Developers map path to promising post recession future
For real-estate developers, the meteor has struck, the Great Extinction has happened and the survivors are finally getting opportunities to get back to work.
The brightening future and the opportunities it provides were the subject of a panel on Thursday that focused on commercial and residential development. The panel kicked off the Boulder Valley Real Estate Conference, organized by the Boulder County Business Report.
The market crash in 2008 brought on some dark days for the industry, W.W. Reynolds Cos. chief executive Jeff Wingert said, but there are enough positive trends that developers with new projects are moving forward.
“We’ve come out of probably the worst real-estate cycle this country has ever seen,” Wingert said.
Banks now are less stringent with loans, he said, which allows development to go forward. The market is ready, too, with rents for offices hitting pre-recession levels in the Boulder area.
“Right now downtown is the tightest sub-market in the Boulder area, and it’s ready for some new development and redevelopment,” Wingert said.
W.W. Reynolds is planning a major infill project in downtown Boulder at 1301 Walnut St. The 55,000-square-foot, four-story office building will be connected to the Colorado Building. Those plans are still in the entitlement phase.
The residential situation also has improved greatly, as pent-up demand is outstripping supply, said Chuck Bellock, president of Community Development Group.
“We’re having a sustained housing recovery that will influence all of you at some time in the coming months,” Bellock said.
The growth will be pushed east into Erie and cities across Interstate 25, because of growth limits in cities such as Boulder, which have limited the supply of new housing and driven up prices.
“For opportunities, every broker should know: go east,” Bellock said. “You can’t find them here.”
Meritage Homes Inc. bucked that trend when it decided a few years ago to move into the northwest Denver market, Colorado division president Christina Presley said.
Meritage, which is now the third largest developer of new housing in the Denver and northern Colorado region, studied the data closely before investing $38 million in land in the northwest Denver region.
“All signs pointed us to the northwest Denver area,” Presley said.
Sometimes, but rarely, great opportunities fall into a developer’s lap, said Jim Loftus of Loftus Development. An unexpected phone call from a growing grocery chain has restarted a mixed-use project in Louisville that looked doomed, he said.
Loftus had hoped to build apartments in the shopping center formerly occupied by Safeway at the corner of South Boulder Road and Centennial Drive. The project fell apart because of community opposition, but now Alfalfa’s, a Boulder-based grocer, is looking to move in.
“By pure dumb luck, we now have essentially a pre-leased retail project that will be financed,” Loftus said. “We’re going to have our opportunity after all.”
– Michael Davidson
Bright economic spots encourage economist
Continued consumer and business uncertainty and the potential “fiscal cliff” the federal budget faces are key factors driving the economy, according to Tucker Hart Adams, a national economist.
But the residential real estate market continues to be a bright spot both locally and nationally, said Adams, who also is principal at The Adams Group/Summit Economics LLC in Colorado Springs. Adams made her comments in the presentation, “Real World Expectations for Residential Real Estate” on Nov. 15 at the Boulder County Business Report’s Boulder Valley Real Estate Conference and Forecast at the Millennium Harvest House hotel in Boulder.
Continued low mortgage interest rates will continue to drive home sales and resales, Adams said. Prices are rising and the supply of homes for sale is tight, she said.
“It really doesn’t look too bad for residential real estate here in Boulder,” Adams said. “Consumer and business confidence will continue to increase, (and) jobs will continue to grow.”
Turning to the national arena, she predicted the federal government will not be able to reduce the deficit quickly, which could create a possible drag on the economy. As consumers and companies pay down debt and save money, she said, the economy does not get stimulated, either.
“We can’t have everybody saving at the same time,” Adams said. “I believe the government will have to maintain stimulus while businesses continue to deleverage themselves.”
No matter how much economists may study the economy, however, they can’t fix it, Adams said. She reminded listeners that too many homeowners were using their homes “as ATM machines” when the mortgage market fell apart in 2008. Single-family home construction dropped by more than half in recent years, she said, and the industry still is working its way out of that drop.
