Denver: The Mile-High Market

Nov. 17, 2006
Although the Denver metropolitan area’s economy hasn’t quite reached the heights it scaled in its boom years, construction in the Mile High City remains

Although the Denver metropolitan area’s economy hasn’t quite reached the heights it scaled in its boom years, construction in the Mile High City remains quite strong.

High-end residential construction continues to thrive, but the residential market overall has tailed off. Downtown construction is booming, and there is no shortage of construction projects such as schools, hospitals and other medical facilities, strip malls and retail shopping centers, wastewater treatment facilities and electrical substations. In the high prairies and Rocky Mountain foothills surrounding the Denver metropolitan area, electrical distributors and reps see tremendous growth in the energy market.

“These markets are busier now than they were in the 1970s,” says Daniel Ryall, a manufacturers’ rep with DJ Ryall Electrical Group Inc., Denver. He says refinery expansion and new exploration in natural gas fields, coal bed methane and oil supports the residential and commercial markets.

One long-time Colorado resident says Denver’s growth has been phenomenal.

“It used to be that after you left Thornton just north of Denver on I-25, the transition to farm country was dramatic,” he says. “When you got into Loveland, it was just a little town bucked up against the mountains. But now it’s just one big housing development after another.”

Denver’s sprawling growth makes it tough to define the market’s exact boundaries, but it generally includes most of what’s called the “Front Range,” the eastern slopes of the Rocky Mountains. When Dean Stauffer, owner of QED Inc., Denver, and other Colorado-based industry executives talk about the size of the Denver market, they often include the Front Range from Boulder to Colorado Springs. The Census Bureau defines the Denver/Aurora metropolitan area as including the 10 counties of Adams, Arapahoe, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson and Park. Overall, electrical distributors in the Denver market will sell about $825 million in electrical products this year, according to Herm Isenstein, president, DISC Corp., Orange, Conn.

Although residential building has cooled in the last year, it fueled much of the Denver area’s growth over the past several years. In terms of 2005 building permits, the National Association of Home Builders (NAHB), Washington, D.C., ranked the Denver-Aurora metropolitan statistical area (MSA) as the 17th largest single-family housing market in the nation, with 17,590 building permits issued last year. This year, the region’s 13,350 total building permits (single-family and multi-family) year-to-date through August are down 6 percent over August 2005. The 9,940 single-family building permits year-to-date through August are down 16 percent from August 2005.

Electrical distributors and reps have noticed a decline in some residential product categories, including wiring devices, boxes and coaxial telephone cable. Colorado also has had the highest home foreclosure rate in the country for the first sixth months of the year, according to RealtyTrac, a California firm that tracks foreclosures.

“The total foreclosures in the Denver market on the residential side is like 1,700,” says Bob Casey of Casey Bergquist Inc., a manufacturers’ rep in Northglenn, Colo. “There are over 30,000 homes on the market. So it’s a pretty soft market in Denver on the residential side.”

Ryall says residential construction started to slow about a year ago and is now down about 10 percent. “But don’t let that 10 percent fool you,” he says. “They are still building a lot of homes in Colorado, especially high-end. Growth is down, but again, you have to consider the kind of growth they are comparing the numbers to. In the last three to four years, they have had good double-digit growth.”

Although residential construction has declined, the electrical industry is enjoying strong growth in other market segments. There is no shortage of loft construction in downtown Denver, and several major construction projects are in the works, including the transformation of the 578-acre former Fitzsimons Army Medical Center into one of the largest medical-related development projects in the United States.

Casey of Casey Bergquist says downtown Denver has revitalized since Coors Field opened in 1995. Coors Field, home of the Colorado Rockies baseball team, sparked the redevelopment of a 26-block warehouse district known as LoDo, short for “Lower Downtown.” The Lower Downtown Historic District was formed by an act of the City Council in March 1988. This protection was achieved in part by enacting a zoning ordinance that includes building height limitations and strict design guidelines for rehabilitation and new construction.

“There are more cranes visible downtown now than I can ever remember,” says Ryall with DJ Ryall Electrical Group. “Since the completion of the Convention Center, most of these cranes belong to new downtown loft projects.”

One of the largest residential projects in downtown Denver is the Glass House, the largest residential tower to be built in the city in the past 30 years. Scheduled for completion in early 2007, the condo-tower will have 389 homes with floor-to-ceiling windows offering views of the Front Range, an 8th-story pool overlooking downtown and a 6,500-square-foot health club.

The Regional Transportation District’s $4.7 billion FasTracks Project and Union Station projects have also sparked construction in downtown Denver. FasTracks is a plan to build and operate high-speed rail lines and expand and improve bus service and park-and-ride commuter lots throughout the region.

“You will continue to see even more loft/condo projects built in downtown Denver,” says Ryall. “Surrounding suburbs also continue to grow to support the additional infrastructure needed to support Denver’s growth.”

In the foothills of the Rockies, commercial and industrial construction is solid.

“From Fort Collins to Colorado Springs, including Denver, commercial is still going strong,” says QED’s Dean Stauffer. “It’s the residential business that has dropped significantly.”

Stauffer believes commercial business will continue to be strong and that the residential building cycle will swing up again by the end of 2007.

Ryall agrees and says growth in the residential market always creates demand in the commercial market. “With the large increase in residential markets, it naturally creates demands for supporting infrastructure,” he says.

Growth also continues near Denver’s International Airport. Several new hotels have moved in and several more have announced plans to build. Plus, a $500 million project near the airport encompassing nearly 1,800 acres, 10 million square feet of commercial space and as many as 4,500 residences, according to The Denver Business Journal, has started construction. Known as The Prairie Center development, the “planned community project” will be pumping dollars into Denver’s construction market for years to come. Ryall estimates the project will take 10 years to complete.

Electrical manufacturers’ reps and distributors don’t see any slowdown in Denver construction in the foreseeable future.

“I’m optimistic,” says Casey of Casey Bergquist Inc. “Commercial business is going to be steady, and a lot of what’s going on in the industrial sector is going to hold strong. There are a lot of nice projects that are going to take a while to get done across the Front Range, from the northern part of the state all the way south to the Pueblo area.”