooms, enhanced elevations, three-car garages, and optional finished basements. A 231-unit apartment complex is being constructed in Gunbarrel, an unincorporated neighborhood in Boulder County. The complex is called Apex 5510, located at 5510 Spine Road, and will be developed by a partnership between Crossbeam Concierge LLC and Trammell Crow Residential. The complex amenities will include a pet Paw Spa, Bark Park, storage units, a community garden, fitness center, lounge, and a resort style pool. The first finished apartments are expected in October. Metro Denver Economic Development Corporation September 3, 2014 Page 10

12 The 4400 block of Morrison Road in Denver will be the new location of 185 apartment units, replacing two of the Westwood neighborhoods trailer parks. Residents of the Belmont and Shady Nook mobile home parks will vacate the property in the next 30 days. The new development will serve as affordable housing due to a $2 million loan from the city s federal Community Development Block Grants. In order to qualify for the housing, homebuyers must make 60 percent or less of the area s median income. The completed property is expected in late Home Resales The National Association of Realtors (NAR) released the July analysis of U.S. existing-home sales, reporting that sales rose 2.4 percent between June and July to 5.15 million homes sold annually. July home sales increased at the highest pace of the year but were 4.3 percent below the July 2013 level of 5.38 million sales. The housing inventory continued to rise through July with a 3.5 percent increase over-the-month and 5.8 percent higher over-the-year, representing a 5.5-month supply of homes for sale. NAR economists stated that homebuyers are growing more confident in the market and expect that trend to continue as interest rates remain low and apartment rents continue to increase. They also noted that the affordability of housing is expected to decline in the coming years as mortgage rates increase because of changes to monetary policy. Existing home sales in Metro Denver declined between June and July, falling 3.4 percent to 5,431 total homes sold during the month of July. The July home sales were 5.6 percent lower in 2014 compared with the previous year. Unsold homes on the market were 0.8 percent higher in July 2014 than June but they were still 52.2 percent lower than the previous year s inventory level. The existing home inventory levels have reported over-the-year declines since June The average sales price for single-family attached homes fell 0.8 percent between June and July to $223,977 but was 11.2 percent higher than the previous year s price. The average sales price of single-family detached homes ($379,385) increased 0.4 percent overthe-month and 7.4 percent over-the-year. Previously-Owned Home Sales Activity Month of Month of Month of YTD Total YTD Total YTD Total Ann Total Jul-14 Jun-14 Jul % Change 2009 Home Sales (Closed) 5,431 5,621 5,751 33,083 31, % 39,892 Unsold Homes on Market 8,416 8,353 17,619 8,416 17, % 26,884 Average Sales Price (Single Family Attached) $223,977 $225,680 $201,340 $222,092 $194, % $160,199 Average Sales Price (Single Family Detached) $379,385 $377,708 $353,167 $361,979 $347, % $266,968 Median Sales Price (Single Family Attached) $186,900 $182,750 $164,900 $136,000 Median Sales Price (Single Family Detached) $316,250 $315,000 $291,950 $220,000 Home Prices Source: Metrolist, Inc. NAR data shows the July median existing-home sales price across the U.S. was $222,900, an over-the-year increase of 4.9 percent. Median housing prices increased over-the-year across the nation s four regions through July. The West median home price of $304,100 was 6.3 percent higher in July 2014 than July The South ($192,000) and the Midwest ($175,200) also reported over-the-year growth in prices, rising 5 percent and 4.1 percent, respectively. Compared with the previous year, the Northeast reported a 2.4 percent increase in the median home price to $273,600. Median Sales Price of Existing Single-Family Homes ($000s) Quarter 2 Quarter 1 Quarter 2 YTD Avg YTD Avg YTD Avg Median Median 2014 (p) 2014 (r) % Change Boulder MSA $448.8 $418.7 $431.2 $433.8 $ % $345.5 $325.3 Denver-Aurora MSA $316.3 $288.4 $286.5 $302.4 $ % $219.9 $239.1 United States $212.4 $191.6 $203.4 $201.8 $ % $172.1 $195.2 Source: National Association of REALTORS. (p) =preliminary (r) =revised A separate NAR report revealed that median home prices throughout the Metro Denver area were strong during the second quarter of the year. The Boulder MSA reported a 7.2 percent increase ($448,800) in home prices between the first Metro Denver Economic Development Corporation September 3, 2014 Page 11

