Industry outlook

Whether it’s tech, natural foods, real estate, cannabis, beer or banking, experts project optimism for 2022. Some industries are hot, hot, hot.

Banking

Unlike in 2008, the rocky economic period that has defined the past two years was not led nor exacerbated by the banking and finance sector. 

In fact, the industry, including major players in the Boulder-area market, is healthier than ever in many respects as the calendar turns to 2022. 

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Despite the pandemic and economic downturn, banks are in a better cash position than they’ve been in 30 years — a position no bank thought was possible a year ago when they were shoring up their loan loss reserves in anticipation of a huge wave of pandemic-related loan defaults that didn’t materialize.

“Banks entered the COVID-19 pandemic with unprecedented strength and capital levels,” according to University of Colorado economists. “Industry experts say the fact that banks showed profits in this environment is proof of U.S. banks’ paramount strength and resiliency.”

Over the past year, the Boulder Valley and Northern Colorado banking sector has seen the opening of a handful of new branch locations, as well as the entry of new national players into the market. 

High Plains Bank opened a second Longmont branch in November, while Boulder-headquartered Premier Members Credit Union set up shop over the summer in Pueblo and Thornton, while Elevations Credit Union, also based in Boulder, expanded its presence in Fort Collins.

InBankshares Corp. (OTCQX: INBC) and its wholly owned subsidiary InBank also broke into the Boulder market in the summer of 2021.

Around the same time, PNC Financial Services Group Inc. (NYSE: PNC) took over BBVA USA Bancshares Inc., resulting in the rebranding of local branches in Boulder, Fort Collins, Greeley, Lafayette, Longmont, Loveland and Westminster.

Mergers and acquisition activity, along with expansion by existing banks into new growth areas, is expected to continue into 2022.

On the finance side of the sector, 2021 will likely be remembered as the year that SPACs exploded.

The region has become a hub of special purpose acquisition companies and their acquisition targets and that reputation is likely to continue into 2022 and beyond. 

Boulder biotech company SomaLogic Inc. (Nasdaq: SLGC) went public in September after merging with a SPAC and Loveland-based Lightning eMotors Inc. (NYSE: ZEV) merged with a SPAC in May and is now trading on the New York Stock Exchange.

SPAC Crucible Acquisition Corp. is led by Boulder investor and Foundry Group founder Brad Feld, who is planning to launch two additional SPACs.

Los-Angeles-based venture capital fund The Gores Group has already launched a Boulder-based SPAC and is planning another, while Boulder equity fund Aravaipa Ventures has formed a pre-SPAC company called Aravaipa Growth Equity Fund II. 

Whether the “SPAC attack” continues into 2022 and beyond is dependent on the value the model ultimately provides to investors and the merger parties.

“It’s going to be highly dependent on the returns that we see,” University of Colorado Leeds School of Business professor Andrea Pawliczek told BizWest late last year. “As we start getting more longer-term returns from some of the SPACs that went public in 2020 and seeing how these merged companies are performing a year or two years after the merger, that may dictate the direction” of the SPAC trend. 

The slowing rebound of the economy and the ongoing supply-chain crunch have created some uncertainty for the banking and finance sectors as the new year dawns. 

“Will we be lacking in forward economic momentum heading into 2022? Continued supply chain disruptions remain a threat to businesses large and small, impacting profitability and, in the extreme, can impact businesses’ ability to service their loans — the latter of which is a concern of banks,” according to CU economists. 

— Lucas High

Brewing

Despite increases in packaged beverage and draught sales, breweries in Northern Colorado and the Boulder Valley faced a tough 2021 through supply-chain constraints and labor shortages — two trends that are likely to continue into 2022.

In addition to the shortage of cans, new and expanding breweries also had to contend with a lack of construction materials. And the shortage of labor affected not just breweries, but also their suppliers and distributors, leaving them at times unable to fulfill their deliveries.

2021 also saw changes to local brewing icons, as Boulder Beer closed and sold its taproom, whereas Longmont’s Left Hand Brewing Co. opened a new beer garden and announced plans to expand into Denver. New Belgium Brewing Co. responded to the pandemic by discontinuing 11 packaged beers in order to put focus on the best sellers.

Atlanta-based Sweetwater Brewing Co. made its first foray into Colorado by purchasing Fort Collins’ Red Truck Brewing Co. Sweetwater’s production facility will produce up to 80,000 barrels per year. 

