patty silverstein at rebarcamp denver

2010 Economic Update for Metro Denver

Picking Up The PiecesPicking Up The Pieces

Metro Denver2010 Economic UpdateJune 2010


Real Gross Domestic Product Growth

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009e 2010f

4.1%

1.1%

1.8%2.5%

3.6%3.1%

2.7%2.1%

0.4%

-2.4%

2.1%

Source: U.S. Bureau of Economic Analysis.


Consumption (70%)

Household spending on goods and services.

Investment (16%)Residential real estate + business spending on software,

equipment, & real estate.

Government Spending (19%)

Goods and services, debt service, transfer payments/social programs.

International Trade (-5%)

Global demand for US goods, US import activity.

“Pieces” of the Economy…Each Affected by Recession


Consumer Activity

Income

Wealth

Prices

Borrowing Costs

Consumer Confidence

Retail Activity

Housing Sales

Savings Rate


Population by County

Denver22%

Arapahoe20%

Jefferson19%

Adams16%

Boulder11%

Douglas10%

Broomfield2%

2009 Population = 2.83 million


Metro Denver Annual Change in Population

Source: Colorado Division of Local Government


Consumer Confidence Index

20

40

60

80

100

120

140

160

Jan

-00

May

-00

Sep

-00

Jan

-01

May

-01

Sep

-01

Jan

-02

May

-02

Sep

-02

Jan

-03

May

-03

Sep

-03

Jan

-04

May

-04

Sep

-04

Jan

-05

May

-05

Sep

-05

Jan

-06

May

-06

Sep

-06

Jan

-07

May

-07

Sep

-07

Jan

-08

May

-08

Sep

-08

Jan

-09

May

-09

Sep

-09

Jan

-10

May

-10

Mountain Region U.S.

Source: The Conference Board.


Unemployment Rates (not seasonally adjusted)

0%

2%

4%

6%

8%

10%

12%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f

4.0%4.7%

5.8%6.0%

5.5% 5.1%4.6% 4.6%

5.8%

9.3%10.1%

2.6%

3.8%

5.9%6.4%

5.8%5.2%

4.4%3.9%

4.9%

7.8%8.6%

United States Metro Denver

Metro Denver Total Labor Force = 1.5 million

Sources: U.S. Bureau of Labor Statistics; CO Dept. of Labor & Employment.


Colorado Personal Income Growth Rate

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009e 2010f

12.5%

6.4%

0.8%1.4%

5.4%6.6%

8.2%

5.7%

3.3%

-2.5%

2.2%

Sources: U.S. Bureau of Economic Analysis.


Dow Jones Industrial Average

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Jan-

00

Jul-

00

Jan-

01

Jul-

01

Jan-

02

Jul-

02

Jan-

03

Jul-

03

Jan-

04

Jul-

04

Jan-

05

Jul-

05

Jan-

06

Jul-

06

Jan-

07

Jul-

07

Jan-

08

Jul-

08

Jan-

09

Jul-

09

Jan-

10

Source: Yahoo! Finance.

2007: 18% of U.S. families have stocks; 53% have retirement accounts


Metro Denver Real Retail Trade Sales Growth Rates

-15%

-12%

-9%

-6%

-3%

0%

3%

6%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f

-3.3% -2.8%

-0.5%

4.5%

1.7%

4.0% 4.4%

-4.8%

-12.0%

0.6%

Source: Colorado Department of Revenue.


Metro Denver Existing Home Sales

25,000

30,000

35,000

40,000

45,000

50,000

55,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f

48,61147,832 47,919 47,966

54,01253,106

50,244 49,789

47,837

42,070

45,900

Source: Metrolist, Inc.


Residential Mortgage Loans in Foreclosure or Delinquent

Sources: Mortgage Bankers Association, National Delinquency Survey


Metro Denver Foreclosures

0

5,000

10,000

15,000

20,000

25,000

30,000

1988 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f

17,122

4,223

6,537

9,42212,250

14,335

18,958

26,52024,799

26,51025,735

Sources: CB Richard Ellis; County Public Trustees.


Median Home Price(in thousands)

$0

$50

$100

$150

$200

$250

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f

$147.3$156.6 $167.6

$180.2$195.2

$219.0 $221.9 $217.9

$196.6

$173.2 $174.7

$196.8

$218.3$228.1

$238.2 $239.1$247.1 $249.5 $245.4

$219.3 $219.9 $222.5


Source: National Association of REALTORS.


Metro Denver Building Permits

0

5,000

10,000

15,000

20,000

25,000

30,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f

Multi-Family Two-Family Single-Family

Source: Home Builders Association of Metropolitan Denver.


Business Activity

Sales Expectations

Profit Expectations

Interest Rates

Other Borrowing Costs

Human Resources

Software, Equipment Purchases

Commercial Real Estate


Nonfarm Job Growth Rates

-6%

-4%

-2%

0%

2%

4%

6%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f

2.2%

0.0%

-1.1%

-0.3%

1.1%1.7% 1.8%

1.1%

-0.6%

-4.3%

-0.3%

4.3%

0.0%

-3.1%

-1.4%

0.8%

1.9% 2.0% 2.2%

1.0%

-4.4%

0.1%


Sources: U.S. Bureau of Labor Statistics; CO Dept. of Labor & Employment.


Metro Denver Net New Jobs

(80,000)

(60,000)

(40,000)

(20,000)

-

20,000

40,000

60,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f

56,300

300

(42,400)

(18,800)

10,700

25,400 27,500 29,800

13,500

(62,700)

1,400

Source: CO Dept. of Labor & Employment.