13 quarter of 2014 and the second quarter of Boulder home prices were also 4.1 percent higher than the second quarter of The Denver-Aurora MSA reported significant increases in home prices, reporting a 9.7 percent rise in prices overthe-quarter to $316,300. Between the second quarter of 2013 and 2014, the Denver-Aurora MSA recorded a 10.4 percent increase in the median sales price. The national median sales price rose nearly 11 percent over-the-quarter to $212,400 and was 4.4 percent higher than the previous year s level. Of the 173 MSAs included in the second quarter 2014 report, the Boulder MSA reported the seventh highest annual median price and the Denver-Aurora MSA median price was 18th highest. According to the S&P/Case-Shiller home price index, Denver housing prices continued to rise through June compared with May. The Denver index rose 1.2 percent to , an absolute increase of 1.81 points, recording the sixth largest over-the-month increase of the 20 cities. For the third consecutive month, all 20 cities tracked by the index reported over-the-month increases as well as over-the-year increases in their indexes. Denver s home prices in June 2014 were 7.7 percent higher than the prior year s level. Las Vegas (+15.2 percent) reported the largest over-the-year increase, while New York City (+1.6 percent) reported the largest over-the-month increase. The national home price index rose 6.2 percent between June 2013 and Analysts with the company stated that home price gains have decreased since fall 2013 and for the first time since February 2008 all cities reported lower gains than the previous month. They also stated that a more normal housing sector is emerging with other housing indicators being positive, such as housing starts, existing home sales, and builder sentiment. Foreclosures Housing foreclosures throughout the Metro Denver area continued to decline in each of the seven counties between July 2013 and Metro Denver recorded a 40.7 percent decrease in foreclosures in July compared with the previous year and was 5.4 percent lower than the previous month. The City and County of Denver reported the largest decrease in foreclosures over-the-year, falling 61.3 percent. The City and County of Broomfield reported the lowest number of total foreclosures in July with three foreclosures, followed by Boulder County with 15 foreclosures. Adams County and Arapahoe County were the only counties to report an increase in foreclosures between June and July, rising 23.6 percent and 8.3 percent, respectively. Real Estate Foreclosures Month of Month of Month of YTD Total YTD Total YTD Total Annual Total Annual Total Jul-14 Jun-14 Jul % Change Total Metro Denver* ,444 5, % 26,509 12,311 Adams County , % 5,646 2,499 Arapahoe County , % 6,233 3,125 Boulder County % 1, Broomfield County % Denver County , % 6,141 3,351 Douglas County % 2, Jefferson County % 4,027 1,880 *The total number of election and demand setups (initial filings) received by county public trustees. Filings may be subsequently cured or withdrawn. Sources: Colorado Division of Housing and county public trustees. RealtyTrac released the July foreclosure report, stating the U.S. foreclosure rate decreased 2 percent between June and July. The total filings for July (109,434) were also 16 percent below the July 2013 level. The over-the-year decline of 16 Metro Denver Economic Development Corporation September 3, 2014 Page 12

