Colorado-Real-Estate-Journal_342676

Page 6 — Retail Properties Quarterly — May 2023 www.crej.com BRYANCONSTRUCTION.COM 855.391.5355 DELIVERING PERFORMANCE EXCELLENCE EVERY. TIME. ALL COPY PRODUCTS HEADQUARTERS- DENVER, CO TAKE A LOOK AT OUR RECENT PROJECTS Suburban Market I don't want to sound negative, but … Lately, this phrase has been reverberating through commercial real estate spaces everywhere. We are all looking for a sign of improvement, but as the days pass, it feels like the bad news is mounting. Another bank has failed. Downtown office tenants are clearing out. Getting a construc- tion permit is akin to going on a quest for the Holy Grail. Colorado lawmakers are trying to socialize apartments. Transactions are down around 65% at all brokerage houses, and Denver’s lack of enforcement for flagrant open drug use and crime makes a stroll through the central business district feel like a scene out of Zombieland. It’s easy to be negative these days, but as my good friend and one of the top bro- kers in the coun- try always says, “You’ve got to be a good news guy on a bad news day!” So folks, here’s the good news! Colora- do, like many other parts of the coun- try, is in a period of transition. This shift will create exciting new retail trends, problems to solve and opportunities for those prepared for the cycle. Many of you reading this know I grew up in Pittsburgh, a place that was once a business epicenter. Andrew Carnegie pumped out steel at the mills in Bethlehem, Pennsyl- vania, and built one of the largest global business empires. During the decades U.S. Steel operated, wars were fought and labor unionized, but the company continued to grow, and the city grew along with it. In the 1970s, this all began to change. The markets were suffering due to rapid inflation. The labor cost shift- ed quickly, and businesses began to off-shore their product, which ultimately led to the decline of both U.S. Steel and the city. Over the next 50 years, Pittsburgh transitioned. The suburbs grew, and today Pittsburgh is alive and well. While the weather sucks, it is ranked one of the top 10 cities in the country to live in by Livability. com, which, candidly, surprises me. Sadly though, from what I see and hear today from friends in and out of the real estate business, there are a lot of sobering similarities between Pittsburgh’s decline in the ’70s and Denver’s current state. Redfin.com recently announced that Denver lost 2,700 people in the fourth quarter of 2022. Many people cite affordability as one of the top reasons for leaving, and I would be willing to bet many of these people are moving to the suburbs. While the reasons may vary for this migration, the sobering truth is that more people are working from home now, and the thrill of being in a bustling city is no longer a key driver of motivation. Further, vacan- cy rates are climbing. Over the past four years vacancy has climbed in the CBD substan- tially, with CoStar recording rates as low as 13% pre-pandemic to as high as 25% for the last quarter. I believe this is very, very good for suburban retail. Working from home allows people to have more time and lower personal expenses. Businesses can reduce their over- head, which helps them remain healthy. This shift is obviously bad for the city and horrible for office product, but again, this is good for retail. Further, this population shift has resulted in people having more expendable income and more time to spend it. Traditionally, daytime populations are low in the suburbs, but telework has increased demand for more high-quality services, restaurants and shops. Business Retail market is shifting: Suburbs are winning Eric Diesch Vice president, Pinnacle Real Estate Advisors Please see Diesch, Page 19