Anheuser-Busch invested $18.2 million to upgrade its Fort Collins facility. 

Nationwide, the Brewers Association anticipates that craft-beer production in 2022 will exceed pre-pandemic levels, but that sales of draught beer will likely continue to lag behind packaged beverages.

— Tommy Wood

Cannabis

Colorado, and especially parts of Northern Colorado and the Boulder Valley, are synonymous with a handful of things: a laid-back culture, great public universities, groundbreaking craft breweries, gorgeous mountain views and outdoor activities, and, of course, weed. 

Local residents have long been cannabis pioneers and since recreational legalization in 2014, area pot businesses have emerged as industry leaders as the sector has expanded beyond traditional products and into new cannabinoid compounds and ancillary services.

“Three-fifths of overall marijuana sales in Colorado occurred in five counties,” according to University of Colorado economists, with Boulder County coming in fourth and accounting for 6.3% of total state sales, which have increased during the COVID-19 pandemic.

In October 2021, the most recent monthly data available from the Colorado Department of Revenue, Boulder County recreational dispensaries sold more than $11 million worth of product. That’s up from the pre-pandemic October 2019 total of about $8.6 million.

In Larimer County, recreational sales totaled more than $9.6 million in October.

“Cannabis companies continue to expand and build new manufacturing facilities in the state due to the increasing popularity and consumption of cannabis, which continues to increase at double-digit rates,” a University of Colorado economic outlook report said. 

But as Boulder County-born companies look to expand, their gaze often falls outside of the county toward areas with more options for affordable commercial real estate. 

CBD product maker Charlotte’s Web Holdings Inc. (TSX: CWEB) (OTCQX: CWBHF) moved its headquarters out of Boulder County to Denver in 2021.

Canopy Growth Corp. (TSX: WEED, Nasdaq: CGC), an Ontario, Canada-based cannabis brand umbrella company, inked an agreement with Boulder’s Wana Brands in 2021 to acquire the pot gummies maker for nearly $300 million. While some in the space worried that the deal would lead to a relocation, company officials told BizWest that it is committed to its Boulder roots. 

Relocation is less of a concern in Northern Colorado, where real estate tends to be less expensive.

In fact, Greeley, which lacks a legal marijuana market but has plenty of industrial space, has emerged as a hotspot for CBD extraction.  

As the cannabis market matures and new cannabinoid profiles are discovered, consumers are becoming more sophisticated, according to Boulder-based cannabis market intelligence and research company BDS Analytics Inc.

“Going forward, we expect … cannabinoid ratios, terpene profiles, and beyond to replace strain and indica/sativa labeling,” the company said in its 2022 market predictions report. “A host of new products have already begun to see success in mature markets. For example, in the edible category with the rise of CBN-infused products targeted as sleep aids, CBD products targeted toward consumers seeking anxiety relief and relaxation, and other less common cannabinoids such as CBG and THCv working their way into the product mix.”

Additionally, BDSA expects 2021 trends to include increasing popularity of vape products and reliance on brand recognition, along with greater price differentiation among producers. 

— Lucas High

Commercial real estate

Commercial real estate in the Boulder Valley and Northern Colorado markets was characterized in 2021 by two words: institutional money. And, in the Boulder Valley especially, life-sciences companies took record amounts of space.

But don’t call them “trends.”

“I’m not sure we could use the word ‘trend’ just because of how fluid everything is,” said Becky Gamble, president of Boulder-based commercial brokerage Dean Callan & Co.

Gamble noted that she had about three weeks to prepare a recent presentation for a meeting of the Boulder Economic Council.

“What I had prepared three weeks prior to last week was just different in the evolving workforce,” she said.

Nonetheless, institutional money remains a major factor in the area’s commercial real estate, characterized by a year-end transaction that saw Denver-based West Hampden Investors LLC pay $42.9 million for 20 buildings in the Prospect East Business Park in Fort Collins.

Boulder has seen a wave of deals, including Google’s purchase of The Reve office space for almost $100 million.

“What we certainly saw in 2021 was an incredible amount of capital, institutional capital that is pouring into our state and pouring into Boulder County like never before,” she said. “I do anticipate that that will continue in 2022. We will see some of the largest transactions ever to occur, I think, on the investment side.”

And life-science companies should continue to be a factor in the local market, whether it’s startup companies taking space, existing companies expanding or larger national or global companies opening local operations.