14 percent was exactly half of the annual decrease reported the previous year. According to the report, 49,624 properties began the foreclosure process, while 51,595 properties nationwide were scheduled for foreclosure auction. The report also stated that five of the nation s 20 largest metropolitan areas reported over-the-year increases in foreclosures including Houston, Texas (+ 66 percent) and Washington, DC (+24 percent). Of the 212 MSAs in the July report, 69 reported increases in foreclosures and 143 reported decreases compared with the year-ago levels. New Homes The Census Bureau report on new home sales after adjustment for seasonal trends stated that national home sales in July fell to 412,000 annual sales from the revised June level of 422,000 annual sales. The July homes sales level was 2.4 percent lower than June but was 12.3 percent above the previous year s level. The South was the only region to record an over-the-month increase in sales, rising 8.1 percent. The Northeast reported the largest over-the-month decrease in sales, falling nearly 31 percent to 18,000 sales. The West and the Midwest also reported significant declines between June and July, decreasing 15.2 percent and 8.8 percent, respectively. With 253,000 total sales, the South reported the only increase in sales between July 2013 and 2014, rising 33.2 percent. The Northeast (-43.8 percent), the West (-3.3 percent), and the Midwest (-1.9 percent) all posted decreases in sales over-the-year. The National Association of Homebuilders (NAHB)/Wells Fargo Housing Market Index rose 2 points to 55 in August from the July level of 53, the highest level since January. NAHB spokespersons reported that homebuilders are reporting significant increases in the number of serious homebuyers entering the market, but they still face tight credit conditions for borrowers and shortages of finished lots and labor. The report stated that growth in the index was attributed to sustained job growth, low mortgage rates, and affordable home prices. Every region reported a growth in their three-month moving average Housing Market Index score in August. The western region reported a four-point increase to 56. According to the Census Bureau, the seasonally adjusted annual number of nationwide residential building permits increased in July (1,052,000 permits), rising 8.1 percent from June, and were 7.7 percent higher than the prior year. The increase in permits is attributed to growth in multi-family units (382,000 permits), reporting a 23.6 percent increase in total permits between June and July. The multi-family permits were also 15.4 percent above the previous year s level. Singlefamily detached permits nationwide rose 0.9 percent between June and July and were nearly 4 percent higher than July Single-family attached units were unchanged from the previous month and the previous year. The Northeast reported the largest increase in permits over-the-month, rising 18.8 percent to 120,000 permits. The Midwest reported the largest over-the-year growth, with permits increasing 17 percent, but was the only region to report an over-the-month decline. The South (+8.6 percent) and the West (+0.8 percent) recorded over-the-year increases in permits as well. Residential building permits for the Metro Denver area continued to report positive market trends through the end of July compared with the prior year. Metro Denver reported a 73.5 percent increase in total permits issued between July 2013 and 2014, with an additional 829 permits issued. Single-family detached permits rose nearly 20 percent over-the-year, while single-family attached permits fell 7.4 percent with 15 fewer permits. The total permit growth was attributed to a significant rise in multi-family permits, rising percent and reporting 711 additional permits in July 2014 compared with July Compared with June 2014, permits though July in Metro Denver rose 10.8 percent with 190 additional permits. All three residential markets reported increases in permits over-the-month, with multi-family reporting the largest increase (+14.4 percent). Metro Denver Economic Development Corporation September 3, 2014 Page 13

15 Residential Building Permits Month of Month of Month of YTD Total YTD Total YTD Total Total Total Jul-14 Jun-14 Jul % Change Single-Family Detached Units ,684 4, % 2,397 14,260 Single-Family Attached Units , % 601 4,843 Multi-Family Units ,817 1, % 438 2,681 Total Units 1,957 1,767 1,128 10,878 6, % 3,436 21,784 Apartment Rental Market Source: Home Builders Association of Metro Denver. The Denver Metro Apartment Vacancy and Rent Survey for the second quarter of 2014 reported the second consecutive quarter of decreasing vacancy rates. The Metro Denver apartment vacancy rate fell 0.4 percentage points from the first quarter level, as declines in three of the six