DENVER | Main Development Thread #7

[dasaudi]

[QUOTE=rds70;9885956]Rendering of 2000 Welton, the next X Denver project (either 3 or 4 depending on how you count the projects). 23 stories, 262 feet, 344 units, LJC Architects:

The color palette reminds me of the Mirabella at ASU in Tempe, AZ. Not at all an X project, but it turned out nice.

https://structurae.net/en/media/377847-mirabella

My image on Structurae.

https://structurae.net/en/structures/mirabella

[i4isoar]

Originally Posted by MovinOnUp

The "Would have" is coming across a little bitter.

While I'd be sad to see this go - it was a little generic for such a central tower that could have a defining impact on the skyline. Not holding by breath, but would hope for something more unique (and much taller) to go here.

FWIW, this was one of my favorite iterations of 16th and California:

Originally Posted by laniroj

All of the other active projects on this arch's website have a status that says 'In-Design'. Unfortunately, methinks this one is dead...

Do we know yet what killed it? I hope it wasn't the small, frivolous curb-cut issue...

Though I like to think that whenever one door closes, another opens. Here's to hoping that one day, someone will be able to take over the 2 empty lots on that block and the Target as well, then combine all 3 lots and build a true megascraper on the site. (As much as I like that Target and believe it's good to have at least one supermarket directly on the Mall... I'd be okay with seeing it go if it meant we were getting a new city-defining landmark in its place).

Originally Posted by rds70

Rendering of 2000 Welton, the next X Denver project (either 3 or 4 depending on how you count the projects). 23 stories, 262 feet, 344 units, LJC Architects:

Originally Posted by dasaudi

The color palette reminds me of the Mirabella at ASU in Tempe, AZ. Not at all an X project, but it turned out nice.

https://structurae.net/en/media/377847-mirabella

My image on Structurae.

https://structurae.net/en/structures/mirabella

Looks great! My goodness - they haven't even finished X2 and they're already planning for X3. But with how long the permitting process takes, it's probably better to get started sooner rather than later.

[TakeFive]

There's an old saying that: "they don't ring a bell before the markets are about to take a header"
Or "they don't ring a bell at the top and bottom of markets."

Some have suggested that Twitter, Reddit etal were ringing bells...

A little concerning?

Moody’s cuts outlook on U.S. banking system to negative, citing ‘rapidly deteriorating operating environment’
MAR 14 2023 By Jeff Cox - CNBC

So what could this mean for RE development - in Denver?
Who can predict these things? No me!

New construction starts could come to a screeching halt (exceptions always possible) at least for some period of time. Current construction should continue unless thing get really, really bad which I don't anticipate.

Liberals continue to claim that the country is in need of many millions of (more affordable) housing units. While not a fan of these statistics, it is fair to say there is no oversupply of housing - in Denver. One thing that Congress could do is to increase the funding for the LIHTC program.

[laniroj]

Originally Posted by TakeFive

....So what could this mean for RE development - in Denver?
Who can predict these things? No me!

New construction starts could come to a screeching halt (exceptions always possible) at least for some period of time. Current construction should continue unless thing get really, really bad which I don't anticipate.

Liberals continue to claim that the country is in need of many millions of (more affordable) housing units. While not a fan of these statistics, it is fair to say there is no oversupply of housing - in Denver. One thing that Congress could do is to increase the funding for the LIHTC program.

New construction starts (single family) are already seeing huge declines which will likely continue. I anticipate construction costs will break sometime this year once current project pipelines get built out - asset pricing has already broken across most spectrums. If costs break, I could see some stabilization in single family and likely continued decent production in multifamily. That's the "soft landing" for real estate.


IMO the other scenario looks much more ominous and seems to be where we are headed and it involves capital drying up and waiting for some certainty in the world. There's still equity capital but it's much more selective than a year ago and requires a meaningfully higher risk-adjusted return. The debt side has been tightening for a year now, likely much more quickly after the past week's events going forward.

