CEO Roundtable: Boulder economy booms amid housing challenges

BOULDER — Boulder’s burgeoning tech scene seems to get more and more recognition on a national and international scale all the time, making housing and office space tough to come by in the city as its reputation grows. But despite the real estate constraints, local executives don’t see the wave of tech companies trying to locate here slowing down any time soon.

After they’ve been in Silicon Valley, after all, companies and their leaders still view Boulder as a bargain. And Google’s commitment to the city with construction of a 300,000-square-foot campus in the center of town will only attract more startups and tech firms to follow in the giant’s footsteps.

Local business leaders weighed in on the pros and cons of such developments on Wednesday at BizWest’s CEO Roundtable on the local economy. The event was sponsored by accounting firm EKS&H LLLP and the law firm of Berg Hill Greenleaf & Ruscitti LLP.

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“Where Google goes, so goes the rest of the tech industry,” said Shaun Oshman, founder and CEO of local IT support company iSupportU. “So this will not stop, and we just have to figure out how to deal with it.”

Of course, there’s plenty of good to deal with as the tech industry brings high-paying jobs and an entrepreneurial spirit to the area. The local economy stands out even in a state that outpaces the nation for most economic metrics. As a downturn in the oil and gas industry is wreaking havoc on energy companies in the state, noted University of Colorado Boulder economist Richard Wobbekind said Wednesday that it’s the tech industry that is gobbling up and backfilling much of the industrial space being left behind by energy companies.

Wobbekind said more economic growth is forecast for 2016 in almost every industry but oil and gas, with tech one of the major players leading the way.

So the upside is that finding jobs in Boulder should remain relatively easy. The downside is that commutes into town will likely keep getting longer as the availability of housing dwindles.

DB Wilson, manager and broker associate at Re/Max of Boulder, called housing metrics in Boulder and the surrounding area “staggering” in 2015. He noted that at the end of December, there were only 65 attached dwelling listings for sale in all of Boulder County, with 65 percent of those under contract. There were 453 single-family home listings, meanwhile, countywide. More and more people working in Boulder are having to look east, not just to Boulder County towns such as Longmont, Louisville and Lafayette, but also to towns in Weld County such as Frederick and Firestone. He spoke of local agents showing homes even as far away as Highlands Ranch.

Such a tight market is leading to some home sellers receiving several offers. And that, said Peter Schaub, an attorney at Berg Hill Greenleaf & Ruscitti, is causing some home buyers to get lax in their due diligence when buying properties for fear that they’ll miss out if they include too many contingencies with their offers.

“You hear the rumblings of problems down the road (when issues pop up with their homes),” Schaub said. “I hope that’s not the case.”

Wilson said exacerbating the issue of high housing prices in Boulder County is the fact that much of what is being built is high-end rather than being aimed toward the affordable end of the market. The average single-family home price in the city of Boulder in 2015 was just shy of $1 million.

“I think the prices are going to go up fairly significantly,” Wilson said of the county as a whole. “But obviously you have to consider what the product is.”

Housing and energy industry challenges aside, though, most are in agreement that the outlook is pretty rosy for Colorado in general and Boulder County in particular.

Other topics of note Wednesday included:

COMMERCIAL STRENGTH: Commercial real estate vacancy in Boulder remains ultra low, meaning lease rates keep rising almost unchecked. With office lease rates in particular, Gibbons-White Inc. president Lynda Gibbons said she feels like there’s no ceiling on top of the office pricing. She said neither the office nor industrial sides of the market are seeing much resistance to prices rising, a notion with which Jeff Wingert of W.W. Reynolds Cos. concurred.

Industrial space is going away altogether in the city of Boulder, they said, as much of it is converted to tech or flex office uses.

Institutional buyers are also getting increasingly interested in Boulder. “I would say that (for most of her 30 years in real estate) Boulder has been considered a suburban market, which most institutions avoid,” Gibbons said. “But in the last three years, those floodgates opened up, and institutional buyers were willing to consider Boulder as an exception to those rules.”