submarkets contributed to the over-the-quarter decline. The Boulder/Broomfield submarket reported the largest decline in vacancy between the first quarter and the second quarter, falling 2.3 percentage points to 4.4 percent vacancy. The City and County of Denver also reported a significant decline in the vacancy rate, decreasing 1.2 percentage points to 5.6 percent, while Adams County reported a 0.2 percentage point decline to 4.5 percent. Jefferson County (3.7 percent), Douglas County (3.8 percent), and Arapahoe County (4.6 percent) reported slight increases in the vacancy rate during the same period. Every county reported higher vacancy rates in the second quarter of 2014 compared with the previous year, with the exception of Jefferson County reporting no change. Apartment Statistics Quarter 2 Quarter 1 Quarter 2 YTD Average YTD Average YTD Average Annual Average Annual Average % Change Apartment Vacancy Rate 4.7% 5.1% 4.2% 4.9% 4.4% 8.1% 9.7% Average Monthly Rental Rate (all units) $1,117 $1,074 $1,022 $1,095 $1, % $877 $817 Source: Denver Metro Apartment Vacancy and Rent Survey. While vacancy rates reported mixed trends, the average rental rate of apartments in Metro Denver reported an all-time high. The second quarter average rental rate in Metro Denver ($1,117) was 4.1 percent higher than the previous quarter s level. This rate was also 9.3 percent higher than the second quarter of 2013, marking the 17th consecutive quarter of overthe-year gains. All seven counties reported average rental rates above $1,000 during the second quarter and the average second quarter rental rates in the six submarkets ranged from $1,024 in Adams County to $1,351 in Douglas County. The City and County of Denver (+9.8 percent), Jefferson County (+9.7 percent), and Adams County (+9.6 percent) reported the largest increases in rental rates between the second quarters of 2013 and Commercial Real Estate Hansel Phelps Construction Company announced plans for three new construction projects as well as an expansion of at least 12 employees in their Denver office. The company acquired an adjacent building and plans to expand the existing Denver location by 1,200 square feet. The company will also begin construction in the fourth quarter of 2014 on two Denver Health projects, a 250,000-square-foot administration building and a clinic facility. Hansel Phelps is the contractor for the 1801 Wewatta Street development, which includes 100,000 square feet of office space and a 150- room hotel. Located in downtown Denver, the Z Block development on Wazee Street will include a 170-room hotel by Sage Hospitality along with 30,000 square feet of retail and restaurant space and 200,000 square feet of commercial space. The development will include a 400-car garage next to the hotel, connection to RTD s MetroRide shuttle and light rail station, while the hotel will be the closest hotel to Coors Field. The completed project is expected in fall of Metro Denver Economic Development Corporation September 3, 2014 Page 14

16 The Enterprise Business Center in Stapleton will be expanded by United Properties Colorado LLC. The company announced plans to expand the existing building by 466,000 square feet for 1.2 million square feet of total space in the area. United Properties Colorado stated that 96 percent of the existing space is pre-leased or committed to and new tenants are already expressing interest in the expanded space. The completed building is expected in April A 12,500-square-foot warehouse building originally built in 1932 will be redeveloped by River North Investment Company. The company broke ground on Backyard on Blake, a development that will include a restaurant with patio seating, retail space, and office space. The building will surround a park and courtyard that will be open to the public. Office Market According to the second quarter analysis of the office market by Cassidy Turley, economic growth and population expansion are driving up demand for products and services, leading to positive effects on commercial real estate. The office market continues to see declines in the vacancy rates, falling 0.1 percentage point over-the-quarter to 11.4 percent, while rental rates rose $0.38 per square foot to $22.75 per square foot. The office market reported an additional 861,100 square feet