As to your supply opinions, please read these and study these graphs...

https://fred.stlouisfed.org/graph/?i...OUST1F,HOUST5F,
^You'll notice starts beginning to drop

https://fred.stlouisfed.org/series/HOUST1F
^You'll notice that when you were 20 and our population was 30% less than what it is today, we were producing the same amount of actual housing units (I often mention this and you often refute this being a material factor in housing affordability).

https://www.theatlantic.com/ideas/ar...s-2022/672240/

[TakeFive]

It never hurts to review ground that has been previously covered

Originally Posted by laniroj

As to your supply opinions, please read these and study these graphs...

https://fred.stlouisfed.org/graph/?i...OUST1F,HOUST5F,
^You'll notice starts beginning to drop

https://fred.stlouisfed.org/series/HOUST1F
^You'll notice that when you were 20 and our population was 30% less than what it is today, we were producing the same amount of actual housing units (I often mention this and you often refute this being a material factor in housing affordability).

https://www.theatlantic.com/ideas/ar...s-2022/672240/

I understand that memories are short but the Great Recession/Financial Crises wasn't THAT long ago.

Despite the various spin from Conservatives the triggers were simply classic Greed and Fraud. It was enabled by fancy dancy new software that failed miserably because "garbage in, garbage out" ie LIAR loans.

Wall Street made $billions by buying homes for 50 cents on the dollar. That hardly speaks to a housing shortage. In fact housing units exceeded demand by million of units. It's fair to point out that the areas most impacted were Phoenix, Las Vegas, Inland California and Florida. Colorado was only briefly and marginally impacted so it's understandable you'd forget about all this. Texas was only marginally impacted because Texas kept growing and growing right through the recession.

We became a Rental Nation

Historically, new starter home development led 'us' out of recessions but this time was very different.

The Great Millennial Migration

Millions of new apartments were built all over the country but especially in cities like Denver; Denver is one of the poster children for this as Millennials flocked to Denver but they all wanted to live in the urban center in apartments.

wong reminded us that due the Great Recession it was very difficult for young buyers to get loans for new homes for the few that wanted to buy. Believe it or not, but there was a period when builders were afraid to build new starter homes in the Denver suburbs because they weren't sure Millennials wanted to live there so any new home construction catered to upscale needs.

We've all come to appreciate the length of time it takes to build one land barge (let alone lots of them) in downtown. So even while the lust for home ownership has returned you can't just turn on a faucet and spew out new homes. It takes years. There has also been various logistical problems.

Bottom Line: The fact that fewer new single family 'ownership' homes have been built than historical averages should not come as a surprise given that we've become a Rental Nation.

Footnote: Despite the high regard for The Atlantic, I'd rather stick to the facts (as I see them) and not read spin from either the Left or the Right.

[TakeFive]

What is This?

akin Golden Triangle - 990 Bannock


Representatives from Pinkard, Revesco, Alpine and OZ break ground on akin Golden Triangle


Rendering of akin Golden Triangle, courtesy of OZ Architecture.

12-Story Multifamily Project Breaks Ground in Denver’s Golden Triangle
March 15, 2023 - Mile High CRE

On March 14, Revesco Properties/Alpine Investments (RPAI), Pinkard Construction, and OZ Architecture celebrated the groundbreaking for akin Golden Triangle, a 12-story, multifamily project. Construction commenced in early February and is expected to continue into Q4 of 2024. The luxury-boutique building will contain 98 units of multifamily and amenities.

Financing?

Equity for the project was provided by Cohen & Steers and Posterus Partners. The project’s construction lender is MidWestOne Bank.

[TakeFive]

What we need is more Affordable housing, No?

Peoria Crossing 1 - 3002 N. PEORIA


Courtesy Peoria Crossing 1

AHA to Begin Final Phase of Affordable Housing Project in Aurora
March 14, 2023 - Mile High CRE

On Wednesday, March 15 the Housing Authority of the City of Aurora (AHA) will begin construction of the second and final phase of Peoria Crossing. The 2.3-acre transit-oriented site is adjacent to Peoria Crossing I and will add 72 units of affordable housing to round out the multifamily campus to 154 units.