Now that the presidential election is over, it appears politicians will work together to avoid a potential impending “fiscal cliff” of the federal budget, Adams said. Gross domestic product numbers are being revised upward, she said, and unemployment figures are down, both indicators that things are getting better.
“I’m more optimistic now,” Adams said.
– Beth Potter
Commercial real estate momentum cited
Boulder’s and Broomfield’s commercial real-estate market has had a pretty good year, and looks set to enter 2013 with some momentum, Lynda Gibbons predicted Nov. 15 while giving an overview of the local real-estate picture at the Boulder Valley Real Estate Conference.
Gibbons is president and managing broker of commercial real estate brokerage firm Gibbons-White Inc.
Vacancy rates are down and rents are climbing for office space in Boulder and Broomfield, with rents reaching $30 per square foot in downtown Boulder. The downtown vacancy rate is about 6 percent, Gibbons said.
In the city of Boulder, office rents are $21.50 per square foot with an 8 percent vacancy rate, and the average rent for Boulder County is $20.50 per square foot. In Broomfield, the vacancy rate is 14 percent, and the average rent is $27.50 per square foot.
For flex space in the city of Boulder, the average rent is $10 per square foot, while it’s $9.25 in Boulder County and $9 in Broomfield.
Looking forward, 2013 shows promising signs. Karlin Real Estate is expected to have work under way on its redevelopment of the former Daily Camera building, and W.W. Reynolds Cos. has a major office building planned for 13th and Walnut streets that will be going through the entitlement process.
In the multifamily housing market, growth also is expected to continue. Apartment projects in the planning stages for Gunbarrel and along 28th Street near the University of Colorado are going through the planning process.
One of the few clouds seen this year might have a silver lining, Gibbons said. Phillips 66 recently announced it was not going to build a research and training center in Louisville and put its land up for sale. That was a setback, but with 10 corporate-campus relocations in north Denver taking place in 2012, it might not be on the market for long.
“It wouldn’t be preposterous to assume that gets snapped up pretty quickly,” Gibbons said, adding, “or so we can hope.”
– Michael Davidson
Boulder Valley allure draws national attention
Even during the darkest days of a recession, the Boulder Valley remained a top draw for developers from around the nation.
Gordon “Gordy” Stofer, a director at Houston-based Hines, ticked off the reasons Nov. 15 at the Boulder Valley Real Estate Conference & Forecast.
“Colorado is the fourth-fastest growing state – first for ages 25 to 34,” Stofer said. “It’s the third most educated. It’s No. 2 in infrastructure index — things like FasTracks, museums, convention centers — and it’s the least obese, which means more productivity.”
“Boulder has one of the lowest unemployment rates in the entire country and a very attractive business climate,” added Steve Eaton, vice president of Goff Capital Partners LP, which has roots in Fort Worth, Texas. “It has one of the highest-educated workforces, and the highest number of Ph.Ds per capita.
“I heard one large tech employer in Silicon Valley say he put up a job in Boulder and got 120 resumes.”
Allen Ginsborg, managing director at NewMark Merrill Mountain States, which is redeveloping the struggling Twin Peaks Mall in Longmont, isn’t surprised that the area has weathered the tough years. “In a downturn,” he said, “there’s always a flight to quality.”
The Denver metropolitan area’s northwest quadrant — the part closest to Boulder — has “a very active and healthy lifestyle,” Stofer said, and his company’s Eos at Interlocken development in Broomfield reflects that attitude with such features as charging stations for electric cars, woodwork constructed from beetle-killed mountain conifers, solar panels and a system that gets 35 percent of its power from wind energy. The four-story, 186,000-square-foot building, reportedly the first large-scale speculative office development building in metropolitan Denver in three years, opened in August.
Hines’ new building in lower downtown Denver plays to Colorado strengths as well. “Young urban professionals want to be around light rail, amenities, infrastructure,” Stofer said.
When NewMark Merrill bought Twin Peaks Mall, Ginsborg said, its aim was to keep a sense of community while updating the dated shopping center’s focus.
“Thirty years ago, retail was about commodities,” Ginsborg said. “Now the Internet does that better. Now retail is about selling proprietary products and being service-oriented, relationship-oriented.”