of completed office space during the second quarter, up from the first quarter level of 55,700 square feet. The report also stated that new construction in the office market rose 20 percent and that speculative development is being increasingly considered by developers. The CBRE Denver Office Market Overview for the second quarter of 2014 stated that the office market construction picked up through the quarter to 2.6 million square feet under construction, which was the highest level of construction since During the quarter, CoBank broke ground on a new 276,000-square-foot Class A build-to-suit building and AMG Bank broke ground on a 45,000-square-foot Class A build-to-suit structure. Investment sales activity reached $1.2 billion year-to-date, a 57.6 percent increase in year-to-date transactions compared with the same time in The Metro Denver office market reported a slight decrease in the vacancy rate and an increase in the average lease rate through the second quarter of According to CoStar, the direct vacancy rate fell 0.2 percentage points to 10.8 percent vacancy. The 2014 direct vacancy rate was the lowest second quarter vacancy rate since the second quarter of 2001 when the vacancy rate was 8.3 percent. The average lease rate rose 4.3 percent during the second quarter compared with the previous year s level. The average lease rate gained $0.93 per square foot between the second quarters of 2013 and Office Market Statistics Quarter 2 Quarter 1 Quarter 2 Quarter 2 Quarter 2 Quarter Number of Buildings 5,939 5,928 5,914 5,898 5,886 5,865 Existing Square Feet (millions) Vacant Square Feet (direct, millions) Vacancy Rate (direct) 10.8% 11.0% 11.6% 12.1% 13.0% 13.3% Vacancy Rate (with sublet) 11.2% 11.5% 12.0% 12.5% 13.5% 14.1% Avg. Lease Rate (direct, per sq. ft, full service) $22.38 $22.04 $21.45 $20.16 $19.87 $20.22 New Construction Completed (year-to-date) 0.31 MSF, 0.08 MSF, 0.49 MSF, 0.35 MSF, 0.45 MSF, 0.73 MSF, Currently Under Construction 12 Bldgs 1.73 MSF, 21 Bldgs 4 Bldgs 2.00 MSF, 21 Bldgs 8 Bldgs 0.79 MSF, 10 Bldgs Source: CoStar Realty Information, Inc. MSF=Million Square Feet 4 Bldgs 1.30 MSF, 9 Bldgs 9 Bldgs 0.71 MSF, 8 Bldgs 4 Bldgs 0.73 MSF, 14 Bldgs Office property construction remained brisk through the second quarter but projects completed to date were slightly below prior years. There was 1.7 million square feet of space under construction through the second quarter of 2014, a 119 percent increase from the prior year. There was 310,000 square feet of space completed as of mid-2014, which was lower than this same time during the past four years. The largest office project completed so far this year was the 106,000- square-foot One Union Station building at 16th and Wynkoop streets. Metro Denver Economic Development Corporation September 3, 2014 Page 15

17 Industrial & Flex Market The Industrial Market Snapshot released by Cassidy Turley for the second quarter of the year reported that the industrial market has reached unprecedented levels with historically low vacancy rates and the highest asking prices ever recorded. The company expects that this trend will continue as supply remains constricted, as most new construction is pre-leased. The second quarter reported significant investment property sales such as the sale of the former Exabyte headquarters in Boulder and five buildings totaling 130,847 square feet at the Ball Aerospace Campus in Boulder. According to an analysis by CBRE, the industrial market continued to report steady growth through the second quarter of The market reported 1 million square feet of net absorption, mostly due to the fully leased Enterprise Business Center 3, which is a Class A warehouse. With demand for industrial space on the rise, there was an increase in build-tosuit and build-to-own property through the quarter and speculative development has increased over the past few quarters. The Southeast and Airport/Montbello submarkets reported the most speculative construction during the second quarter, with the largest under construction project of the quarter being the Mile High Business Center 3 in Airport/Montbello. CoStar Realty data showed that the industrial market improved significantly during the second quarter of The data showed that with record low vacancy rates, construction picked up considerably in