Key Metro Denver Industry Clusters

Employment 2009 Job Growth

Concentration Rank (50 metros)

Aerospace 19,900 -1.2% 2Aviation 15,700 -1.5% 10Bioscience Pharmaceuticals & Biotechnology 5,600 4.5% 18 Medical Devices & Instruments 9,500 1.6% 6Broadcasting & Telecommunications 41,400 1.7% 4Energy Fossil Fuels 15,800 0.4% 8 Cleantech 16,300 4.6% 7Financial Services Banking & Finance 44,000 -0.3% 4 Investments 23,300 0.3% 7 Insurance 26,700 -5.9% 23IT/Software 42,300 -0.2% 9


Metro Denver Office Vacancy Rates(with sublet)

Existing Square Feet = 163.0 millionCompleted 2009 = 1.6 MSF; Under Construction = 1.2 MSF

Source: CoStar Realty Information, Inc.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f

8.3%

13.2%

16.5% 16.6% 16.3%

14.5%13.8%

12.6%14.0%

14.8% 15.2%


Metro Denver Industrial Vacancy Rates (with sublet)


Existing Square Feet =214.7 millionCompleted 2009 = 0.2 MSF; Under Construction = 0 MSF

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f

5.7%6.3%

7.5%8.3% 8.6%

8.0%

7.0%

6.1%

7.0% 7.0%7.3%


Metro Denver Retail Vacancy Rates(with sublet)

Existing Square Feet = 155.3 millionCompleted 2009 = 2.1 MSF; Under Construction = 0.4 MSF


0%

2%

4%

6%

8%

10%

12%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f

0.8% 1.2%2.1%

5.6% 6.0%6.7%

7.3% 7.3%8.5%

9.2% 9.7%


Government Activity

National Security

Overall Economic Health

Tax Collections

Political Leadership

Fiscal Policy

Monetary Policy/ Interest Rates

Regulatory Reforms


Economic Stimulus Highlights

$787 billion American Recovery & Reinvestment Act (ARRA, February 2009) Tax Relief (37%), State & Local Fiscal Relief (18%), Infrastructure & Science (14%), Protecting the Vulnerable (10%), Health Care (7%), Education & Training (7%), Energy (6%), Other (1%)

$700 billion Emergency Economic Stabilization Act (EESA, October 2008)Created TARP, which led to the Financial Stability Plan, which includes CPP, CBLI, CAP, TALF, AGP, TIP, SSFI, etc.

Federal Reserve maintains 0 – 0.25% target federal funds rate

Other monetary policy actions


U.S. Historic and Projected Budget Deficits by Fiscal Year($bil)

Source: Congressional Budget Office.

-$1,600

-$1,400

-$1,200

-$1,000

-$800

-$600

-$400

-$200

$0

$200

$400

1990 2000 2010 2020


Colorado Budget Concerns

A state and local “budget tsunami” – lower revenues and higher obligations.

More than $2 billion shortfall addressed for FY 2009-2010. Further cuts possible.

Projected shortfall for FY 2010-2011 budget more than $1 billion. Proposed reductions:K-12, higher education funding

Modifications of tax exemptions and credits

Changes in capital construction, public safety and corrections, Medicaid, and other areas


International Activity

Relative Quality, Price of Goods

Value of the Dollar

Financial Markets

Trade Policies

Exports: Sales of U.S. Goods and Services

Imports: Purchases of Foreign Goods and Services


Year-Over-Year Growth in Exports

-30%

-20%

-10%

0%

10%

20%

30%

2000 2003 2006 2009

12.4%

-6.8% -4.9%

4.6%

12.4%10.6%

13.9%11.9% 12.1%

-17.9%

11.2%

-7.1%-9.8%

10.2% 9.4%

1.7%

17.4%

-7.6%

4.9%

-25.1%U.S. Colorado

Source: U.S. Department of Commerce, International Trade Administration.

Key Colorado Trading Partners: Canada, Mexico, China, Japan, GermanyKey Products: Computers and electronics, chemicals, processed foods, machinery


Commercial Real Estate.

Funding a major challenge for maturing loans, new development. Demand for space will be slow to rebound.

Fiscal Health.

Tax revenues down sharply and are likely to lag economic recovery.

Inflation.

Monetary easing, other stimulus policies could fan inflation in coming years. Potential to dampen recovery.

Engine of Growth? Not consumers. What will support and sustain recovery?

Some “Pieces” Still Out of Place…


Consumer Confidence Rebounding.

Confidence still fragile, but improved wealth prospects (homes, stocks) helping.

Residential Real Estate Improving.

Home prices more solid, foreclosures down, sales activity picking up.

Employment Stabilizing.

Pace of job losses slowing, but unemployment will still rise.

Stimulus Dollars Flowing Federal dollars helping to thwart state budget cuts while offering some job

opportunities.

…But Other “Pieces” Starting to Fit


Development Research PartnersDevelopment Research Partners10184 West Belleview Avenue, Suite 10010184 West Belleview Avenue, Suite 100

Littleton, Colorado 80127Littleton, Colorado 80127(303) 991-0070(303) 991-0070

www.DevelopmentResearch.netwww.DevelopmentResearch.net

Patricia Silverstein, PresidentPatricia Silverstein, [email protected]@DevelopmentResearch.net

patty silverstein at rebarcamp denver

Real Estate

msf source

pieces metro denver

population source

exports source

bil source

thousands source

metro denver annual

economic recovery