2020 left its mark on the economy with industries and communities affected differently – some more severely than others, according to the recent 56th annual Colorado Business Economic Outlook Forum.
Each year the Business Research Division at the Leeds School of Business at CU Boulder provides a forecast of Colorado’s economy. This year the forum – produced in partnership with 125 private and public state leaders – provided a look at the impact of 2020 and what might come to pass in 2021.
The impacts of COVID-19 on Colorado’s economy are both expected and unexpected. This two-sided story is no more apparent than in the state’s real estate market where residential real estate has continued its upward surge while commercial real estate suffers.
Employment took a hit in 2020 and is estimated to close down 5.3% with a loss of 148,800 jobs, notes Richard Wobbekind, executive director of the CU-Boulder Leeds Business Research Division.
For those who know the Colorado economy, the destructive impact of COVID-19 on Colorado’s job market is astounding. Colorado has led the nation for employment and job growth for several years running prior to the economic shutdown of 2020.
Wobbekind says jobs are expected to grow in 2021, but not reach its peak. Depending on a successful vaccine rollout, Colorado will add 40,500 workers in 2021, or growth of 1.5%.
The local 2020 real estate story is a study in contrasts. The disruptive economic environment resulted in real estate market sectors performing differently, according to the forum’s Real Estate Panel. Panelists included Mike Kercheval, Executive Director of the CU Real Estate Center; Paul Books, President and Founder of Palisade Partners; Chad Brue, CEO & Founder of Brue Baukol Capital Partners; Jessica Ostermick, Director at CBRE; and Darren Powderly, Co-Founder of CrowdStreet, Inc.
The group of experts examined the impact and prospective future of the market’s subsectors: office, retail, industrial, and residential real estate.
As the pandemic sent droves of professional workers home to work in mid-March, office occupancy rates plummeted. Commercial vacancy rates in Denver soared to 15% — the highest in eight years. Meanwhile, more spacious offices in the suburbs gained occupants.
There were select winners in the commercial real estate space, such as WeWork’s flexible workspace. And industrial real estate space gained leasers when warehouse and distribution centers rose to meet the demand of online shopping and home delivery.
“The pandemic jumpstarted a serious reconsideration of space sharing,” Darren Powderly, Co-Founder of CrowdStreet said. “National industrial real estate prices have increased 7% over the last year,” he added, “compared to national retail real estate [prices] experiencing a 5.2% decline over the same period.”
On the positive side, residential real estate thrived due to movement from large coastal cities to smaller cities, and from urban environments to surrounding suburban cities, noted Paul Books. Chad Brue added that people gave up urban lifestyles for “more space and breathing room.”
Single-family home prices soared along with home ownership rates – evidence of strong demand. The median price of a single-family home in Denver increased 8.3% year-over-year in 2020. Demand was also fueled by historically low interest rates and an already robust housing market. Home ownership rose from 65.3% in Q1 2020 to 67.9% in Q2 2020.
Secondary markets Colorado Springs, Pueblo, and Greeley benefited as well, noted Jessica Ostermick. She said demographics also are contributing as Colorado’s aging population seeks suburban or rural markets.
The question remains, is this shift in lifestyles temporary or permanent? Statistics may provide the answer: Panelist Mike Kercheval pointed out that 14.2 million of the 16 million who fled large cities in 2020 filed a permanent address change.
For the full report on all sectors of the Colorado economy, see www.colorado.edu/business/sites/default/files/attached-files/cbr_2021-issue-1-final.pdf.
By Tom Kalinski. Tom is the broker/owner of RE/MAX of Boulder, the local residential real estate company he established in 1977. He was inducted into Boulder County’s Business Hall of Fame in 2016 and has a 40-year background in residential and commercial real estate. For questions, e-mail [email protected], call 303.441.5620 or visit boulderco.com.