While there might not be quite as much upward pressure on retail lease rates, there is still plenty of demand, particularly in regional centers such as Twenty Ninth Street in Boulder, which Kim Campbell, senior manager of property management there, said was nearly 100 percent leased. Macerich, owner of Twenty Ninth Street, had to give up its own office space at the shopping area last year so that Zayo could expand its headquarters there without looking elsewhere.

TO GIVE OR NOT TO GIVE: While the good economy might be rolling, Josie Heath, president of The Community Foundation Serving Boulder County, said charitable giving in the area continues to lag. Saying she wasn’t trying to be the “skunk at the garden party,” Heath noted that Colorado is 31st in the nation in charitable giving and that Boulder County is 44th out of 64 counties in the state. A bright spot has been the tech industry, from which the Community Foundation took in nearly $900,000 last year, thanks to companies donating 1 percent of their equity, creating a windfall for The Community Foundation when those companies are sold or go public.

She said one of the reasons for why local individuals aren’t giving, however, is that people don’t see the need in this area, despite the issues many working families face with affordability of Boulder County. “Having a rosy economy is a great thing,” Heath said. “But we also see that this spread between the haves and the have-nots is really growing.”

EDUCATION FUNDING? WHAT FUNDING?: As the economy soars, the University of Colorado continues to deal with an ever-shrinking amount of funding from the state. Vice Chancellor for Strategic Relations Frances Draper said, assuming current trends and projected refunds in coming years due to the states Taxpayer Bill of Rights, that state funding for CU-Boulder is projected to hit zero by 2024. That means a $60 million to $65 million hit to the budget annually for CU, making it more difficult to retain top faculty without raising tuition significantly.

Some, Draper said, have wondered why CU just doesn’t go private. “A, there’s a little constitutional issue there,” Draper said. “B, we’re sitting on state property, and we’re in state buildings.”

QUICK HITS: Susan Moratelli, senior vice president of Sunflower Bank in Boulder, said it’s exciting times to be a banker, but also challenging because of the strict regulatory climate. “I think the banks that are in business now are all very strong, well-capitalized banks, which is a good thing for all of us.” … The region’s balanced economy is driving a nice boom for the hospitality industry, which is seeing a new Embassy Suites and Hilton Garden Inn being built at the corner of 28th Street and Canyon Boulevard in Boulder. High-end properties like that might hurt overall occupancy rates for other local hotels, but could be good for all in Boulder in the long run. “We’re going to feel some decline,” Boulder Convention and Visitors Bureau executive director Mary Ann Mahoney said. “But with this type of property moving in, it gives the other properties permission to raise their rates.” … As for professional services, business is good at EKS&H, Jim Cowgill said. But business clients who have been perhaps overly optimistic about their prospects in recent years are a little more reserved entering 2016. “What we’re seeing this year, is the optimism is a little more realistic.”

Participants in Wednesday’s CEO Roundtable included: Kim Campbell, senior manager/property management, FlatIron Crossing & Twenty Ninth Street; Frances Draper, vice chancellor of strategic relations, University of Colorado Boulder; Lynda Gibbons, president, Gibbons-White Inc.; Josie Heath, president, The Community Foundation Serving Boulder County; Mary Ann Mahoney, executive director, Boulder Convention and Visitors Bureau; Susan Moratelli, senior vice president, Sunflower Bank; Shaun Oshman, founder/CEO, iSupportU; D.B. Wilson, manager/broker associate, Re/Max of Boulder; Jeff Wingert, president, W.W. Reynolds Cos.; Rich Wobbekind, senior associate dean, Leeds School of Business, University of Colorado Boulder; Jim Cowgill, EKS&H; Peter Schaub, Berg Hill Greenleaf Ruscitti. Moderator: Chris Wood, BizWest.