order to keep up with pent up demand for industrial space. The second quarter direct vacancy rate fell 0.2 percentage points to 3.4 percent compared with the first quarter and was 1.7 percentage points lower than the second quarter of The average lease rate rose 6.7 percent between the first and second quarter of 2014, adding $0.35 per square foot to the average lease rate. There was also a 16.1 percent increase over-the-year in the average lease rate. There was nearly 1.2 million square feet of industrial space competed through the second quarter of the year, the highest level since the second quarter of Much of the completed construction about 44 percent was in the City and County of Denver, including two buildings in the Enterprise Business Center at Stapleton. There was also 1.3 million square feet of space under construction during the period, including three buildings that are over 255,000 square feet each. Industrial Market Statistics Quarter 2 Quarter 1 Quarter 2 Quarter 2 Quarter 2 Quarter Number of Buildings 6,916 6,906 6,895 6,885 6,875 6,869 Existing Square Feet (millions) Vacant Square Feet (direct, millions) Vacancy Rate (direct) 3.4% 3.6% 5.1% 6.1% 6.6% 6.2% Vacancy Rate (with sublet) 3.7% 3.9% 5.4% 6.6% 7.2% 6.9% Avg. Lease Rate (direct, per square foot, NNN) $5.61 $5.26 $4.83 $4.59 $4.63 $4.76 New Construction Completed (year-to-date) 1.18 MSF, 0.10 MSF, 0.88 MSF, 0.06 MSF, 0.08 MSF, 0.07 MSF, Currently Under Construction 13 Bldgs 1.31 MSF, 9 Bldgs 4 Bldgs 2.22 MSF, 17 Bldgs 3 Bldgs 0.17 MSF, 4 Bldgs Source: CoStar Realty Information, Inc. MSF=Million Square Feet 3 Bldgs 0.50 MSF, 6 Bldgs 2 Bldgs 0.24 MSF, 4 Bldgs 3 Bldgs 0 MSF, 0 Bldgs The Metro Denver flex market reported modest progress through the second quarter of the year. The direct vacancy rate for flex space declined 0.3 percentage points to 9.4 percent between the first and second quarters of 2014, the lowest rate since the fourth quarter of The average lease rate increased 2 percent over-the-quarter to $9.72 per square foot. The second quarter average lease rate was also 6 percent higher than the previous year and added $0.55 per square foot during the period. The flex market reported 360,000 square feet of new space was completed through the end of the second quarter and 420,000 square feet of space remains under construction. Metro Denver Economic Development Corporation September 3, 2014 Page 16

18 Flex Space Statistics Quarter 2 Quarter 1 Quarter 2 Quarter 2 Quarter 2 Quarter Number of Buildings 1,458 1,452 1,449 1,445 1,444 1,440 Existing Square Feet (millions) Vacant Square Feet (direct, millions) Vacancy Rate (direct) 9.4% 9.7% 12.3% 12.6% 13.4% 14.2% Vacancy Rate (with sublet) 10.8% 11.1% 13.7% 13.9% 14.7% 15.6% Avg. Lease Rate (direct, per square foot, NNN) $9.72 $9.53 $9.17 $8.87 $8.90 $9.28 New Construction Completed (year-to-date) 0.36 MSF, 0.07 MSF, 0.07 MSF, 0.00 MSF, 0 MSF, 0 MSF, Currently Under Construction Retail Market 5 Bldgs 0.42 MSF, 6 Bldgs 2 Bldgs 0.45 MSF, 7 Bldgs 2 Bldgs 0.10 MSF, 3 Bldgs Source: CoStar Realty Information, Inc. MSF=Million Square Feet 1 Bldgs 0.20 MSF, 2 Bldgs 0 Bldgs 0 MSF, 1 Bldgs 0 Bldgs 0.02 MSF, 1 Bldgs The retail market analysis by Cassidy Turley for the second quarter of the year reported that the market continued to strengthen. The retail market reported positive net absorption of 232,668 square feet, which occurred largely in the West/Southwest markets. The Cherry Creek/Colorado Boulevard submarkets reported the tightest vacancy rates in the area. The report stated that the market growth was attributed to big box retailers, grocery stores, and restaurants. Many of the current construction projects are residential units with ground floor retail space, which will account for the population shift to urban areas allowing consumers to walk to shopping areas. CBRE released their analysis of the retail market in Metro Denver and reported that the retail market posted increased lease rates and positive net absorption during the second quarter of The company reported that fitness centers and grocery stores drove absorption levels, with the expansion of national chains and specialty grocers in the area. Much of the quarter s new construction was expansion of existing centers and new retail in urban areas. The retail market in Metro Denver