Area Economy, Commercial Real Estate Show Signs of Bottom

DENVER-The unemployment rate fell slightly in all Denver-area metro counties with the exception of Broomfield, which posted no change, according to the Denver Metro Chamber of Commerce’s May Business and Economic Indicators. Employment, however, declined by 700 positions in the Denver metro area from January to February and total employment is down by 8,700 positions for the first two months of 2003, a 0.7% decline.

The Chamber’s May report shows that nine indicators moved in a positive direction this month. The nine gainers were distributed throughout the four categories of data featured in the monthly report, which include labor and employment, the consumer sector, residential real estate, and commercial real estate.

“While the metro area economy remains unstable, this month’s indicators illustrate the best economic performance that we have seen in a long time,” says Denver Metro Chamber consulting economist Patricia Silverstein of Development Research Partners, who compiles the monthly report.

“Though we are encouraged to see some positive signs in this month’s report, the stagnant job growth indicator and continued job losses reinforce the need to focus our resources to develop strong proactive economic development actions,” adds Tom Clark, EVP of Economic Development for the Denver Metro Chamber.

The Denver Metro Chamber of Commerce’s monthly Economic Indicators Report provides a monthly snapshot of metro-area economic activity, as well as its relationship to national and regional economic trends, to help businesses make informed decisions and projections.

Highlights include:

• The office vacancy rate continued to increase in the first quarter of 2003, but the increase was much less severe than in previous quarters. The direct office vacancy rate throughout the Denver metro area increased to 15.2% by the end of the first quarter, up from 14.9% in the fourth quarter of 2002. The office vacancy rate has been increasing steadily since the second quarter of 2001 with some quarters posting increases greater than one percentage point. But the increase this quarter of just 0.3 percentage points is a welcome change.

• Trammell Crow reports that the office market experienced negative absorption of just 167,400 sf during the first quarter of 2003. This represents a significant improvement from fourth quarter 2002 reports of negative absorption of 1.03 million sf.

• The industrial vacancy rate continues to show little movement. The direct vacancy rate rose to 6.8% in the first quarter of 2003, comparable to the 6.7% rate posted last quarter. Despite the stable vacancy rate, the average lease rate slipped to $6.47 per sf. The industrial lease rate peaked in the second quarter of 2002 at $6.63 per sf.• The direct vacancy rate in flex buildings declined from the fourth quarter 2002 to the first quarter 2003. The direct vacancy rate of 16.5% represents about 5.7 million sf of available space. Construction activity in this market segment has slowed substantially with only 810,000 sf of new flex space introduced in 2002, down from 2.45 million sfof space built in 2001. Three new buildings are currently under construction which will add about 170,000 sf to the flex space inventory.• Total retail sales declined in February, with activity for the first two months of the year 0.6% below the same period last year. Performance was split at a county level with four counties posting year-to-date increases and three registering declines.

• Most ski resorts in Colorado ended their 2002-2003 season in mid-April. Although final figures won’t be available until June, skier visits through the end of February totaled 7.75 million, 7.7% higher than last season at this time. Skier visits for the season could reach 12.8 million, topping the industry’s 1997-98 record.