That relationship to the community has led NewMark Merrill to hold three community meetings which drew a total of more than 500 people. Developers asked them what they want at a new Twin Peaks. “That outreach is voluntary,” he said. “None of this is mandated by a code.
“I want people to see this coming,” Ginsborg said. “I want to build excitement as we announce tenants. I want to integrate the project into people’s thinking.
“Longmont is affluent and well-educated like Boulder – but higher on the ‘family’ scale.”
The proximity to Boulder led Goff to focus on aesthetics when planning to redevelop the Campus at Longmont office park it acquired this year. “We knew we were competing with central Boulder, so we want to create a sense of place,” Eaton said.
Campus at Longmont already has drawn an impressive list of tenants, including Micron, Dot Hill and Texas Instruments. Its location in Boulder County helps, Eaton said, and “all of our buildings are near Twin Peaks Mall – so I’m very excited about what NewMark Merrill is doing.
Then, turning to Ginsborg, Eaton added, “Thank you!”
– Dallas Heltzell
Continued residential seller’s market seen in Boulder valley
Homeowners and real estate agents have reason to give thanks this November, and the good news looks set to continue next year, according to a residential real estate forecast presented Nov. 15 by D.B. Wilson, manager of Re/Max of Boulder Inc.
Boulder County is once again a seller’s market, and all trends point to a strong future, Wilson said.
Local data shows prices and the number of sales are up, while time on market is down. Statistics from the Federal Housing Finance Agency also show that home prices are up in the Boulder area and have recovered to pre-recession levels. Nationally, a 1.8 percent increase in home prices from the first to second quarter of 2012 is the biggest quarter-to-quarter increase since 2005, according to the FHFA.
“What’s encouraging about this,” Wilson said, “is that every category is going the way you’d want it to go.”
The median sale price of a single-family detached home in the city of Boulder is $570,000, and the average sale price is $668,000. Both are the highest ever, Wilson said. The median price of $375,000 in Boulder County also is a high, and the average price of $447,000 is the highest since 2007.
Trends point to continued growth.
“I think the market is going to continue to strengthen,” Wilson said.
The only problem is a lack of homes to sell despite the demand. Inventory for single-family homes has dropped to 4.1 months, down from a high around 15 months, and the number of active single-family listings is down 27 percent.
“We actually need inventory. It’s the one concern I have. Buyers are getting frustrated,” Wilson said.
Despite the lack of inventory, buyers seem to have gotten choosier. Some properties stay on the market longer than average, he said, but that is usually because of a miscalculation on the part of the owner and his or her agent.
“Even though there’s very little inventory, you still have to price it right and show it really well,” Wilson said. “The buyers just won’t bite if you don’t.”
Sellers in Boulder County are getting about 97 percent of their listing price, up one percentage point from last year, which is close to the same for the condominium market.
Real-estate agents also should keep in mind the record low interest rate. The National Association of Realtors believes rates could rise by about one point next year. The change would be about a $50a,000 difference for borrowers, Wilson said.
The association also reports very little “shadow inventory” of foreclosed homes owned by banks in Colorado, Wilson said.
– Michael Davidson
Ex-Fed economist downplays impact of ‘fiscal cliff’
Although it’s growing slowly but steadily, the nation’s economy faces a 25 percent chance of slipping back into a recession in the next nine to 18 months, a former Federal Reserve economist said Nov. 15 at the Boulder Valley Real Estate Conference.
Mark Snead, founder and president of economic analysis firm RegionTrack, gave the forecast. Before founding RegionTrack, Snead was vice president and Denver branch executive of the Federal Reserve Bank of Kansas City. His responsibilities included serving as the bank’s regional economist.
Snead is not especially pessimistic about the “fiscal cliff,” which would see the federal government cut spending next year while simultaneously raising taxes unless a deal is cut by the end of this year. Going over the cliff could lead to some ugly GDP numbers, he said, but the data would look worse than conditions really are.
“I really expect this to be a non-issue,” he said.