“That segment of the market is super hot right now, and I fully anticipate that that will still be the case in 2022,” Gamble said.

As to office space, that’s where the changing workforce — and COVID — become factors.

Gamble said that as the fourth quarter of 2021 began, “It started to look good, and people were going to go back to the office, and activity started to happen again, but then we got a new variant, and everybody kind of retreated and put things on hold.”

Some companies extended leases or put new leases on hold as new COVID variants emerged.

“I think, 2022, a lot of companies will be forced to actually do something,” she said. “We will see activity,” depending on new variants and whether COVID gets under control.

But, even though life-sciences and some big tech companies absorbed space, holes remain in the office market, including space available for sublease.

Retail space has performed better than anticipated, with COVID-related shutdowns and a shift of some buying activity to online retailers.

“Retail, I think was a little of a surprise for everybody,” Gamble said. “It was a pleasant surprise. I can’t tell you why, I really can’t.”

— Lucas High

Health care

For the health care industry in the Boulder Valley and Northern Colorado, 2021 was much the same as 2020. The COVID-19 pandemic continued to be an issue, exacerbating a labor shortage in nursing and health care. Employees at many hospitals and other providers had to work extreme hours, and employers had to institute measures such as just-in-time training to deal with turnover.

“Everyone is having to figure out, how do we manage [on an ongoing basis],” Isaac Sendros, CEO of Louisville’s Avista Adventist Hospital, said in an interview with BizWest. “I think, COVID, long-term, it’s going to be just one of the things we treat, where I think for six months, it was the main thing we treated as an industry.”

Avista sustained significant smoke damage in the Marshall Fire and will remain closed for the foreseeable future.

Employee overworking also remains an issue. According to the 2022 Colorado Economic Business Outlook by the Leeds School of Business at the University of Colorado Boulder, 93% of clinicians in the state are dealing with burnout and trauma, and 39% are considering leaving the industry.

Despite all this, research, development and manufacturing in the medical sector continues to grow. Medical-device giant Medtronic is building a 400,000-square-foot campus in Lafayette. And the University of Northern Colorado is moving forward with an osteopathic medical school at its Greeley campus.

— Tommy Wood

Natural and organic products

Whether there’s a pandemic or a healthy outlook, a recession or an economic boom, the Boulder Valley and Northern Colorado, were and will continue to be a mecca of the natural and organic products industry.

This is especially true for the area in and around Boulder. 

The sector “in Colorado contributes $3.1 billion to the state’s economy and supports 22,142 jobs,” according to University of Colorado economists. “Many leaders in the natural and organic products industry nationwide got their start in Boulder, and the area remains an international hub for the industry.”

The COVID-19 pandemic, now nearing its third year, has been a rollercoaster ride for many in the industry as consumers hoarded goods in advance of store closures before eventually venturing out and resuming many of their prior shopping habits.

Naturally Boulder executive director Bill Capsalis told BizWest that “the frenzied pantry loading we saw as the pandemic kicked off in 2020 subsided in 2021 as everyone started to get vaccinated. [Understanding] how the disease spreads opened up the consumers to in-store shopping experiences. Recent estimates indicated that approximately 73% of all food being purchased was being purchased at retail [locations]. Many brands have also pivoted to an increased omni-channel approach — selling through retail, online grocery and direct to consumers.”

The supply-chain crunch in 2021 has served as a minor crisis for many sectors, natural and organic products included. 

As availability of ingredients and materials has decreased, prices have increased and local companies have found it more difficult to live up to their reputations as sustainability-conscious environmental stewards. 

But the supply-chain has loosened somewhat in late 2021 and “the state of the industry as we go into 2022 [is] cautiously optimistic — with a definite leaning toward optimism,” Capsalis said. 

Locally, the past couple of years have been tough on area natural and organic grocers. Alfalfa’s shut down its Boulder, Longmont and Louisville locations in 2021 as the natural grocer fell behind on rent and payments to vendors. This followed the 2020 bankruptcy of Boulder-born Lucky’s Market, which was followed by store closures in Boulder, Longmont and Fort Collins.

Still, Capsalis said, “I feel confident that we will see continued growth in the natural organic food industry with a non-stop stream of innovation in 2022.”

— Lucas High

Outdoor industry

Despite troubles in the ski industry, outdoor recreation represented a relative bright spot in Colorado’s economy during 2020 and 2021, as people flocked to the outdoors as many indoor activities were curtailed.