reported mixed trends through the second quarter of The direct vacancy rate increased 0.1 percentage points between the first and second quarter of 2014, but it was 0.5 percentage points below the second quarter 2013 level. The average lease rate for retail space increased slightly, rising 0.1 percent over-the-quarter and adding $0.02 per square foot. Compared with the second quarter of 2013, the average lease rate was 1.5 percent higher in the second quarter of 2014 and added $0.23 per square foot to the lease rate. Most of the retail spaces completed have been relatively small projects. Of the 32 buildings completed so far in 2014, 28 of them are smaller than 15,000 square feet, with an average size of 5,900 square feet. About 38 percent of the 320,000 square feet of retail space completed so far this year was located in Adams County. An additional 580,000 square feet of retail space was under construction during the second quarter, including three spaces that are 96,000 square feet or larger. Metro Denver Economic Development Corporation September 3, 2014 Page 17

19 Retail Market Statistics Quarter 2 Quarter 1 Quarter 2 Quarter 2 Quarter 2 Quarter Number of Buildings 11,400 11,375 11,321 11,246 11,205 11,171 Existing Square Feet (millions) Vacant Square Feet (direct, millions) Vacancy Rate (direct) 5.8% 5.7% 6.3% 6.9% 7.3% 7.9% Vacancy Rate (with sublet) 5.9% 6.0% 6.5% 7.1% 7.6% 8.2% Avg. Lease Rate (direct, per square foot, NNN) $15.35 $15.33 $15.12 $14.56 $14.61 $15.26 New Construction Completed (year-to-date) 0.32 MSF, 0.13 MSF, 0.69 MSF, 0.09 MSF, 0.51 MSF, 0.32 MSF, Currently Under Construction 32 Bldgs 0.58 MSF, 23 Bldgs 20 Bldgs 0.60 MSF, 19 Bldgs 39 Bldgs 0.35 MSF, 16 Bldgs Source: CoStar Realty Information, Inc. MSF=Million Square Feet 15 Bldgs 0.67 MSF, 27 Bldgs 8 Bldgs 0.44 MSF, 7 Bldgs 11 Bldgs 0.17 MSF, 6 Bldgs Metro Denver Economic Development Corporation September 3, 2014 Page 18

20 Monthly/Quarterly Direction Annual Direction Positive Changes 13 of of 18 Nonfarm Employment ,300 Growth Employment was up 0.0% from June to July YTD employment up 2.9% through July 26% 21% % Companies Hiring Companies expecting to add workers YTD average down 1 percentage point (Denver Area) increased from 2Q 2014 to 3Q 2014 compared with % 5.6% Unemployment Rate Unemployment was unchanged from June to July Down from 2013 YTD average of 6.8% 7.3% -11.6% Initial Unemployment YTD average claims decreased 11.6% through Insurance Claims Claims increased from June to July July 2014 Total Retail Sales 34.7% 3.6% Metro sales increased from Feb. to Mar. YTD sales up through Mar Mountain Region Consumer Confidence Index Index down 5.7% from July to Aug. YTD average up 17.9% through Aug % 76.6% Hotel Occupancy Increased 2.8 percentage points from June to July YTD occupancy up 8.7% DIA Passengers 4.9% 2.1% Passengers increased from June to July YTD passengers increased through July 2014 Bloomberg Colorado Index % Index down 1% from July to Aug. YTD Return through Aug Dow Jones Industrial 17, % Average Index increased 3.2% from July to Aug. YTD Return through Aug Home Sales (closed) 5,431 33,083 Sales down 3.4% from June to July YTD sales up 6.5% through July 2014 Median Home Price $316,300 $302,400 (Denver-Aurora MSA) Up 7.2% from 1Q 2014 to 2Q 2014 YTD price 10.4% higher through 2Q 2014 Foreclosures 423 3,444 Down 5.4% from June to July Down 40.7% YTD through July 2014 Residential Building Permits 1,957 10,878 (Total) Permits increased 10.8% from June to July YTD permits up 64% through July % 4.9% Apartment Vacancy Rate Vacancy decreased 0.4 percentage points from 1Q 2014 to 2Q 2014 YTD average up 0.5 percentage points through 2Q % -0.8 percentage points Office Vacancy Rate (with Vacancy rate down 0.3 percentage points 2Q 2014 vacancy rate down from 12% one Sublet) from 1Q 2014 to 2Q 2014 year ago 3.7% -1.7 percentage points Industrial Vacancy Rate Vacancy rate down 0.2 percentage points 2Q 2014 vacancy rate down from 5.4% one (with Sublet) from 1Q 2014 to 2Q 2014 year ago Retail Space Vacancy Rate (with Sublet) 5.9% -0.6 percentage points Vacancy rate down 0.1 percentage point from 1Q 2014 to 2Q Q 2014 vacancy rate down from 6.5% one year ago Metro Denver Economic Development Corporation September 3, 2014 Page 19

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