How affordable are these?

The affordable housing project will serve households earning between 30 and 60 percent of the Area Median Income (AMI). 14 units will be reserved for project-based vouchers that will serve very low-income families.

[SirLucasTheGreat]

Originally Posted by TakeFive

What is This?

akin Golden Triangle - 990 Bannock


Representatives from Pinkard, Revesco, Alpine and OZ break ground on akin Golden Triangle


Rendering of akin Golden Triangle, courtesy of OZ Architecture.

12-Story Multifamily Project Breaks Ground in Denver’s Golden Triangle
March 15, 2023 - Mile High CRE

Financing?

I see Parq II in that rendering. Hopefully that one starts soon as well

[laniroj]

Originally Posted by SirLucasTheGreat

I see Parq II in that rendering. Hopefully that one starts soon as well

Gotta say, I really do enjoy this high effort architecture. I wish more local developers had financial capacity to do this because the out of state merchant builders will never put this much thought and money into architecture...or so they haven't historically.

https://milehighcre.com/12-story-mul...lden-triangle/

[TakeFive]

Coming But Not Soon

Embrey to Build 283-Unit Apartment Community on Leetsdale Drive
March 15, 2023 - Mile High CRE


Rendering of 5231 Leetsdale, courtesy of Capstone Companies

San Antonio-based Embrey, a diversified real estate investment company, has purchased 5231 Leetsdale, a 219,562-square-foot (5.04 ac) land property in Denver.

The site is home to a small retail strip building and a hardwood flooring company. Embrey plans to demolish the buildings and build a new 283-unit Class A apartment community.

A classic suburban builder, Embrey has stayed on the periphery of the city center.

[TakeFive]

As Denver (downtown) Continues to Grow and Grow

This is a post I missed from back in November.

Fueled By Airport Acreage, Denver Development Opportunities Abound In The East
November 28, 2022 By Joe Fassler, Bisnow Denver

A parcel the size of Newark, New Jersey, sits on the east side of the Denver metro area, just south of the city’s airport, waiting for the development projects that local officials hope will transform the land surrounding Colorado’s major transportation hub.

A new slate of ambitious, large-scale projects were announced this year and are expected to bring previously unseen levels of activity to the area, offering up big potential for those willing to navigate the varying interests in the area and bet on further population expansion of the swelling cities that make up metro Denver.

The state of warehousing has changed (unsurprisingly); it's a bit mind-bogging.

“The scale of industrial development has changed,” Witty said. “Your average new building in Denver was 100K to 150K SF, and it didn't account for some modern functionality, like trailer parking. Now we’re seeing huge trailer parking requirements, and much larger-scale industrial developments, where you're talking about buildings that are two hundred to a million feet. And even though that million-square-foot building could functionally fit on 40 acres, the reality is they need so many employee parking spaces and trailer parking spaces, that they're now taking 70 to 90 acres for a single project.

Projects of that size can’t be plunked down anywhere in the city.

There's a disconnect somewhere

Industrial construction has been a hot sector for a decade but by the end of 2022 signs of being overbuilt were being reported. Fast forward and now they say there's a warehouse shortage.

Despite recent reports of consumer spending resiliency, warehouses are stuffed with goods that aren't moving. NPR Radio had an interesting segment on this last week.
Reuters also carried a relevant story.

Meanwhile, importers are selling products for pennies on the dollar to liquidators or offering steep discounts in customer email blasts. Still others have thrown up their hands.

Bobblehead maker Funko (FNKO.O) earlier this month said it was destroying $30 million to $36 million of toy products from its overstuffed distribution center in Arizona.

With respect to Denver I'd assume they're still catching up with the times for needing more space and more modern warehouse space.

[mhays]

Warehouses can certainly go into smaller sites, but it requires stacking.