Interest in the outdoors increased about 3% annually, according to the Colorado Business Economic Outlook prepared by CU, with more casual users sampling the state’s outdoor-recreation amenities.

“2020 was one of the toughest years in recent history. With so much isolation and loss, the outdoors was something we could all turn to in order to connect with our families and friends and maintain physical and mental health,” Nathan Fey, director of the Outdoor Recreation Industry Office, said in a prepared statement. “Outdoor recreation participation soared, especially close-to-home recreation. This increase highlighted two things: the importance of better access to the outdoors for everyone and the impact increased use has on the state’s outdoor recreation assets.”

The outdoor industry accounts for 120,063 direct jobs in Colorado, according to the Boulder-based Outdoor Industry Association, with $5.6 billion in wages and salaries and $9.6 billion in value added to the economy, or 2.5% of gross domestic product. The data are derived from the U.S. Bureau of Economic Analysis.

Those numbers are lower than in 2019. Colorado’s ski industry suffered from COVID-related shutdowns — and a slow start to the 2021-2022 ski season due to low snowfall. Fishing, sailing and snow activities saw a $410 million decline in value added to the state’s economy in 2020.

The state ranks No. 1 in dollar-value added in snow activities and in the Top 10 in climbing/hiking/tent camping and bicycling.

Colorado also ranked 10th among all states in compensation and employment in the outdoor sector.

Boulder County serves as home to many outdoor manufacturers, including American Recreation Products, La Sportiva, Salewa, Spyder Active Sports and Zeal Optics.

— Christopher Wood

Residential real estate

The Boulder Valley and Northern Colorado enter 2022 with historically low inventories of homes available for sale, pointing to continued strength in a housing market that set records regionwide for median sales price in 2021.

Fort Collins listed just 68 detached homes on the market in November, down from 166 for November 2020, according to data provided by Information and Real Estate Services LLC, the Loveland-based multiple-listing service for the region.

The Greeley-Evans market had 156 active listings for single-family-detached homes, down from 207 a year ago.

The Loveland-Berthoud market reported 157 active listings, compared with 248 in November 2020. In Estes Park, 48 homes were on the market, down from 75 in November 2020.

Boulder listed just 57 detached single-family homes available for sale in November; that compares with 116 homes on the market in November 2020.

Longmont had just 61 homes on the market in November, down from 91 a year ago.

Todd Gullette, managing broker with Re/Max of Boulder, said the low inventory entering the new year points to a continued hot market.

Whereas the market traditionally becomes most active in the spring, that likely will get pushed back as low inventories push buyers to initiate earlier starts to home searches, he said.

“We should start extremely fast in January,” Gullette said. “As people know it’s going to take a little bit more time to buy, sometimes they have to wait until a house becomes available that they want. So we’ll start hot this January, that’s my guess, red hot.”

Boulder’s median sales price reached $1.54 million in November, the third month in 2021 that it eclipsed the $1.5 million mark, compared with $1 million in November 2020.

Longmont’s median single-family sales price hit $545,000 in November, compared with $440,000 in November 2020.

Gullette said some high-priced home sales can skew appreciation trends. He said that although raw numbers might point to 40% appreciation in some markets, 15% to 20% has been more typical. 

“We probably still are on track to continue those numbers,” Gullette said, adding that there is “nothing really economically to stop it that we can see.”

— Christopher Wood

Tech

Northern Colorado and the Boulder Valley showed again in 2021 that their potential as tech hubs is only beginning to be tapped.

In Boulder, tech giants made big splashes. After announcing that it wanted to expand to 700 employees in the Boulder area by 2026, Apple has been identified as leasing 240,000 square feet in the Flatiron Park business development. 

Google purchased the 125,000-square-foot office space at The Reve in Boulder for nearly $100 million. It also completed the third building at its 300,000-square-foot Pearl Street campus that is designed to house up to 1,500 employees.

Tech startups also continued to perform strongly. Louisville electric vehicle battery manufacturer Solid Power Inc. went public through a deal with a special-purpose acquisition company that valued the company at $1.2 billion. JumpCloud Inc., a directory-as-a-service platform also based in Louisville, raised $225 million in a Series F that brought its valuation to more than $2.6 billion.

Loveland electric vehicle company Lightning eMotors established itself as a leader in the commercial EV market, going public with a $823 million SPAC deal, expanding its production facility by more than 100,000 square feet and inking deals with companies such as Amazon.

— Tommy Wood

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