As the pandemic trends continue to reverse and buyers fall back into old habits, we are seeing a huge pull back towards urban areas. Does this mean Denver is set for a huge rebound? What are the best metro markets to invest in Colorado and why? What trends are driving these huge changes? Is Denver proper the best investment?
Three trends that will guide your Colorado investing over the next several years
Just as we are now seeing in the stock market, fundamentals in real estate will be the decider of winners and losers as we transition to a new phase in the pandemic. The past winners will not perform in this cycle. Peloton was a darling during the pandemic, and now it is down substantially; this is a warning to real estate owners/investors that everything does not always go up. The pandemic changed people’s attitudes towards work, play, and family but at the end of the day habits are hard to break. Here are three trends that will influence the winners in the next cycle.
- Family: US birth rates were already falling before the pandemic, now they are the lowest in 50 years to 1.64 for each woman (down from 3.65). With less children, the amount of space and location are altered.
- Work: Old trends hard to break. Business travel and back to office are happening. Delta and others are now forecasting even more demand for business travel. This leads us to the question, if business travel is going to roar back, who are the travelers visiting? Others in the office! I don’t forsee where all the business meetings will now take place in pajamas in a basement home office. With business travel coming back and offices transitioning to more normalization, employee location will come into play. If you now must go back in the office 4 days a week, it is not feasible to live 100 miles from the office.
- Play: Millennials largest cohort of borrowers making up 37% of all purchases, many of these younger buyers are childless. With a younger cohort of buyers, they will coalesce around areas that have the amenities they desire: restaurants, nightlife, similar age cohorts, etc… which are typically found in more urban areas.
What do the trends above mean for Denver’s real estate?
Unfortunately just because people are migrating back to metro areas, this doesn’t mean they are going back to the urban cores like Denver. Many companies are now migrating to smaller metro areas and/or suburban locations. This means that workers are following. If companies are not going to the urban core then neither will their employees. This trend is playing out in Denver as office space hits record vacancies while demand for spaces in Boulder, Ft. Collins, etc.. holds up considerably better. As you can see below Denver is not mentioned on any of my top places to invest as it will continue to struggle with crime, high taxes, etc… and in many areas there will be a “doom loop” where the negatives continue to reinforce themselves. A good example is many of the areas with long term homeless encampments in Denver.
What are my top investment choices in the Colorado front range
- Evergreen/Golden/etc..: these are good close in suburban locations with low crime, lower taxes, good schools, and yet still close in for a commute. These areas will continue to perform well.
- Boulder: I’ll put Boulder into its own city and not necessarily drawing on Denver as Boulder has its own draws of high tech, life sciences, etc… that will continue driving this market. Just as Denver is in a doom loop, the inverse is occurring in Boulder where companies like Google, Microsoft, etc.. draw others to the market. Even though prices in Boulder are high, I do not see a huge drop even when there is a recession.
- Collins: Ft. Collins is anchored by Colorado State University and has become a hub for high tech growth on a smaller scale than Boulder. Ft. Collins has a great quality of life, plenty of open space, a thriving young well-educated population, and lower taxes than many other front-range cities. This will continue to propel Ft. Collins and surrounding areas like Greeley.
Real estate investing in Colorado during the last 15 years has been very easy. Basically, anything with four walls surged in value. The crazy days are over, and market fundamentals will drive not only future upside potential, but increased downside potential. Evergreen/Golden, Boulder, and Ft Collins fit my criteria for good long-term investments that should outperform regardless of the real estate cycle.
Additional Reading/Resources:
https://coloradohardmoney.com/should-you-only-buy-real-estate-in-a-vail-resort-town/
https://coloradohardmoney.com/new-colorado-law-leads-to-200-police-calls-at-one-apartment/
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Glen Weinberg personally writes these weekly real estate blogs based on his real estate experience as a lender and property owner. He is the owner of Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
Glen resides in Colorado, lends in Colorado, owns property in Colorado, and services loans in Colorado which provides a unique real estate prospective of what is actually happening on the ground both in Denver and throughout Colorado. My goal of this real estate blog is to provide an honest assessment of what I see happening in Colorado real estate and how it will impact real estate owners, buyers, realtors, mortgage professionals, etc…
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