It's easy to build parking garages.

It's harder to stack warehouses, but this is increasingly common in some cities, mine included. And in some of the world it's extremely common. Of course it requires highway-like ramps to the upper floors. But when land is expensive and hard to find, particularly in location-sensitive areas...

https://www.trammellcrow.com/en/proj...e/terminal-106

https://www.prologis.com/news-resear...own-crossroads

[TakeFive]

This is interesting

Originally Posted by mhays

Warehouses can certainly go into smaller sites, but it requires stacking.

It's easy to build parking garages.

It's harder to stack warehouses, but this is increasingly common in some cities, mine included. And in some of the world it's extremely common. Of course it requires highway-like ramps to the upper floors. But when land is expensive and hard to find, particularly in location-sensitive areas...

https://www.trammellcrow.com/en/proj...e/terminal-106

https://www.prologis.com/news-resear...own-crossroads

They do mention "for lighter-scale warehouse operations" but still it's interesting.

Of course there's no shortage of land in the desert and as wong has pointed out Phoenix feeds back into SoCal to a certain extent. I've had occasion to drive by some of the large and huge warehouse areas down here and it's simply amazing, watching all the 18-wheelers driving in and out.

I could see Denver utilizing both styles of warehousing.

[mhays]

Only the third floor of the ProLogis example is for lighter operations.

Even so, a lot of big stuff isn't heavy and doesn't require ground-floor-equivalent load capacity.

Another example is our new convention center, which puts the main exhibition hall on the bottom and a "flex hall" above that, which is basically exhibition space except you can't drive trucks on it. Then two levels of meeting rooms on top of that. Then the ballroom on top of that. Still small compared to Denver's center (we'll never get the 20,000-person hotel-using events) but it's the best we can do in five acres above-grade.

[TakeFive]

Congrats on completing your Convention Center redevelopment and expansion; it looks very nice. GeekWire had some nice coverage.




Photo credit to GeekWire / Kurt Schlosser

Originally Posted by mhays

Another example is our new convention center, which puts the main exhibition hall on the bottom and a "flex hall" above that, which is basically exhibition space except you can't drive trucks on it. Then two levels of meeting rooms on top of that. Then the ballroom on top of that. Still small compared to Denver's center (we'll never get the 20,000-person hotel-using events) but it's the best we can do in five acres above-grade.

Yeah, Denver has a logistical advantage of being 'centered' for ease of travel.

Originally Posted by mhays

Only the third floor of the ProLogis example is for lighter operations.

Even so, a lot of big stuff isn't heavy and doesn't require ground-floor-equivalent load capacity.

It's the huge volume of seasonal imports that created the need for very large distribution centers but things can and do change.

The LA Port of Entry and it's sibling Long Beach are no longer backed up with cargo waiting to unload. The gal on NPR who represented the retail segment mentioned shifting goods to more truck freight as appose to railroads which she said were still a logistical mess. This may eventually allow for more targeted delivery to smaller sized warehouses... who knows?

[mojiferous]

There was a scholarly article published today about the price effects of upzoning vs downzoning: https://journals.sagepub.com/doi/10....20980231159500 If you have SAGE access or are willing to spend $37 it's very interesting. Upzoning does focus new construction on high-end construction, but the effects are felt across price levels and rent does not increase, whereas downzoning definitely increases rents. Even more interesting is that they find that downzoning does not actually reduce construction!

I don't think there is any talk of downzoning anywhere in Denver, but there is definitely a lot of talk about how horrible upzoning is and how rent increases are the fault of new construction. A lot of people are convinced that things would be cheaper if we never built dense housing and it's nice to see yet another study providing evidence to the contrary.

[TakeFive]

Originally Posted by mojiferous

There was a scholarly article published today about the price effects of upzoning vs downzoning:

At first blush this sounds credible(?) At the least interesting.

