Wobbekind: Northern Colorado most-prosperous part of state

LOVELAND — Rich Wobbekind kicked off the Northern Colorado version of his economic-forecast road tour with a complimentary description of the region’s economy, but also with a caution that the national economy will not grow at the fevered pace of 2018.

Wobbekind, executive director of the Business Research Division at the University of Colorado Boulder’s Leeds School of Business, delivered the keynote address at BizWest’s Economic Forecast 2019 event at the Embassy Suites in Loveland, referring affectionately to Northern Colorado as “the Northern territory.”

“The Northern territory, as you know, is probably the most-prosperous part of the state of Colorado,” Wobbekind said to appreciative murmurs from the sold-out crowd of more than 550.

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But Wobbekind cautioned — as he has at other presentations around the state — that national growth in gross domestic product, which reached 4.2 percent during the second quarter of 2018 and 3.5 percent during the third quarter, likely won’t continue to grow at that pace in 2019.

He pointed to a Colorado consumer-confidence index prepared by the Leeds School that began to weaken a bit beginning late last year.

Nationally, Wobbekind predicts solid income growth and consumption in 2019.

“We expect solid income growth in the next year,” Wobbekind said, along with strong consumer consumption, which he noted accounts for 70 percent of GDP.

“If the consumer is in the game, the economy tends to keep going,” Wobbekind said.

He said that the Federal Reserve has hinted that it might back off or slow down anticipated interest-rate increases, responding to some signs of weakening consumer confidence, low inflation, the partial federal-government shutdown, trade pressures and other factors.

Wobbekind still anticipates strong employment growth, exceeding 2 percent in Colorado this year. He noted that the Greeley metropolitan statistical area — comprised of Weld County — and the Fort Collins-Loveland MSA — comprised of Larimer County — topped the state in employment growth since January 2010.

He said that oil prices, which have dropped in recent months, remain at a level that continue to be viable and profitable for producers. Weld County produces about 90 percent of the state’s oil and about one-third of the state’s natural gas.

Northern Colorado continues to experience faster population growth than the Denver metropolitan area or the state overall, due in part to less-expensive housing and availability of land.

Jobs have been strong in finance, manufacturing, mining, professional and business services and high technology, he said, adding that it’s a plus that Larimer and Weld counties enjoy two different economic bases, with Weld heavy in agriculture, food-processing and energy, and with Larimer heavy in government, high-tech and other sectors.

Nationally, Wobbekind said, “We are going to be very interested in seeing how the December numbers come through,” alluding to the partial government shutdown and declines in the stock market.

Overall, he said, 2019 is likely to be slower in growth than 2018, but still positive. He said that relatively slow growth of the labor force and Baby Boomers exiting the workforce will make it difficult to maintain the growth of 2018.

He said that federal tax cuts “revved the engine and got the car to above 3 percent for the past several quarters,” but the economy will “start to decelerate in 2019.”

Other speakers at the Economic Forecast event included Linda Hoffmann, county manager for Larimer County; Kevin Unger, president and CEO of Poudre Valley Hospital and Medical Center of the Rockies; Matt Vance, director of research and analysis for CBRE; Shawn Osthoff, president of Bank of Colorado; and moderator Paul Bobrowski, dean of the Monfort College of Business at the University of Northern Colorado in Greeley.

Here’s a summary of presentations:

Matt Vance: Vance said the commercial real estate sector continues to enjoy low vacancies and higher lease rates. “The story for office has been very, very strong momentum, which we expect to continue throughout the year,” he said, adding that vacancy rates should continue to decline, leading to higher rental rates.

“Their [tenants’] willingness to pay those rates has also gone up,” he said.

Industrial real estate, Vance said, “has really become the darling of commercial real estate nationally and really globally.”

He said it’s been the No. 1 sector for targeted investment dollars, with vacancies remaining around 4 percent locally.

“That is incredibly tight, and there is just not a lot of space, particularly in the form that lessees have been looking for,” he said.

As for retail, “I call it strong and steady,” he said. “You see nice, steady vacancy rate, around 3 percent.”

He said that although the large amount of retail space under construction is “alarming in some ways,” almost 90 percent of that new construction is pre-leased. He said it bears watching to determine how the additional square footage will affect overall vacancy rates.

Vance noted that multifamily is one area for which he sees some negatives, with thousands of apartment units under construction putting constraints on rental rates.

Shawn Osthoff: Osthoff began his presentation with a rousing endorsement of positive presentations on the overall economy, as well as the real estate sector.

“I just have more good news,” he said. “This is the most positive economic outlook I’ve ever been associated with. It’s an exciting time to be in Northern Colorado.”

Osthoff said that banks overall are recording strong profits, lower charge-offs and past-due accounts, and strong growth in lending activity.

Interest rates have edged up a bit but are “still near all-time lows,” he said.

He also pointed to regulatory reform passed in 2018 that eased some of the Dodd-Frank restrictions on banks.

“It allows us to be more flexible and serve our customers better,” he said.

Osthoff also pointed to a newer dynamic in the banking industry: legalization of industrial-hemp production. The Farm Bill of 2018 legalized hemp, following on pilot easings of restrictions in 2014.

Financing hemp-related ventures is something that Bank of Colorado and other lenders are exploring, he said.

“A lot of banks such as ours are looking at whether that makes sense for them,” he said.

Kevin Unger: Major national organizations are consummating mergers or acquisitions that get them into other areas of health care, Unger noted, mentioning the CVS purchase of Aetna.

“We’re seeing large organizations become larger and kind of getting into each other’s business,” he said.

In Colorado, Unger pointed to potential legislation that might be passed with the inauguration of new Colorado Gov. Jared Polis.

“Here in Colorado, we’re facing some headwinds,” Unger said. “When the governor creates a new office called the Office of Saving People Money on Health Care, you know it’s going to be a rough legislative session for you.”

Unger noted that Polis favors Medicare for all, which could cause tremendous change for the state’s health-care providers. He said a push toward value-based, positive outcomes from health care is good, as is the focus on behavioral health and the opioid epidemic.

Linda Hoffmann: Hoffmann said that Larimer County has adopted a strategic plan promoting three main goals:

• Ensuring that the county has the physical infrastructure to support anticipated growth, including transportation, watershed health and services for rural communities.
• Programs and services to serve a larger population base.
• County-government capacity and efficiency.

She noted that the county’s landfill will run out of capacity in the next few years and that the county also intends to work with other stakeholders to boost housing affordability and a qualified workforce.

One labor-force asset is the number of underemployed persons with disabilities, she said.

She also said that Larimer County suffers from a severe shortage of child care, making it difficult to address the labor shortage.