GDP – Gross domestic product, the standard measure of economic health – is showing minor growth every quarter, Snead said. Digging deeper into the numbers, indicators such as retail sales and the unemployment rate are better, he said, which shows the recovery has traction and in some ways has returned to normal.
“If you looked at this data, you would think we’re looking at very normal conditions,” Snead said.
What hurt, he said, was how bad the drop was in 2008 and 2009, plus the absence of the usual rebound in growth that follows most recessions.
“We just didn’t have that bounce or that surge,” Snead said.
Commercial real estate did not emerge from the recession unscathed, but it could have been much worse, Snead said. In 2009 and 2010, many forecasters were expecting the industry to crash as hard as the residential market.
“Commercial real estate has actually made tremendous progress, and I’d argue it’s off the radar as an area of concern,” Snead said.
Industries such as agriculture, energy and professional services are doing well, as is manufacturing. Telecom, construction, tourism and publishing are not doing as well.
The nation is not out of the woods, though, Snead said, and the threat of a recession is real if not likely.
Problems in Europe or slower growth in China and the rest of the developing world could provide a drag, he said, adding that bad economic policy from Washington also could be a shock.
The conference, held at the Millennium Harvest House Hotel in Boulder, was sponsored by the Boulder County Business Report.
– Michael Davidson
Realtors share tips to get best prices for home sellers
As all real-estate agents know, pricing a home to sell for maximum returns can be an art as well as a science. What they might not know are some of the tips and tricks local Realtors use to get the best prices for their clients.
Steve Altermatt, a top-selling broker associate at Re/Max of Boulder Inc., uses his years of experience in selling homes in south Boulder to crunch a variety of numbers to come up with the best sales price, he said Nov. 15 during the Pricing Strategies panel discussion at the Boulder County Business Report’s Boulder Valley Real Estate Conference and Forecast at the Millennium Harvest House Hotel.
Altermatt’s pricing strategy paid off recently when a colleague sold the south Boulder home he had priced at $569,000 — for $570,000.
“I’m a nuts-and-bolts guy. I’m a geek,” Altermatt said. “So that’s how I go about pricing things.”
How many showings a home gets in a 14-day period also can be a key metric, according to Altermatt and others on the panel.
On the other hand, all properties are different, said Stephanie Iannone, president and managing broker of Housing Helpers in Boulder. For example, Iannone said she has had homes priced close to $1 million that she thinks will sell quickly but don’t, while other listings priced at $300,000 to $400,000 in Erie have done unexpectedly well.
“We start with the comps (houses that have sold recently of comparative value) and look at their individual market,” Iannone said. “I can’t tell you I have mastered the pricing game yet.”
Perhaps more important when pricing a home is to think like the “market maker,” said Joel Ripmaster, founder and president of Colorado Landmark Realtors of Boulder. Realtors also use their knowledge of the home’s location, condition, potential price and potential terms that buyers might be able to access to decide a home’s value, he said.
“Every time you get up to bat with somebody, that house is the most important thing in their lives,” Ripmaster said.
Make sure to understand your seller’s way of understanding information, whether it’s more quantitative – such as number crunching – or more qualitative or emotional, said Sonia Chritton, who works at Fuller Sotheby’s International Realty. If sellers wants to talk about how much time and effort they put into the decor, she said, listen to them.
“It’s where you can help them appreciate approaching it and letting go and moving on,” Chritton said.”
But just as important is making sure homes attract “excited buyers” rather than dealers, by not being overpriced, Chritton said. For investment properties, do the math for potential investors to show them how much they’ll make on their investment, she said.
Perhaps the unexpected stars of the panel were workers from the Boulder County Assessor’s Office, who were sitting in the audience. Lori Freedman, senior residential appraiser, reminded attendees that the assessor’s office decides home values for tax purposes two years in arrears of the actual date. Therefore, assessed values appear to be closer to what homes in the Boulder market are selling for at the moment because the market has been so flat, Freedman said.
All homes will be reassessed in 2013 for tax purposes, Freedman said, calling on real-estate agents to put as much information on sales listings as possible to help the assessor’s office decide value. Internet websites such as Zillow.com are believed to use assessor information, according to those in the industry.