The statistical effort is impressive enough

We generate the first cross-city panel dataset of land-use reforms that increase or decrease allowed housing density and estimate their association with changes in housing supply and rents. To generate reform data, we use machine-learning algorithms to search US newspaper articles between 2000 and 2019, then manually code them to increase accuracy. We merge these data with US Postal Service information on per-city counts of addresses and Census data on demographics, rents, and units affordable to households of different incomes. We then estimate a fixed-effects model with city specific time trends to examine the relationships between land-use reforms and the supply and price of rental housing.

And after all that what were the results?

We find that reforms that loosen restrictions are associated with a statistically significant 0.8% increase in housing supply within three to nine years of reform passage, accounting for new and existing stock. This increase occurs predominantly for units at the higher end of the rent price distribution; we find no statistically significant evidence that additional lower-cost units became available or moderated in cost in the years following reforms. However, impacts are positive across the affordability spectrum and we cannot rule out that impacts are equivalent across different income segments. Conversely, reforms that increase land-use restrictions and lower allowed densities are associated with increased median rents and a reduction in units affordable to middle-income renters.

WOW; no wonder statistical analysis give me a rash; plus the fact that Stats don't talk; they can't add context (although here they make a valid effort, I guess). There's no way of 'understanding' - unless you live there - what happened and why.

[mhays]

Real estate analysis suffers from a complete lack of parallel or "control" cases. There are always huge situational differences between any two.

Further, any data is typically about the past, not about the present, with some exceptions you can pay a ton for. Then you spend however long messing with already-outdated data.

[TakeFive]

Story Telling - every place has a story to tell

Sticking with what we're familiar with are we talking about up-zoning in Aurora or in Denver? Makes a huge difference.

Let's start with Denver. Note: rezoning or zoning in Denver is NOT my area of expertise. For that Ken is an expert but I can talk in generalities.

First Point: It's not 'impossible' for a fairly simplistic demand - supply concept to work it's magic.

First a definition:

For an apartment complex 5% vacancy is the same as full occupancy. Wait how can you say that? In the normal course of business of unit turnover and need to clean. maintain, repair, refresh may mean there's no ready-to-rent units at this moment. 3% to 5% is like a minimum vacancy but 5% is sort of an industry standard. A unit may lease out but not start for say 3 weeks is another item.

It can happen

There's currently a ton of new apartments under construction. Should the local economy flatline (or turn down) while these apartments are being completed resulting in vacancy tripling to say 15% then there's a HIGH probability that adding density will lower rents with a 15% (or higher) vacancy rate.

Over the last dozen years a lot of land has been rezoned to allow for added density. Prior to rezoning you couldn't build all those apartments along Brighton Blvd. Density enhancements have been added in many areas like 38th & Blake, Arapahoe Square, Golden Triangle. There's been new re-zoning neighborhood plans. Sun Valley has been rezoned for more density and targets affordable housing along with market rate housing. Areas like Fox Park have been rezoned, etc etc.

Sprawl can help relative to Metro Denver

Rezoning-upzoning land near DIA that provides various housing options will surely be more affordable than in the city center.

Doing the same near Castle Rock or Lone Tree can, at the least add more affordable options relative to those areas BUT affordability has a different meaning in more desirable areas.

And "Now you know the rest of the story" as Paul Harvey would always say at the end of his broadcast

[TakeFive]

Well said and funny too

Originally Posted by mhays

Real estate analysis suffers from a complete lack of parallel or "control" cases. There are always huge situational differences between any two.

Further, any data is typically about the past, not about the present, with some exceptions you can pay a ton for. Then you spend however long messing with already-outdated data.

I've read a number of White Papers by liberals that in order to be credible sounding rely on statistical analysis to insinuate that Correlation = Causation (what else can they do?) which we should all know this is is a fallacy. It may or may not be the primary cause(s).

As I would skim through these MS papers, I could easily spot certain dynamics that were (intentionally) overlooked that might be more critical than those things that were considered. Then there's influences that can't be known or measured. In any case, Conservative Think Tanks are just as guilty; that's politics.