A word of caution on the present boom

Nothing lasts forever.

Dallas Heltzell’s cover story on a wave of hotel construction throughout the Boulder Valley and Northern Colorado — published in this edition of BizWest — is just the latest such package that we’ve published in recent months.

Since July, BizWest has published cover stories on the region’s tight housing market, mall redevelopments, health-care construction and even on a boom in self-storage projects.

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Add in an article on the tight market for industrial real estate in Greeley and dozens of articles on new real estate developments, mergers, acquisitions and expansion, and you get a picture of a region going gangbusters, from Broomfield to Fort Collins, Boulder to Brighton, and every community in between.

And yet, as experts in self-storage told me for an article in October, we know that booms never go on forever. In the case of self-storage, experts predict another three to five years, dependent on trends with in-migration of population, financing and how much new product actually makes it to the market.

The same question looms over hotels, hospitals, office buildings, retail space, industrial projects — you name it. As vacancies decrease, prices increase, and pro formas justify new construction, as long as financing is available. But what happens if too much space is built, and demand drops?

It’s happened before, and it will happen again. Some developers will get a little aggressive. Lenders will get a little too free with funds. Fundamentals will be forgotten. Think Denver in the late 1980s and early 1990s, when skyscrapers such as 1999 Broadway sat largely vacant for years.

Think Boulder and Broomfield with the dot-com bust, when 50 percent of the Interlocken business park sat empty. Think Greeley and Weld County — the harbinger of the housing crisis in 2006 — with national media reporting from lonely neighborhoods in the Tri-Towns, tumbleweeds blowing in the background.

In the words of one self-storage expert: “Just because you can build a project doesn’t mean you should.”

That statement should be in gold plate on the desk of every would-be developer, and should be the last thing read before signing onto a new project.

It doesn’t mean that the current wave of projects — hotels, health-care facilities, office buildings, retail centers, housing and self-storage developments — won’t be successful. But the reality is that a bust follows every boom. And just as few saw the financial/housing crisis coming — or the subsequent Great Recession — fewer still can predict what might precipitate another economic downturn.

So let’s enjoy the current wave of projects. (They do make for fun times gathering news for our daily email blasts.)

But let’s keep an eye on the fundamentals, and remember that not every project should see fruition — even if the money is there.

Christopher Wood can be reached at 303-630-1942, 970-232-3133 or via email at cwood@bizwestmedia.com.