“When you put as much information on the MLS (the industry’s multiple listing service) as you can,” Freedman said, “it’s helping us help the taxpayer, and that’s our goal.”
– Beth Potter
Surviving recession means back to basics for brokers
Honesty, compassion and persistence are all critical to success in a current real-estate market with low inventory and high demand, a panel of home-selling veterans agreed Nov. 15 at the Boulder Valley Real Estate Conference and Forecast.
The brokers also stressed the need for negotiation skills, relationship-building and new technology in the sector.
Sponsored by the Boulder County Business Report, the event was held at the Millennium Harvest House Hotel in Boulder.
“For me, the No. 1 key to success in this business is trust,” said Barb Bashor, a broker at Wright Kingdom Inc. “Our customers have to know that they can trust us to do the right thing by them. There are so many interesting people in this world, and the good news is that they all have to live somewhere.”
Jo Kearney of Metro Brokers-Boulder said consistency in communicating with clients and self-care are both critical to maintaining the energy required to sustain a long career.
“I like being a steady hand in helping guide our buyers and sellers through some pretty stressful times,” Kearney said. “I have always felt that willingness to be of service attracts the opportunity to help people, which contributes directly to success. Consistency is important — that effort to spend years sowing seeds in the community contributes to years of reaping success in the long run. But you have to take care of yourself, and exercise regularly.”
Survival of real-estate agents during a recession concerned Rise Staufer of Staufer Team Real Estate as well. “You need to set expectations as to what your clients can expect from you. That shows a level of respect that marks you as a professional,” she said. “A lot of people didn’t make it through the desert, and those that did are the ones who consistently act like professionals.”
The agents voiced support for younger prospects in the crowd who were being encouraged by their mentors to go into the business. “There is no business out there that will take more out of you,” Kearney said, “but there is also no business that will give more back.”
– Clayton Moore
Cities look inward for room to grow or sites to redevelop
Local cities now are channeling growth inward, as the lack of new land for development is leading to more in-fill redevelopment projects, according to a panel of local government officials.
Planning departments in Longmont, Louisville and Lafayette are placing greater emphasis on revitalizing neighborhoods and redevelopment instead of “greenfield” development.
In Longmont, the change in emphasis comes as it approaches buildout and sees the need to revitalize aging parts of town, said Brad Power, the city’s director of economic development.
“We’re starting to look inward for opportunities in some parts of town that, in some cases, have been passed over for decades,” Power said.
The new owner of Twin Peaks Mall already has plans for an ambitious redevelopment project, and Longmont officials hope whoever buys the vacant Butterball turkey plant will redevelop the site, Power said.
Lafayette has placed emphasis on revitalizing vacant retail space, community development director Phillip Patterson said.
Jax Mercantile and Sprouts have moved into vacant retail spaces, bringing new sales tax revenue to the city, he said. An unconventional redevelopment project has paid dividends too. Flatirons Community Church has redeveloped an ailing shopping center and become a source of vitality for the community.
Lafayette also is rewriting its comprehensive plan with an eye toward helping developers.
“As developers, you need more flexibility about what you can do to accommodate market demands,” Patterson said.
A number of large redevelopment projects are under way in Boulder, and the planning department is the busiest it has been since 2007, said David Driskell, executive director of community planning and sustainability.
“It’s a very active year, and that doesn’t appear to be slowing down in the final months of the year,” he said.
In 2013, the city will focus on creating a plan for the Boulder Civic Area, which is south of downtown. It also wants to address a shortage of affordable housing, Driskell said.
Broomfield is an exception to the shift to redevelopment. The city has land available in Interlocken, on the city’s western edge, on its north side at North Park and along Colorado Highway 7. A number of projects are ongoing or are planned for those areas, acting community development director Dave Shinneman said.
Major residential projects are under way at Interlocken, as the city’s top business park becomes more of a mixed-use development, Shinneman said. Broomfield is in the middle of a boom in apartment buildings, with 2,000 new units approved this year, he said.
— Michael Davidson