CEO Roundtable: BV economy will keep growing in 2020, but growth will slow

BOULDER — Boulder County’s economy will continue to grow alongside the national economy, but rising housing costs are putting pressure on cities across the Boulder Valley.

That was the main theme from a group of economic development professionals gathered at BizWest’s Boulder Valley Economic Roundtable Wednesday afternoon.

Rich Wobbekind, executive director of business research at the University of Colorado Leeds School of Business, said while the U.S. economy is expected to slow its gross domestic product growth rate to around 2 percent this year, a recession is unlikely unless an unpredictable “black swan” event shakes consumer confidence.

He doesn’t expect the Wuhan coronavirus outbreak to be that black swan, despite its potential to slow the world’s second largest economy to a near-halt.

At the state level, Colorado has hovered around record-low unemployment rates, forcing employers to compete for a smaller pool of available labor. Wobbekind said Boulder County’s labor participation rate has been among the highest in the country for several months, meaning there simply isn’t enough people to fill the open jobs in the area and across the country.

“This is not a political statement, but sans changing our immigration policies, or at least getting them worked out for both less-skilled and more skilled workers, it’s something we personally really think needs to be addressed for the country as a whole,” he said.

Capping off a year of new big employers

Boulder Economic Council executive director Clif Harald said large technology companies such as Google and Apple have continued to add to their footprints in Boulder, whether through acquiring more commercial real estate or by buying local startups, like Pfizer’s $11 billion acquisition of Array Biopharma over the summer. He expects the mergers and acquisitions figures to keep growing into this year, particularly because of how much liquidity there is in global capital markets.

“There’s no real reason to think that would slow down in 2020 given how much capital there is out there,” he said.

He also mentioned the city’s manufacturers such as Medtronic are doing well, despite a nationwide slump in the manufacturing sector.

Large employers also established themselves further north. Jessica Erickson, CEO of the Longmont Economic Development Partnership, noted the newly opened plants for Smuckers and for drugmaker AveXis currently employ about 650 people after opening in the past few months, and both have space to add square feet and employees.

However, the region’s low unemployment rate combined with the new open jobs is heating up an already competitive atmosphere for workers in the city.

“We do have some manufacturers within our community that are looking at leaving our community because they can’t compete with the wages in the city,” she said. “Walmart has increased its wages because it was losing employees to the new Smuckers facility.”

Competition for employees rising…

Boulder’s technology scene is growing, but has yet to reach the level of cutthroat recruiting seen in Silicon Valley or Austin, Texas, said Creative Alignments CEO Peggy Shell. However, the recruitment firm owner said smaller startups are having to offer benefits like flexible work hours to compete against large tech companies with massive base salaries.

“I had lost two of my recruiters to Google alone, and it was like, ‘Yeah, you should go take that offer,” she said.

Frances Draper, senior advisor for strategic and government relations at CU Boulder, said the university is struggling to hire at the far ends of its needed workforce. That includes janitors, maintenance staff and low-skill workers who struggle to afford Boulder’s cost of living, along with top-tier faculty and administrators who could get better benefits at other major research institutions.

She said it’s an increasingly difficult balancing act to compete with those labor market pressures and keep student tuition and fees low while the university gets only $91.2 million of its $1.89 billion budget from state legislators.

“I would say we’re working on a couple of different pressures at once,” she said.

…and so are CRE prices

Dryden Dunsmore of commercial real estate brokerage Dean Callan & Co. said almost all of the large buildings in Boulder are being taken up by large companies, startups backed with war chests of venture capital money and institutional investors looking to make money as landlords. All of those large-money groups are pushing smaller businesses to relocate out in Longmont, Lafayette and Louisville.

“That’s going to make a significant impact on rates, and it’s only going to be the types of companies like Google, Amazon and Apple that can afford that,” he said.

But there is a silver lining for small companies. Dunsmore said rates for second-floor offices under 5,000 square feet downtown are falling because large firms aren’t looking for spaces of that size.

Harald also said the city’s coworking spaces can also provide cheap and flexible offices for pre-seed stage startups, and that 78 percent of the city’s businesses have fewer than 10 employees and are managing their office costs.

“So it’s not like nobody can afford Boulder if you’re a small business, or you can only afford Boulder if you’re Google,” he said.

Housing costs rising

Todd Gullette, managing broker at Re/Max of Boulder, estimates houses rose in value by about 1 to 1.2 percent last year across the county. That’s driven by demand, as many of the brokerage’s listings so far this year are getting multiple requests for showings.

However, the cost of housing remains the dominant topic of conversation among the county’s real estate agents, particularly in terms of whether or not wages in the city are growing in line with higher home prices. He also believes that’s driving more people to buy homes in the surrounding county, raising prices in those cities.

“I think that’s the ‘drive until you qualify,’ and historically, what people do is they move to Longmont and Broomfield and maybe Superior or Erie,” he said. “They do that when the price is more painful than the commute.”

Jeff Romine, director of economic vitality for the city and county of Broomfield, pointed to recent research from the Federal Reserve Bank of Boston suggesting high costs of housing in major metro areas is slowing job growth.

While he acknowledged the sticker shock factor, Romine said Colorado has an inherent advantage to attract homebuyers that it doesn’t advertise particularly well. 

Between the Taxpayer Bill of Rights and the 1982 Gallagher Amendment to the Colorado Constitution, he said state and local property taxes are far lower in Colorado than they are for comparable properties on the East and West Coast.

“We haven’t been able to figure out how to tell that story to say, yes, it is a million-dollar house in Boulder, but you’re getting a pretty good value and it has different operational costs, per se,” he said.

Chris Barge, vice president of strategic initiatives at the Community Foundation Serving Boulder County, said there have been several unintended consequences to Boulder’s growth trajectory, such as a majority of Boulder residents having to rent instead of own property and growing traffic times.

He cited U.S. Census commuting data, which shows about 80 percent of people who live and work in Boulder County commute into its namesake city for work. That’s backed up by Census estimates showing while cities like Longmont and Erie have grown in recent years, Boulder’s population has been either flat or on a slight decline.

“So it is, live on the east side of the Greenbelt and drive west into Boulder, where there’s still about two jobs for every adult who lives in Boulder,” he said.

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The CEO Roundtable was sponsored by Plante Moran, Berg Hill Greenleaf Ruscitti and Community Banks of Colorado.

© 2020 BizWest Media LLC

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